Apple knows everything you've ever purchased on iTunes. Foursquare knows where you tend to eat dinner on Tuesdays. And your mobile-phone carrier could be sharing aggregated information about its customers -- such as age, gender, geographical area and marital status -- with others.
Data points, such as customers' geographic location or participation in a family plan, are associated with "anonymized" identifiers such as encrypted phone numbers and device numbers and can be sent to third parties that can use that data to serve ads based on where customers live or based on their gender -- say, diaper ads to moms near Chicago.
For providers, who have missed out on billions of dollars that have gone into the pockets of ad platforms, this targeted advertising presents a valuable revenue stream that's only going to increase as mobile marketing grows. "Carriers are trying to figure out how they make money in this ecosystem," said Krishna Subramanian, co-founder of mobile-ad exchange Mobclix. "Their bandwidth gets slammed and the platforms profit from selling ads."
But at the same time, the industry realizes those profits can easily be imperiled by privacy concerns, which is why carriers are rushing to self-regulate before agencies such as the Federal Trade Commission and the Federal Communications Commission step in. Trade organizations including the Mobile Marketing Association, the Interactive Advertising Bureau and the Cellular Telecommunications Internet Association are all in the process of drafting self-regulation guidelines, but the problem is that the self-regulatory policies adopted for digital marketing don't easily translate to mobile.
First, there are a lot more parties with their hands in the data -- wireless carriers are a major source, for one.
One mobile-ad network, Jumptap, has a financial relationship with AT&T, a carrier spokeswoman confirmed. AT&T licenses aggregate and anonymized data to Jumptap, which sells ad space on behalf of AT&T across the AT&T MediaNet portal. Jumptap is not allowed to use AT&T data for any purposes beyond selling the AT&T network, the carrier spokeswoman said via email. But AT&T is not the only carrier to share data with third parties, just the most willing to cooperate with Ad Age. In marketing materials, Jumptap touts its relationship with carriers including AT&T, U.S. Cellular and Alltel -- now a Verizon-owned network -- that gives advertisers access to 60 different data points on subscribers. Jumptap did not respond to requests for comment.
Verizon also provides data to GroundTruth, a mobile-metrics company, and Sprint has a relationship with Amobee. Due to "commercial sensitivities," Amobee declined to comment on its relationship with U.S. carriers including Sprint. Mobile-ad companies can also purchase data associated with subscriber-carrier records at a premium from data companies such as V12 Group, which says it provides 80 million records of users 18 years or older on its website.
To look back at internet history, companies that culled user data from those that control the pipes -- internet service providers -- have not flourished. Companies like NebuAd and Phorm partnered with ISPs to gather data about web surfing for ad targeting, but, after government scrutiny, those endeavors have withered. The corollary in mobile is, of course, the carriers, which provide mobile internet service.
In mobile, hardware companies are also liable -- Apple and top app developers are facing a legal action for allegedly shuttling iPhone and iPad users' personal data to advertisers without consent. And Google recently bought mobile ad network Admob and owns and operates Android, the fastest-growing smartphone software in the world, in addition to search and email.
"Mobile historically has been under the thumb of the carriers, so you have a very different scenario than online," said Alan Chapell, co-chair of the MMA's privacy committee.
The trick will be to convince regulators that the two are not equal. "There seemed to be a lack of recognition -- that we hope to change -- that the mobile environment is very different than an online environment," said Andrea Williams, VP-law and assistant general counsel of wireless association CTIA.
What works online doesn't necessarily fit mobile. For one, online ad trade organizations introduced a triangular "advertising option icon" to designate that behavioral data was being collected. But the icon doesn't export well to phones' much smaller screens.
"We can deliver notice on any device, but whether it's meaningful, easily discoverable and understandable to consumers is what we as an industry are trying to do," said Michael Zaneis, VP-public policy for IAB. The organization has recently created a Mobile Marketing Center of Excellence to attack such matters, with founding members including Google, AT&T and The Weather Channel.
As for the Federal Trade Commission's recommendation for a "do not track list" for online behavioral advertising, the cookies that allow for tracking online just don't work the same way on mobile devices.
"How does one create and manage records on opt-out choices without creating a profile?" Mr. Chapell said. "That's not a reliable mechanism in mobile."
Mobile execs argue data tracking begets relevant ads, which are the antidote to annoying spam. But worst-case scenarios could ruin it for everyone: carriers, publishers or otherwise.
"It only takes one bad actor to bring the platform under the wrong light and vilified," said Mr. Zaneis. "We really have a shared fate here."