Long before the internet was invented, there existed an adage about the importance of “location, location, location”.

The adage has taken on its own meaning in the digital age, especially now that billions of people carry tiny computers – smartphones – in their pockets everywhere they go.

Location is used for everything from personalisation to ad targeting.

Retailers, for instance, have used geo-targeted ads to lure individuals into stores, improve their experience in-store, retarget them after the leave the store and develop attribution models to calculate the ROI on their digital ad investments. Companies like Uber competitor Curb have used location based marketing to reach prime consumers exclusively in the geographic markets they serve.

Because of the ways that location data can be put to seemingly good use, it is no surprise that the demand for this data is sky high and continues to grow.

But the use of location data can be far more problematic than is commonly publicized.

Where’s Waldo, really?

One of the biggest problems facing companies using location data to target ads is that, in some channels, much of it is fake.

In a recent installment of its Confessions series, Digiday spoke with a location data executive who called the industry a “Ponzi scheme.” The executive explained:

“Users need to give permission to share location within a given app for the latitude and longitude information to be passed in the bid stream. A very small number of publishers have enabled location sharing while using the app. Of those, a very small number of people will walk into a store with their app open. For the web, the number of people sharing latitude and longitude while walking into a store will be relatively non-existent. It’s unrealistic to scale this sort of data given how hard it is for location data vendors to source it.”

Despite this, location data is commonly available in programmatic channels. So what gives? The executive claims that one agency programmatic leader asked for his help “because they believe up to 80 percent or more of the lat-long data available [in the bid stream] is fake.” He added:

“No one has stopped to think about where that data has come from and why a publisher would choose to sell it all to a vendor who is going to build a business on top of their data. What’s actually happening is these ad tech vendors are trying to pad out the limited data they already own with other data sets from competitive vendors or other unknown sources.”

It’s the perfect recipe for fraud and the ill-effects for advertisers can be significant: they’re spending money on campaigns that, to varying degrees, are intended to take advantage of location. If the location data, however, is inaccurate or totally fraudulent, it means they could be targeting the wrong audiences much of the time.

Abuses of power

Location data can be problematic even when it’s first-party, as there is ample opportunity for it to be used inappropriately.

Case in point: KARE 11, a local news outlet in Minneapolis, Minnesota, recently discovered that the Target app was adjusting the prices of products based on the user’s location, and in a fashion that didn’t appear to be so shopper-friendly. Specifically, KARE 11 found that prices went up when users were in
a Target store. For example, in the app, the price of a Dyson vacuum increased by $148 after entering a store.

Not surprisingly, Target issued a statement downplaying the notion that its app was behaving nefariously, but has since updated its app so that the price increases observed no longer occur. As University of Minnesota Carlson School of Management Marketing Professor George John told KARE 11:

“The most reasonable explanation is that you just revealed your commitment to buying the product, you’re in the store, or in the parking lot. If you are further away, you haven’t quite committed, so I’m going to give you a juicier deal.”

While other retailer apps KARE 11 tested – those for Macy’s, Best Buy and Walmart – didn’t exhibit this behavior, the Target app demonstrates that location data can be put to questionable use, even by companies at which one would expect the obvious pitfalls to be recognized beforehand.

Where to from here?

As the challenges and risks associated with location data become more widely known and accepted, savvy companies will likely rethink when and how they utilize location data. To be sure, the value of this data can be very high, but companies need to ensure that it is legitimate and put to legitimate use.

In both cases, it is clear that this is easier said than done.