Summary:

With the FTC’s crackdown on privacy extending to mobile, the shifting climate is opening up opportunities for start-ups like PlaceIQ and BlueCava that enable advertisers to target mobile users without personally identifying them.

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With the Federal Trade Commission’s crackdown on privacy extending to mobile devices, the shift in regulations is opening up opportunities for startups that enable advertisers to target mobile users without personally identifying them. The field is still new, but by creating a way to help marketers home in on specific audiences without compromising their privacy, companies such as PlaceIQ and BlueCava are a glimpse of what the next generation of mobile advertising might look like.

I talked with both companies about their approaches, which differ markedly. But what ties it all together is the idea that advertisers are having to get more creative in the way they find their target audiences, especially elusive mobile users. Mobile advertising is still small, with an estimated $550 to $650 million spent by advertisers in the U.S. last year, but it is expected to grow to $2.9 billion by 2014, according to BIA/Kelsey. And the more targeted an ad is, the more of a premium ad networks can charge.

BlueCava works by trying to build unique device IDs for connected devices such as computers, smartphones and tablets. It builds a persistent fingerprint for a device by examining things like the device’s software, fonts, screen size, browser plugins, time zones and other data. That allows BlueCava to track the device without gathering any personally identifiable information. It’s a solution that works well on PCs as a cookie replacement. And it has a lot of promise in mobile device which don’t have the same type of ways to target a device. BlueCava expects to have 1 billion devices identified by the end of this year. It identifies a device with a token when users visit pages or ads that have a JavaScript tags attached.

David Norris, BlueCava’s CEO and founder said the technology, which BlueCava has patented, is a good solution as privacy concerns heat up. While BlueCava provides a persistent device ID, it also supplies a simple opt-out mechanism that ensures an easy way to end tracking. But the company also offers the ability for people to block any tracking but still get targeted offers from marketers based on their preferences.

“We can allow consumers to get what they want,” Norris said. “Most consumers want to know about offer and products, but only stuff that’s relevant to them.”

Solutions such as BlueCava may still set off alarms with privacy advocates. Privacy Choice raised concerns about BlueCava’s ability to still track people, who may not know that they’re being followed. But Norris believes BlueCava can be part of the solution because it can be turned off completely.

Another solution is PlaceIQ, which comes at the issue from a totally different angle. Instead of building profiles on devices, it builds profiles on very specific geographic 100-meter tiles of the world, down to about the block level. The company ingests a wealth of publicly available data, from social information, tweets, and check-ins to cell phone density data, retail information, local events and points of interest. It then applies machine learning and sentiment and pattern analysis to create a profile for a specific place that shifts over the course of the day to reflect what kind of people are there. When a user pulls up a mobile ad, the network can consult PlaceIQ to figure out the best kind of ad to serve up based on what it knows of that location and time. It can churn through some real-time data though much of it is more historic information.

For instance, a neighborhood may be overrun with tourists during the day, but at night becomes more of a hang-out for young professionals. PlaceIQ can figure out at what point one group is more likely to be in a place and when that demographic shifts. It’s an interesting way of helping advertisers aim their ads without having to grab personal information on users.

“We can understand what kind of users are out in an area and know these folks have a  stronger affinity to recreation,” said Duncan McCall, CEO and co-founder of PlaceIQ. “If you’re a mobile ad network, you don’t want to show the financial workers who live in the town an ad for a rental car. We’re able to connect right people to the right ads.”

This is a growing opportunity and has its share of believers. PlaceIQ recently raised $1 million from IA Ventures, Howard Lindzon’s Social Leverage and others. Mark Cuban was among the investors who put $5 million into BlueCava last October.

This is a potentially lucrative field. Mobile ads have the ability to be a huge business because they can engage users in very personal and targeted ways. The key is respecting the privacy of users, which is becoming more of an issue as consumers wake up to the realities of online tracking. PlaceIQ and BlueCava might be well positioned to help advertisers find that balance in pushing targeted ads without stepping over the privacy line.

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