iBeacons Backgrounder

Copyright © 2014, Business Insider, Inc. All rights reserved. intell [email protected]

THE BEACONS EXPLAINER:

Everything You Need To Know

About Beacons And Apple's

iBeacon System

Cooper Smith | July 28, 2014

BII E-Commerce

2 Copyright © 2014, Business Insider, Inc. All rights reserved. intell [email protected]

THE BEACONS EXPLAINER:

Everything You Need To Know

About Beacons And Apple's

iBeacon System

Cooper Smith | July 28, 2014

This brief explainer and the accompanying FAQ dispel the most common

misconceptions about beacons, Apple's iBeacon system, and the way these work

with retail apps.

Click here to skip directly to the FAQ.

Click here to read our market forecast and report on beacons, "THE BEACONS

REPORT: Exclusive Market Forecast And Top Strategies As Retailers Race To

Adopt Them."

https://intelligence.businessinsider.com/the-beacons-report-exclusive-market-forecast-and-top-strategies-as-retailers-race-to-adopt-them-2014-7




How Beacons Work

A beacon, in its simplest form, is a small, low-powered and low-cost piece of

hardware that emits Bluetooth low energy (BLE) signals. The BLE that a beacon

emits can wake up apps that are installed on smartphones and tablets within a

range of about 160 feet.

This is useful because it allows developers to engineer apps that act a certain way

when they are within range of a beacon — in other words, location-based actions

and notifications.

All types of mobile apps — from

payments and loyalty programs to

couponing and shopping apps —

can leverage beacons and their

BLE to create a location-based

experience for users.

A single beacon can emit BLE for

up to five years (depending on

battery) and cost as little as a few

dollars. Usually they are not

bidirectional, and they can only transmit signals, not receive them.

But some vendors are adding more technology to their beacons for enhanced

functionality, such as Wi-Fi connections and the ability to send and receive

signals. Over time, we suspect beacons will take on many different shapes, sizes,

and functionality.

For now, beacons typically send a very small packet of data centered on a unique

identifier.


The identifier contains very specific location information, which, unlike most

location-based data, is not tied to GPS. Instead it is tied to specific store

locations and specific areas within a store.

The identifier has three basic components — a UUID, which is specific to a

beacon vendor, a "major," which is specific to a region such as a store location,

and a "minor," which is specific to a subregion such as a department within a

store.

We've talked to executives working with several beacon vendors, including

Shopkick and Estimote, and they have told us that retailers are using beacon-

powered in-store strategies to help them drive foot traffic, conversion rates, and

sales volume.


The BI Intelligence Beacons FAQ

This FAQ seeks to explain the multiple players involved in implementing beacon

technology and how they work together. These players include beacon vendors,

hardware vendors, smartphone platforms, retailers, app developers, and end

users.

1. What is a beacon?

A beacon is a small wireless device that constantly broadcasts radio signals to

nearby smartphones and tablets. Think of it as a lighthouse emitting light in

regular intervals. Mobile apps can listen for that signal and react in some way,

effectively triggering a location-based action in the app.

2. Why is Bluetooth low energy (BLE) important?

BLE is the signal emitted by beacons, and it's important for two reasons. First, it

transmits radio waves, which can penetrate physical barriers such as walls,

unlike Wi-Fi or cell signals, which are often disrupted. Second, BLE consumes

only a fraction of the battery power that classic Bluetooth does.

3. Do beacons work with iPhones and Android phones?

Yes, but they work differently. Only iOS 7 devices constantly scan for BLE and

wake up relevant apps — even if they are closed — when they come within range

of a beacon. iPhones and iPads can do this thanks to Apple's iBeacon protocol

(more on that below). Android devices, on the other hand, do not have a beacon

system of this type at the operating-system level. So this means that Android

apps must scan for BLE, and so in order for Android users to interact with

beacons, they have to have the app running on their phone, at least in the

background. Beacon scanning at the level of apps means there is more of a

battery drain for Android users.


4. What is an iBeacon? Is it just an Apple beacon?

Sort of. iBeacon is not an off-the-shelf beacon that retailers can buy and install

in their stores (at least not yet). Apple has filed documents with the Federal

Communications Commission suggesting that the company wants to

manufacture iBeacon hardware. Currently, iBeacon is a system built into the

latest version of Apple's iOS 7 mobile operating system that lets iPhones and

iPads constantly scan for nearby Bluetooth devices. When iBeacon identifies a

beacon, it can wake up relevant apps on someone's phone, even when an app is

closed and not running in the background. Additionally, iPads and iPhones can

act as beacons; they can also emit beacon signals to wake up apps on other iOS

devices.

5. What does Apple’s iBeacon technology do?

iBeacon lets iPhones and iPads constantly scan for nearby Bluetooth devices.

When it identifies a Bluetooth device, such as a beacon, it can wake up an app on

someone's phone — even if the app is closed and not running. Developers can

make their apps responsive to iBeacon by using Apple's Core Location APIs

(application programming interfaces) in iOS.

6. Do beacons beam data to phones?

Beacons do send small bits of data, typically a unique identifier. This allows

mobile apps to differentiate between beacons and perform an action when

necessary (that is, a location-triggered notification). Think of it as the

combination of a hyperaccurate GPS coordinate or an IP address. The identifier

consists of three components: a UUID, which is specific to a beacon vendor; a

"major," which is specific to a region, such as a store location; and a "minor,"

which is specific to a subregion, such as a department within a store.

7. If, as a retailer, I purchase beacons from a vendor, how do I know

they'll work with my app?

http://arstechnica.com/apple/2014/07/fcc-filings-reveal-apple-designed-ibeacon-hardware/


Developers have to know the unique identifier of a beacon in order to include

that in the code and for their app to be able to recognize it. If an app doesn't

know the identifier for a beacon, then it can't be on the lookout for its BLE

signal. Most beacon vendors provide developer support so that whoever uses

their beacon can get their apps to work with them.

8. Will other apps — besides mine — be able to talk to beacons?

That depends. Some beacons require that an app has authorization; that is, the

retailer can keep other apps from accessing its beacons' location data. This

allows retailers to maintain a closed network of apps that can interact with its

beacons. But most beacons today are "open network," meaning their unique

identifier is publicly available for developers. Many retailers are choosing to

keep an open network so that third-party developers can create in-store apps

that will work with their beacons. For example, a supermarket chain might allow

a nutrition app to access its beacon identifiers to program notifications that will

encourage its users to buy healthy food.

9. What if there’s bad cell reception in the store or no in-store Wi-Fi?

Will a beacon-powered notification still work?

No. Because beacons send only small amounts of data, apps still need to be

connected to the internet to fetch relevant content from the cloud (that is, server

side). One exception to this limitation: A very limited notif ication — "Welcome

to ACME Shoes!" — might be stored locally on the phone, programmed into the

app, and shown to all users who approach a set of beacons, regardless of whether

they have cell reception or a Wi-Fi connection.

10. If beacons are all about pinging phones to tell them a location and

to wake up a specific app, why do people talk about using them to

send in-store coupons based on shopper locations?

This is a common misconception. Beacons themselves do not send notifications

to someone's phone; apps do. Beacons simply send a unique identifier to apps as


a sort of geographic landmark. That

signal makes an app aware that it's

time to send the user a notification

or do some other type of action.

11. How many permissions do

users need to give in order for

my beacons to detect their

phones?

First, a user has to have Bluetooth

enabled on their phone, which is not

by default, so that's a form of opting

in. Second, apps programmed to talk

to a specific set of beacons have to

be installed, which is another form

of opting in. (As we said above, apps

effectively power all the location-

tracking and notifications.) Third,

users are usually asked to grant

specific apps permission to share

their data or track their location.

12. I heard that beacons might be used for payments. How would that

work?

This is true. For example, PayPal is developing such a beacon that can plug into

an internet-connected PC or point-of-sale system via a USB port. These beacons

are also able to connect to the internet via Wi-Fi and receive — not just transmit

– signals. They are "bidirectional," so in addition to waking up the PayPal app on

shoppers' phones, the beacon passes the phone's details to a PayPal server over

the internet (like Wi-Fi or broadband), which starts a secure process on the

server side to check the user into the store. Once that happens their payment

information and their photo (which the user has to upload to the app) are

Macy 's teamed up with vendor Shopkick to create beacon-powered in-store notifications.


relayed to the store's checkout systems. All the customer has to do then is tell the

cashier that they are paying with PayPal and then they can identify the customer

by their photo and charge their PayPal account based on the items they are

purchasing.


About BI Intelligence BI Intelligence, a research service from Business Insider, brings you and your team business intelligence for the digital age. Our research is fast and nimble, reflecting the speed of change in today's business. We give you actionable insights that enable smarter and better-informed decision-making. We publish in-depth reports, news, and an exhaustive library of charts and data focusing on key digital areas: mobile, social, e-commerce, digital video, payments and more. To learn more please visit: intelligence.businessinsider.com. Analysts BI Intelligence has an experienced team of analysts led by Henry Blodget, CEO & Editor-in-Chief of Business Insider. BI Intelligence’s team of dedicated analysts have deep analytical and industry experience, and work with Business Insider’s journalists covering specific verticals, such as technology, advertising, and strategy, to produce unique insight and analysis on today’s digital trends. Copyright © 2014 Business Insider, Inc. All Rights Reserved. Proprietary and Confidential Property of Business Insider, Inc. Licensed for Use By BI Intelligence Subscribers Only. Access to and use of this proprietary and confidential information is limited by the terms of conditions.

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