Location-Based Advertising: Convenience and Personalization vs. Data Privacy

How much data can smartphones collect on their users?

Every day, millions of smartphones ride along with us as we go about our daily tasks.  Traveling from the office to the grocery store and back home, these tiny beacons track our every move – whether we like it or not.

According to several surveys, our phones are tracking and sharing even more data about us than we may have realized. Here’s what that means for businesses, advertising, convenience and privacy.

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How much data can smartphones collect on their users?

According to a study from Italy’s University of Bologna, smartphone apps need only about 70 users to collect a mountain of data. The study’s authors ran an experiment in which they developed a mobile app, TrackingAdvisor, that collected location data from 69 users over a two-week period.  

During that time, TrackingAdvisor tracked more than 200,000 locations. It also identified roughly 2,500 places and gathered almost 5,000 personal information data points. This data pertained to the users’ demographics and personalities. Study participants said the most concerning data the app tracked included their health, socioeconomic status, ethnicity and religion. [Find out why demographics matter in small business marketing.]

Can apps collect ad data while respecting user privacy?

Upon publishing their findings, the study’s authors noted that their work could help businesses collect data without invading consumer privacy. The authors argued that showing app users the volume and depth of data collected can encourage them to set limits on their apps. Advertisers could use these limits to create targeted advertising systems that help smartphone owners protect their privacy.

“Thanks to such systems,” wrote study co-author Mirco Musolesi, “users interested, for example, in protecting information about their own health could receive a notification each time they go to a health clinic or hospital. But there is more. This could also lead to the development of systems that can automatically block the collection of sensitive data from third parties thanks to previously defined privacy settings.”

How does smartphone data empower location-based advertising?

Our phones help marketers get location-based ads out to nearly everyone. Various applications on iOS and Android devices track users’ real-time locations, and those same users are often served timely ads that reference their locations. This can be to the benefit of the businesses advertising.

Sudeep Srivastava, co-founder of Appinventiv, a mobile app development company in India, said accessing location information has allowed his business to reach potential customers in a way that traditional advertising methods don’t.

“By knowing [the customer’s] location, I can get to know what kind of facilities they might have, what kind of connections they might have and what kind of access to systems they might have,” he said. “Based on that, I can show them some offers, some coupons, some products.”

Here’s what else you should know about the connection between user data, personalization and location-based advertising.

Users trade location data for convenience.

While it may be easy to blame location-targeted marketing on our phones’ tracking features, researchers found that users freely give away a lot of their location data because location-based services can provide information, entertainment and security.

When downloading new apps, users generally have to give permission for those apps to access various parts of the phone’s hardware. For example, if an app needs to take photos, it will ask for access to the device’s camera. Generally, it’s up to end users to decide which permissions they grant on an app-by-app basis. Some are capable of autocompleting a user’s location instead of the user typing in their specific whereabouts. 

Other autocomplete and predictive text features aren’t hard to find. A quick visit to Google on a smartphone is the perfect example of the location-based feature. Rather than having users type out long questions, Google’s autocomplete function kicks in, saving users time. However, that autocomplete tool and predictive text function work so well because they rely on data from previous users and searches.

“[People] like to have predictive text, and the more you use the app, the better we get [at] it, because we have more data and we’re able to better predict what the user might want to do,” said Taylor Bond former vice president of sales at MindSea, a mobile app development company based in Canada. “This has become the standard.”

Social media gives advertisers a wealth of location-based data.

In a world where social media has made sharing the minutiae of our lives with friends and family the norm, it’s easy to see how marketers can gather location data from apps like Facebook and Instagram to target specific individuals. [Check out the benefits of using Facebook for business.]

Geotagging photos and posts is often the default, but users also love to tag their locations on posts since doing so regularly increases interest. According to a 2022 study for U10TIX by Wakefield Research, 81 percent of Americans feel they have no control over how their personal information is collected and used, but they are still willing to give away their location data. 

While tagging posts with your current location can be fun, experts warn against doing so since malicious actors can figure out when users aren’t home. For advertisers, knowing a person’s location allows them to reach out to that person. If a business’s social media page is tagged with its location, any user who starts tagging their location can see that page pop up in a list of possible locations.

Location-based advertising is very effective.

Since autocomplete and predictive text based on a user’s location are used extensively on smartphones, it makes sense that users frequently see ads referencing their location. Not everyone views that as a bad thing. Since the pandemic, research has found that almost three-quarters of consumers actually expect personalized communications, according to McKinsey.

Targeted marketing through location-based tech naturally raises ethical concerns, especially since some users share their location by accident, not on purpose. Even some who did consciously accept such a setting may have forgotten doing so or not understood how that information would be used.

“From personal experience, there are times where I’ve granted permission to an app and I maybe don’t recall that I have or why I did,” said Adam Fingerman, co-founder of mobile app development company ArcTouch. “I think Facebook is a good example. Often when you’re posting a picture, it can tag it with the location. You might not realize it’s doing it. You might forget that it’s doing it. I think probably that happens to people a lot of times.”

Consumers increasingly expect personalized ads and content.

Personalized marketing is an effective way to reach consumers, even more so since the pandemic. In the aforementioned McKinsey study, 3 out of 4 consumers said they tried a new store, product or shopping method in the previous year and a half. Of those people, 80 percent said they planned to continue with their new shopping behavior. Businesses can take advantage of consumers’ willingness to change by reaching them with targeted, personalized messages.  

In fact, 71 percent of respondents in the McKinsey survey said they expect interactions with businesses to be personalized, and 76 percent said they were frustrated when interactions were not.  

With this desire in mind, advertisers can use location-based data to identify their target customers and market to the consumers who would most be interested in a certain product or service. If businesses demonstrate they know the individual interests and demands of potential consumers, they are more likely to generate revenue and build customer loyalty.  

Businesses must be transparent about personal data.

According to the study for AU10TIX by Wakefield Research, 81 percent of respondents believe companies are not transparent about how they use consumers’ personal information.   

However, a study published in the International Journal of Retail & Distribution Management in 2021 found that consumers balance sacrificing personal data and privacy with perceived benefits when it comes to receiving location-based marketing messages. The study determined that consumers perceive location-based ads as valuable when personalized, nonintrusive and appropriate based on the consumer’s location.  

Businesses must be transparent with consumers about what data they collect and use. Letting people know what data is being collected and giving them a choice about what kind of information to share will help build consumer confidence and make location-based advertising more effective. 

How many smartphone users disable their location tracking?

Privacy concerns may leave consumers feeling inclined to disable location tracking on their smartphones. However, the number of users who actually enable or disable their location tracking varies based on what source you consult – and perhaps the type of device.

In 2022, Android Authority found that most people still leave their location tracking enabled. In its poll of more than 1,400 people, 66.8 percent of Android users said they keep their location-tracking enabled. In contrast, in 2021, Flurry Analytics found that only 4 percent of iOS users in the U.S. opted in to app tracking. 

There’s an important distinction here: iOS 14.5 and later versions give users the choice to opt in to location-tracking rather than opting users in by default. Users can manage their Android device’s location settings and grant or deny location-tracking permissions. 

Using location-based ads as a marketing tool

Businesses must be sure to balance personalization with privacy when creating location-based communications. Consumers demand personalized experiences, and location-based data is one of the most valuable ways companies can gather the personal information necessary to provide targeted messages. By being transparent about data usage and creating marketing messages that are personalized and relevant, consumers will feel more confident about sharing their personal information, and businesses will be able to provide consumers with the personalization and convenience they are looking for.  

Tom Anziano and Max Freedman contributed to this article. Source interviews were conducted for a previous version of this article.