Apple Faces Two Lawsuits for Sending Mobile Data to Advertisers

(This originally appeared on AdAge.com.)

Apple and top app developers are facing a lawsuit alleging they've been illegally shuttling iPhone and iPad users' personal data to advertisers without consent. (Bloomberg Businessweek first reported the filing.)

The lawsuit seeks class action status against Apple and app developers Pandora, Backflip Studios, Weather Channel and Dictionary.com, which were also named as defendants, for alleged privacy and computer fraud violations. Apple and the other defendants are accused of transmitting personal, identifying information, including app use, to third-party ad networks without user consent.

"Some apps are also selling additional information to ad networks, including users' location, gender, income, ethnicity, sexual orientation and political views," states the complaint.

Apple did not respond to requests for comment, while the Weather Channel and Pandora declined comment.

"It's a pretty common type of suit that's very much in vogue now because privacy is a hot issue," said Brad Seiling, partner at Manatt, Phelps & Phillips and co-chair of the firm's class action group. "The challenge these suits face is that very often it is clearly and specifically disclosed what's taking place."

The complaint was filed last week in Northern California federal court on behalf of Jonathan Lalo, a Los Angeles County resident, and will pursue class action for the "millions" of U.S. residents that have downloaded the defendants' apps on their iPhones or iPads since December 2008. Three of the four apps cited in the complaint are in the top 50, ranked by downloads, in the App Store. As the complaint stands now, damages total a mere $5,000.

(Another complaint making similar claims against Apple and several app developers, including Pandora, Backflip and Weather Channel, was filed on the same day, Dec. 23, in the same court. "The two cases are independently filed," said David Parisi, an attorney for one of the plaintiffs in the second complaint, Dustin Freeman. "After counsel learned of each other, we are speaking to each other about the cases.")

While Apple discloses that personal information may be made available for advertising purposes in its App Store terms and disclosures, the complaint claims that the defendant's actions exceed the scope of consent given at the time of download.

App Store terms, which must be accepted when apps are downloaded, read: "You may be asked to provide your personal information anytime you are in contact with Apple or an Apple affiliated company. Apple and its affiliates may share this personal information with each other and use it consistent with this Privacy Policy. They may also combine it with other information to provide and improve our products, services, content, and advertising."

It also raises the question of who exactly in the app ecosytem is responsible for user data and related violations. Outside of Apple's iAd mobile ad network, app developers have direct relationships with third-party networks like Google's Admob or Millennial Media, though the complaint says Apple sets the "unique device identifier" that ad networks use to track users.

"The liability of platform owners for the apps on their machines is really unclear," said Tim Wu, professor of law at Columbia University and author of "Who Controls the Internet?" "This question is a lot like the internet question of the 1990s. No one ever said Microsoft was on the hook for viruses."

The suit is yet another sign that privacy concerns over online and mobile tracking are reaching fever pitch. Earlier this month, trade organization Mobile Marketing Association set out to create mobile privacy guidelines to determine acceptable and unacceptable practices.

"Frankly, not everybody in the industry does it right," said Mr. Seiling. "There are some instances out there when disclosures haven't been good or haven't been clear."

Contributing: Irina Slutsky
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Apple Rolls Out Self-Serve Tool For iAds

(Originally appeared on AdAge.com)

Web Tool Could Mean More Ad Dollars Faster For App Developers

Want to make an iAd without picking up the phone and calling Apple? Now, you can, at least in principle.

Apple has quietly released its first web development tool for its mobile ad unit called iAd Producer. While digital agency types are likely taking a sigh of relief now that they can develop mobile ads for iPhones--and soon for iPads--on their own without Apple's help, the move is likely also a ploy for Apple to pump ad money to app developers that are increasingly eyeing Google's Android platform.

Until now, Apple had developed iAds in house to make sure the new format got off the ground without hitches. That often meant delays because Apple would have to handle the ads in conjunction with agencies and brands. But now, letting agencies and developers build iAds themselves could mean faster development cycles, meaning more ads and dollars could follow onto the platform faster.

More ads could mean more money for developers that choose to continue to make apps for Apple devices. Keeping developers and their apps on Apple devices is key, especially because of Google's growing dominance in mobile. With more people turning to Android phones, developers could be persuaded to focus on building apps for Google's platform because of its larger audience. But not if Apple can keep developing for iPhone and iPad lucrative.

Google's mobile software Android is growing at break-neck speeds and there's early evidence that developers are flocking to the platform now that there's a solid user base. There are now 100,000 apps in the Android Market--that's three-times as many as this past spring. If Google's Android operating system continues growing at its current pace--it picked up more than 6 points in U.S. smart phone market share from July to October, according to ComScore--Android will soon beat Apple as the number-two platform stateside, after Blackberry's Research in Motion.

However, iAd Producer doesn't necessarily mean Apple will keep its hands off approving iAds. There's been no announcement about changes in the approval process--in the past, there have been complaints that Apple's involvement has slowed down get ads to market, but it's likely that process will evolve to make sure ads are technically sound, like how apps need to be approved before they end up in the App Store.

Google is so far trumping Apple on volume of ad inventory--research firm IDC projects iAd will close the year with more than 8% U.S. mobile ad market share, to Google's nearly 60%. (Google's percentage includes mobile search, while Apple does not run search ads, only display.) Also, Apple relinquished its non-Apple device inventory, which it acquired with Quattro Wireless early this year, in August to focus exclusively on iAd, a format only available on Apple devices. That was a sure sign that Apple is committing to subsidizing development on its devices alone.

However, the iAd network is growing, too, as it goes global and lands on new platforms like iPad. It's been U.S.-only since launch this summer, but has recently expanded to the U.K. and France this month and to Germany in January. The company claims more than half of Ad Age's top 25 U.S. advertiser by revenue have signed on for iAds since launch.
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Windows Phone Sales Not So Bad, Actually

(This originally appeared on AdAge.com)

A Look At The Numbers Behind the 1.5 Million Units Sold to Retailers and Carriers

Microsoft's first official sales figures for the much-hyped Windows Phone 7 are out and one thing's clear: the handset is off to a slow start. Across handset manufacturers, retailers and carriers bought 1.5 million units carrying Microsoft's refreshed mobile software in the first six weeks, according to Achim Berg, Microsoft's vice president of business and marketing for Windows Phones.

This figure is the first clue on how well the high-profile launch -- Microsoft tapped hot shop Crispin Porter Bogusky for Windows Phone's "The Phone to Save us from Our Phones" ads -- is paying off.

To be clear, Microsoft Windows 7 phones haven't reached 1.5 million consumers. The stat refers to the number of handsets that manufacturers sold to retailers and carriers. A Microsoft spokeswoman declined to provide a consumer sales figure, saying only that the company is "pleased with the initial response."

While the Windows Phone's sales are slow by today's smart phone standards -- 3 million iPhone 4s flew off the shelves in less than a month this summer -- at least Microsoft didn't repeat the Kin disaster, and so far the phone is outselling Google's Nexus One, as well as the first iPhone, meaning this would be a competitive product if Microsoft was selling it in 2007.

Let's take a look at the numbers:

$500 million
The marketing budget for Windows Phone has been reported as high as $500 million--the company has never confirmed this figure. However, Microsoft execs told Ad Age that the Windows Phone campaign was "competitive" with a past $100 million effort for Droid phones.

$333.34
Divide that $500 million ad budget by 1.5 million sales and that's more than $300 in marketing cost per unit sold. While that's undoubtedly a high acquisition cost, it only includes Microsoft's ad investment and not AT&T support. The carrier was a marketing partner and helped launch the new set of devices, including some ads and retail support.

$199.99
That's the cost of the Windows Phone Samsung Focus with a two-year contract with AT&T. The devices retails at $499.99 with no commitment.

74 days
Compared to past first-generation releases, Windows Phone is faring better than both Apple and Google's first mobile handset, Nexus One. It took Apple more than 10 weeks--74 days--to sell 1 million first-generation iPhones in 2007. In the 74 days following launch, 1.05 million Droid phones and 135,000 Nexus One phones were sold, according to analytics firm Flurry.

3 million
That's not to say Windows Phone doesn't have a lot of catching up to do in this decade. In 2010, Apple sold 3 million iPhone 4 handsets in less than four weeks.

9.7%
Microsoft had only 9.7% in U.S. smart phone market in October, according to ComScore. Compare that to Blackberry parent Research in Motion's 36%, Apple's 25% and Google's 24%.

However, Microsoft's not worried.

"Our numbers are similar to the performance of other first generation mobile platforms," Mr. Berg said in an interview on Microsoft's press site. "We're comfortable with where we are, and we are here for the long run; Windows Phone 7 is just the beginning."
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Apple Launches First IAd for IPad, for Disney's 'Tron Legacy'

(Originally appeared on AdAge.com)

Initial IAd for Apple's Tablet Is a Preview of What's Coming Next Year

The first iAd for iPad will launch this afternoon for the upcoming Disney blockbuster "Tron Legacy." This is a preview of what Apple's mobile ad format will look like on the iPad, and the only iAd planned for Apple's tablet for this year, an Apple spokesman told Advertising Age.

The format, designed to maximize the ad potential of Apple's tablet computer, will be launched widely in early 2011 when other ads start flowing onto the platform.
Like its iPhone and iPod Touch predecessors, the first iPad iAd is chock-full of the rich graphics, touch navigation and video native to apps. The full-screen "Tron" ad, which will run in iPad apps such as TV Guide, includes close to 10 minutes of video, images from the movie, a theater locator with showtimes, and a preview of the movie soundtrack with the option to purchase on iTunes without leaving the ad. For the first time in any iAd, users will also be able to send email straight from within the ad.

Apple's mobile ads have previously only run on iPhones and iPhone Touch devices. The new format for iPad comes just as the tablet is expected to be the "it" gift this holiday season, especially since the product recently went on sale at major retailers like Walmart and Target for the first time. There are so far more than 7.5 million iPads worldwide, though when iAd for the iPad launches early next year, the ads will only be seen in the U.S.

While Apple has not released the total iAd audience, there are more than 125 million of the company's mobile devices worldwide, though the iAd audience is only a fraction of that figure: iAds on iPhones are only available in the U.S., U.K. and France, though they're coming to Germany and Japan in 2011.

"Disney and Apple are excited to debut the 'Tron Legacy' iAd today as a special preview of iAd for iPad, which launches next year," said the companies in a statement for Ad Age. "iAd brings 'Tron's' pulsing energy and vivid graphic style to iPad's stunning display, creating a truly immersive ad experience."

Apple launched iAd--and threw the iconic computer maker into the advertising business--in April, after the company acquired mobile ad network Quattro Wireless early this year. While some marketers and agencies have become frustrated with Apple's control of the iAd production process -- and its expense -- others, such as Nissan are coming back for repeat campaigns.

Earlier this year, Apple told marketers that iAd would roll out on the iPad in November, but marketers have noted that the production of the ads, managed by Apple, is a time-consuming process, though an Apple spokesman says many of the early hitches have been ironed out.

This is the second time that Apple has used a Disney film to demonstrate a new ad format. Disney's "Toy Story 3" was part of the initial launch of the iAd on iPhones and iPods in April. Mr. Jobs is Disney's largest single shareholder and serves on its board of directors.

Research firm IDC projects iAd will close the year with more than 8% U.S. mobile ad market share, to Google's nearly 60%.
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What's Next for Groupon?

(Originally appeared on AdAge.com)

Having Passed on Google's Acquisition Bid, Burgeoning Global Player Has Insiders Watching Its Every Move

Groupon left many, many mouths agape last week, as the daily deals site walked away from a $6 billion acquisition bid from Google.

While news of the failed deal ensured that the last person under the last rock is now aware of the Chicago-based social-commerce startup, it also means more eyes are watching to see if two-year-old group-buying site will stumble as it walks away.

So, where exactly is Groupon headed?

"We'll continue to expand geographically and on the subscriber front," Rob Solomon, Groupon president and chief operating officer, told Ad Age on Wednesday. Beyond growing its already expansive global footprint -- Groupon has more than 40 million users in 300 global markets to date -- the company is also starting to float services that evolve its daily deals for local merchants to something beyond just emails and alerts.

As for where Groupon plans to plant its flag next, Mr. Solomon says its analyzing the best way to enter China, India and Korea and that the Middle East is also a likely region.

Even without a global partner like Google, Groupon's footprint is spreading at a dizzying pace -- it went from one country to 35 this year alone. With $135 million in new capital from Battery Ventures and Facebook and Zynga investor Mail.ru Group, Groupon entered Europe, Latin America, Asia and Russia largely through acquisition. In May, Groupon picked up CityDeal -- at the time, the European group buying service had sent out its first deal in Berlin only five months prior.

By summer, it was setting up operations in Latin America and, today, it gets 12% of its 21 million in global website unique visitors from Argentina alone, according to ComScore. It went on to acquire Russia's Darberry and Japan's Qpod in August and picked up a trio of sites to get into Hong Kong, Singapore, Taiwan and the Philippines in late November.

"What you'll find is our international business in the very near future will likely be larger than our North American business in terms of revenue," Mr. Solomon said. Like it's done up until now, acquiring fledgling companies like Qpod, which had 20 employees when it was picked up, is part of the formula.

Boots on the ground and subscriber lists abroad have not yet begun to pay off, though. Groupon has more subscribers outside of North America, but is selling far more within North America. The company reports 18 million deals sold in North America, and 7 million abroad, even though the company reports 19 million North American subscribers to 21 million abroad.

That's not to say Groupon isn't doing well -- it says it was profitable less than a year after launch and Citigroup analyst Mark Mahaney put its gross sales at $800 million (estimates for sales have ranged from $500 million to $1 billion). However, time with tell if local merchants will continue to brings their collective millions back to Groupon -- slashing prices and splitting revenue with Groupon ends up unprofitable for one-third of businesses, according to a study from Utpal M. Dholakia, associate professor of Management at Rice University. That meant 42% of small businesses surveyed said they wouldn't run a Groupon deal again.

On global sales catching up to those at home, Groupon spokesman says North America leads in sales because it's the oldest market. As for the others, conversion rates have traditionally improved over time. It could rely on perfecting sales and editorial strategies for international markets -- a key factor when local merchants and local buying habits are concerned. In the U.S., Groupon has created a stylebook and calculated editorial strategy to drive those conversions.

"I have a hard time believing [Groupon is] completing a level of diligence in these acquisitions," said Kevin Ryan, CEO of the strategic consulting and project management firm Motivity Marketing. "America is very unique in that the buying behavior here is not the same it is in South America, or Japan or China. Looking for the inside deal -- the local deal -- it's not the same."

Alongside Groupon, stiff competition is springing up abroad. In Brazil, a market Groupon has just begun to crack, group buying site Peixe Urbano opened its doors before Groupon and has 5 million subscribers. (Check back for Ad Age's three-day series on group buying trends in Latin America, Europe and Asia.)

Meanwhile, back in the U.S., more competitors rush the group-buying field. E-commerce giant Amazon recently invested $175 million in Groupon's biggest competitor here, LivingSocial. Local broadcasters and newspapers are wading into the fray with white-label technology so they, too, can set up shop and send discount emails on deals brought in from their existing sales forces. Though, Mr. Solomon is not worried: "It's easy to copy this model," he said. "But unless you're a 100% dedicated you're going to fail. There's going to be a lot of consolidating over the next year."

Groupon undoubtedly already has the brand, especially thanks to Google, and a healthy head start. But, to prove it can grow above that $6 billion, Groupon will likely have to think bigger than emails and mobile apps. Facebook has managed the feat, largely thanks to CEO Mark Zuckerberg's vision of transforming the website into the social connective tissue for the entire internet. Since Mr. Zuckerberg launched his social graph in April -- those like-thumbs-up buttons that have since popped up on websites everywhere -- the company's valuation has ballooned to $50 billion, based on recent private market transactions.

Groupon, too, has begun to think beyond the emails that have made it popular. While the company is largely known for its deal emails, arriving in users' inboxes daily, Groupon also supports mobile apps, which bring in a "material portion" of its revenue, according to Mr. Solomon. It also acquired a mobile developer Mob.ly this year.

In three U.S. markets, Groupon has launched an e-commerce storefront tool for local merchants, Groupon Stores, for businesses to create their own deals whenever they want and the Deal Feed. With the feed, consumers get a personalized stream of deals, where they can follow merchants and are served others based on prior behavior. The phenomenon builds on Groupon personalization, which it launched this summer to slice and dice the deals to be more relevant. It has also hired ad agency Euro RSCG for strategic counsel on its database and customer-relationship management.

"One driving principle is that we want to be the e-commerce engine for local transactions," Mr. Solomon said. "We hold mobile, hyper-local, social and real-time as basic tenets that we have to get great at. If we get those four right, that can be very powerful. We're focused on all of those things."

Contributing: Edmund Lee
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Ad Age Outlook Episode 19: Groupon's Growth, Call Centers and The Book of Tens

A podcast interview with The Beancast on where Groupon is headed after the startup shocked the business world by leaving Google's $6 billion bid on the table. Enjoy!
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Why I'm Fed Up With All the Check-In Hoopla

(Originally appeared in Ad Age.)

Thanks to the new school of mobile apps and their copycats, there are at least three separate apps that will let you check in to virtually any person, place or thing that you come across. Reading just from the list of apps Ad Age has written about, you can check in to restaurants, the people you eat with, TV shows, processed chicken at the grocery store, soda cans, books and, most recently, websites. Apparently my web surfing is so interesting you'll want to follow along.

As a self-admitted check-in cheerleader up until this point, I have to say, I've hit the wall. I've had enough.

Pretty much every other hour, a new check-in app is born or another brand jumps on the bandwagon. We've seen programs from RadioShack, Macy's, PepsiCo and a slew of retailers for Facebook Deals. Each app and brand has attempted different takes, of course, from games and scavenger hunts to discounts and loyalty programs. I'm impressed the check-in category has been able to attract such tony marketers, but I'm still lost. Aren't their test budgets a bit early for this frenzy? Won't marketers get tired and abandon the check-in once they realize there are so few people actually using this stuff?

My skepticism did not go untested. I vowed to check in to everything I could this week. And I do mean everything. I started off strong: I remembered to check in at all stops on my way to date night: the office before I left, Grand Central, the bar before dinner, the restaurant. I even Instagrammed a snapshot of the Grandma's-house décor at the Russian place Mari Vanna where we had a drink. It was kinda fun.

Things got a little trickier later in the week. It's not all date night and bars with lots of tchotchkes. Other than Foursquare -- my primary tool to brag about cool places I go in New York (sad, but true) -- I usually forgot. At home, I thought about checking in to Season 3 of "Lost." I am firmly in the I-love- "Lost,"-thank-God-for-Netflix camp these days, but I fell asleep on the couch before I found my phone.

I tried to check in to my Stieg Larsson novel during the few stops my train is above ground in the morning, but it was hard enough to juggle a book, coffee and purse on the rush-hour subway. Passing a grocery store, I wanted to download Checkpoints, the check-in app for that locale, but couldn't because I haven't upgraded my iPhone to iOS 4 yet. I guess that app is fine with constraining Apple devices' audience of 100 million to only those users with the latest software.

I took a field trip to CVS to try out the new Altoids and Ben & Jerry's programs on StickyBits, the check-in to products app. I went to the freezer case, found a pint of Cherry Garcia and scanned away. It worked on the second try but nothing happened. I continued on to check-out for the Altoids, and was met by a suspecting "Can I help you?" from the sales clerk. I told her I was just testing something.

"See?" I said, showing her my iPhone. "It's an app. It's marketing." "We don't allow customers to take pictures of merchandise," she said, not smiling. Oh. So I left after only one scan, before I could actually get it to work.

After that, it was very clear that, even in New York, the apparent testing ground for this new-fangled stuff, we're so far from a check-in to everything world. It was too foreign for even my early-ish adopter habits. With my slow 3G, I wasted time. It's hard to do everyday things like buy soap and think about being tech-forward.

I don't doubt that consumer behavior is getting there. My tweet stream, Facebook feed and the U.S. government's worry that check-ins are going to compromise war secrets are evidence enough that people are getting into the services, especially when it comes to restaurants, airports and bars. It just seems like we're taking things a little too far without enough infrastructure or everyday benefit.

I later caught up with StickyBits cofounder Seth Goldstein to tell him about my experiment. He clarified that the Ben & Jerry's promotion was only for Fair Trade pints of ice cream. But without signs in the store, I didn't know that. He acknowledged that promotion is an important part of these still extremely new programs. The Scion car brand is seeding Stickybits codes on its traditional-media ads, for one. And to the points I made above, he reminded me that technology will catch up and check-ins will evolve and get easier and more automatic. Rather than waiting for my 3G to load an app, a list of locations and a button to click, my phone will be able to "sense" where I am, or what jar of peanut butter I'm holding in the grocery aisle. (We'll save privacy concerns for another post.)

While I might not have the patience to look up what pint of Ben & Jerry's to scan for a chance to win a free T-shirt before I go to a store, fanatics will. My New York bar is someone else's packaged good.

"Everybody is passionate about something," he said. "There are people that are passionate about Oreos; there are other people that don't give a shit." I can buy that.
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