How Apple iBeacon Will Transform Local Commerce
One fascinating benefit of today’s converged hardware / software platforms is how a new technology can be “turned on” via OS upgrades, allowing instant network effects at the platform and ecosystem level. Apple’s iBeacon is a model case for this and below are some thoughts on how new capabilities brought forth in iOS7 have the power to transform local and retail at the point of sale.
- iBeacon was announced at Apple’s WWDC in June and is part of iOS7. The magic of Apple iBeacon stems from it being an open standard—Bluetooth 4.0 (BTE) has been inside most smartphones for 2+ years (for Apple, dating to the IPhone 4S). Bluetooth chips have grown leaps and bounds in terms of capabilities and efficiency in recent years and will continue to get smaller and cheaper. Today, a beacon can last 2 years with a low power ARM processor running on a watch battery, even when the device is constantly broadcasting to everyone around it.
- Beacons can take any form factor and can be placed anywhere. From a developer perspective, they simply advertise data in peripheral mode by broadcasting a unique identifier. App developers then use this to understand the location of your device and connect you to a service or to content in the cloud. Apple integrates iBeacon into CoreLocation (nothing to do with the old Core Bluetooth framework). Beacons sit back and broadcast. The discovery, handshaking and communication are all handled by Apple.
- People compare Bluetooth and the now-defunct NFC—but use-cases like range sensing show how superior Bluetooth is and why Apple chose it. BTE also has forward proofing built in—today’s chips are so advanced they have built-in support for over the air (OTA) firmware updates. ((Broadcom, the company with the biggest leadership position in Bluetooth, is one of the top SoC companies in the world and understands networking deeply. They exemplify how the intersection of embedded networking and mobile technologies have accelerated mobile platform innovation at a velocity past anything that PCs / traditional computing ever witnessed)). This is a big deal and means beacons can be updated after being deployed. New firmware can be broadcast to the beacon to enable things like battery saving intelligence—e.g, it’s possible to turn off a beacon at night (if inside a store) to make the battery last longer, or download system upgrades and security patches.
- Additionally BTE allows the concept of ranges—near, medium, and far under iBeacon. This enables distinctions to be made based on distance, enabling both geofences as well as true proximity-based services (touching your iPhone against something). iBeacon and Bluetooth will enable geofencing that is much more granular than today’s location technologies (GPS + WiFi). But another of the less talked about use-cases that is super compelling is indoor navigation.
- Retailers will be able to easily arrange multiple beacons (3 or more) to do triangulation. This allows rough indoor navigation for less than $100 today (much less in the future). Why would retailers not consider deploying beacons when every single person with an iPhone can be marketed to? ((opt-in only, and dependent on the consumer downloading and authorizing an app.)) Indoor navigation is very interesting to Google, and they have been playing with indoor Maps for years. So—though beacons are more about proximity and context than trying to locate position precisely, both may be interesting to Apple and Google for different reasons.
- Indoor navigation can go way beyond traditional geofencing, which simply senses presence—for example, placing 15 beacons every 10 feet apart could create a mesh network, with each beacon transferring different IDs to the phone and to each other. This would allow the network to detect you with a high level of precision indoors. One of the keys for using beacons like this will reside in being able to update them after deployment to a later firmware via OTA updates. Market leaders like Estimote are already thinking this far ahead, so deployments made today can be extended for years as new software features are devised at the app layer.
- Getting all this to work will require a lot of thought at the platform level, which is why Apple has a big edge. iOS can allow you to use CoreLocation to wake up the app with WiFi and GPS, and then the app will discover nearby beacons, at which point they will communicate with the app / user directly—so the app won’t stay in the background wasting power (iBeacon can wake up apps but only after beacons have registered). Apple also has a new framework called CoreMotion that takes advantage of the M7 processor to do granular level precision. Android will struggle wildly to get this level of control neatly exposed for developers. Because consumers don’t want apps to just ping their phone, and because location services are battery killers, a neatly exposed developer toolkit is crucial—devs aren’t going to adopt iBeacon unless consumers see the value and their smartphone batteries don’t die. When used in unison, all of Apple’s APIs will really propel developers to build creative things. MLB recently deployed a trial based on iBeacon which showed ticket-holders a map to their exact seats once they’d entered the park—amazing.
- Interestingly, Apple’s push into iBeacon could enable it to run away in this market while still standardizing on a completely open platform and developer environment. Apple often gets wrongly derided for being closed—but as I mentioned in point #7 in this post on iOS and Android, fragmentation issues in Android will guarantee that only a minority of Android phones (best estimate is 30%) will support a beacon-like system 12-18 month from now. This is bad for Android, but Apple didn’t have to do anything “closed” to create this gap—iBeacon is standardized around 100% open technologies.
- All this begs the question—does Apple have a local strategy? In my opinion, yes. And does this strategy have the capability to change the way merchants think about local? Yes. iOS7 and iBeacon create an ecosystem-wide network effect overnight, with standard technology, offered in an open development environment. It’s very clear that Apple is starting to put the pieces together to allow consumers to make offline transactions with their device—imagine being in a store and authorizing a payment with your fingerprint and never talking to a salesperson. All Apple has to do is open its payment APIs to get to this level, the rest of the stack is already being exposed.
- It’s a sure thing that retail will transform over the next few years with the help of mobile platforms. Apple and Google will push these technologies. And developers will embrace them. Proprietary solutions will go away. Google already backed away from NFC. Another example of this is Shopkick. They were early with a proprietary solution that has seen success, but iBeacon will eclipse this almost immediately. Retailers won’t use Shopkick because they can integrate iBeacon into their own apps, and the company will have to adopt to this technology or be left behind.
Overall, one thing is clear: mobile platforms are set to change the way we buy, transact and consume in our local environment. Local commerce is a massive carrot for growth, a $1 trillion opportunity in the US alone. And somewhat ironically, it may end up being Apple’s “closed platform” which helps unify how online to offline commerce evolves, while fragmentation within Android actually slows adoption of these technologies down.