Will Google’s Eddystone EID be Viagra for the Bluetooth Beacon Ecosystem?

This is a guest post by Stephen Statler, principal of Statler Consulting. If you’d like to contribute a piece of original analysis to GeoMarketing, email us at Tips@GeoMarketing.com.

This new Google standard has very significant implications for almost every player in the proximity market. We review the Eddystone EID announcement and explore seven of its likely effects – along with the occasional digression into adolescent humor:

Performance problems can be an embarrassing topic of conversation, whatever the context. The beacon ecosystem has been burning the candle at both ends. Creating 300+ location and proximity businesses can take it out of you (see www.proxbook.com) and the enormous expectations can create performance anxiety. Over 10 billion beacons by 2020 (according to Gartner) is enough to put anyone off their game.

So maybe Google’s Eddystone EID can help with this beacon Ecosystem Dysfunction (ED) issue.

There has been an issue at the center of this problem that is taboo. Frankly it’s been hard to talk about, because when we do, the excitement wears off. The mood killer is “standards”, or lack of them. The beacon ecosystem has been suffering from partitioning of the industry by proprietary manufacturer specific APIs. Apple’s iBeacon works across manufacturers but has huge gaps, especially around management and security. Few of the parties involved have wanted to acknowledge the issue, but until you do that, it’s hard to take action to solve it.

Who cares?

Venues, developers and solutions providers should care.   There are three reasons why standards problems can create beacon ED, which manifests itself as a disappointing level of performance, as measured by the number of large production deployments (versus pilots). Excessive dwelling in pilot projects is an indication of a lack of confidence, which kills performance.

  1. When developers write apps for a particular beacon vendor’s proprietary APIs, they are locking themselves into a particular platform. Most venues investing in Bluetooth beacons want to control who accesses them. The APIs developers have to use to control this conditional access are completely non-standard. The iBeacon standard is silent on the topic. In many cases developers are getting locked into the fortunes of startups. If the startup goes under, that’s bad news for the project and the career of whoever funded it. If these startups are successful and they get bought by a big company, app developers and venues are playing Russian roulette with the company they will be doing business with after the acquisition. It’s possible there may be a conflict of interest between your business and the acquiring company.
  2. If you like your vendor’s beacons, you had better like their fleet management system too. Currently if you buy a vendor’s beacons, you are automatically locking into using their tools for tracking and configuration.
  3. There is no standards approach to aggregating and sharing access across beacon providers. Imagine the mobile phone business before you could roam across networks. When your telco didn’t have cell towers where you needed coverage, users would be unhappy and the telcos would be earning a lot less money. We are in a similar situation with small islands of beacons, none of which have established critical mass from a network point of view. If you want an app to work across different retailers and DMAs (regional markets) standards would make achieving this scale a lot easier.

Google Eddystone EID takes major steps to addressing all three of these issues. The standard, which was introduced last week, has implications beyond what many have discussed so far.

First, how does this latest version of Eddystone compare with Apple’s iBeacon? Remember those old cell phones the size of bricks that were used back in the 80s (think Michael Douglas in Wall Street), that’s iBeacon 1.0, compared with the Star Trek communicator, that’s Eddystone.

OK maybe there’s a little exaggeration, but the point is when iBeacon came first (over 2 years ago!) it was a historic breakthrough, similarly Michael Douglas looked pretty cool with that amazing breeze block cell phone, but Eddystone has developed the idea and gone so much further.

What is Eddystone EID?

Before we look at what the implications of Eddystone EID are, let’s recap on what it is. In our book “Beacon Technologies, A Hitchhiker’s Guide to the Beacosystem” we describe EID is a “beacon conditional access” standard. You need conditional access if you want to control who sees your beacons, deny access to competitors, charge your partners for their use of this asset, while avoiding privacy and fraud issues.

With EID the identifier of a beacon is changed periodically, so that unless you have access to a key, the identifier appears to be random and meaningless. By default, the change varies around every 8.5 seconds (although this can be adjusted). So if someone scans the beacon and tries to use that identifier again after a few seconds the original beacon will have changed what it’s broadcasting and provide no basis for identification, unless you have the key to unlock the encrypted identity or are using the Eddystone cloud service to resolve it to the unencrypted ID, which remains consistent over time.

While an increasingly large number of beacon vendors have “rotated” the UUID’s of their beacons as a way of avoiding unauthorized tracking and forgery of beacon IDs, the effectiveness of their approaches have varied. Stories abound of schemes with obvious flaws, like rotating a limited number of IDs, using a single key for the whole network or failing to randomize the beacon’s MAC address. The Google approach has used the full power of the Google brains trust, with a team of Israeli cryptographers using a mind numbing amount of mathematics to establish the efficacy of their solution (read section two of https://developers.google.com/beacons/eddystone-eid-preprint.pdf if you have problems with going to sleep at night). The first firewall of protection in Eddystone EID is a firewall of sleep inducement for any bad guys trying to understand the cryptography. Google have done their homework to make sure the solution doesn’t sacrifice response times for security, with an approach that scales up to the 10 billion beacon level that Gartner predicts for 2020.

Standardized Management Interface

The piece of the Eddystone announcement that many news organizations have failed to give adequate coverage to, is the standardization of the management interface for beacons. For the first time there is a public specification of the Bluetooth GATT commands that can be used to configure a beacon for any of the Google Eddystone frame types.   GATT is a standard command set that Bluetooth beacon profiles for other devices such as heart monitors are built on.

Effect #1 – Beacon Management Tool providers may support any Eddystone complaint beacon. The market expands. Sourcing flexibility and competition increase.

EID takes us a big step towards beacon owners (such as retailers and other venues) being able to buy their beacons from Beacon Vendor A and using the tools from Vendor B to manage them. This is new.

What does this have do to the business of beacon vendors? If they are selling beacons as a loss leader with a view to making money from beacon management services, they had better make sure their beacon management is top notch.

For venue owners, the risk of investing in beacons goes down. They can potentially source beacons from two vendors, with a single management system taking care of both.

The beacon management business gets a lot more attractive; suddenly you don’t have to invest in making beacons and winning the best beacon battle. Your total addressable market goes from just your beacons, to all vendors that make Eddystone beacons. Most of the top beacon vendors announced support for EID at the time of the announcement. So we can expect some of the larger providers of network management infrastructure (CA, IBM, Cisco & HP) to pile more investment into this area. Beacon management likely gets included into the management of other network and compute nodes. All this is good for potential investors in beacons.

This isn’t all bad for the smaller guys making beacon management solutions either. They can move fast and have the experience to grow into this bigger market. As their investors consider their exit strategy, all these enterprise management companies become attractive potential acquirers.

Exciting – if this doesn’t get an entrepreneurs blood flowing faster, what will? Let’s get back to the main point of EID.

Effect #2 – More Apps. For the first time there is a way of controlling who sees which beacon consistently across beacon vendors. It’s easier for Beacon App developers to use multiple sources of beacons. A bigger market should drive the creation of more apps.

Sometimes the venue owner and the app owner are one and the same, but increasingly the apps using beacons will come from third parties, not just the venue owner.   This is a good thing. Imagine the PC industry if every vendor had their own incompatible OS – what state would the software industry be in today? It would have been crippled. That’s the situation we had with beacons.

For beacon app developers, their total addressable market just got a lot bigger, so we should expect more investment in beacon apps. This is good because despite all the beacons being deployed, the quantity of quality apps has been surprisingly small. This provides the market incentive for more investment and better apps.

Effect #3 – Beacon networks get bigger

The economics of each app having their own dedicated beacon don’t add up. Even though beacon hardware is cheap, the deployment process can cost hundreds of dollars. The solution is to have beacon networks where different apps can use the same beacon. At an airport, the United App, the Delta App and the airport’s own app should be able to share the same beacons.

For example, the beacons installed by inMarket in over a thousand Rite Aide stores are servicing apps from many more companies than just Rite Aide. ShopSavvy, Epicurious and List Ease all make apps that can use the Rite Aide beacons, so long as Rite Aide approves.

Take this to its ultimate conclusion and you can imagine app developers buying access to a beacon network via a web console that is as easy to use as buying a Facebook advertisement. Networks of “beacons on demand” are key to shrinking the lead time to deployment and injecting more vitality into a sluggish ecosystem. Today many large deployments are taking as long as a year. With established networks of beacons, they can take a matter of minutes. When every beacon vendor has their own way of granting access to beacons, managing access between competitors can take a long time. If everyone of the vendors can use Eddystone EID, that consolidation and interoperability makes those islands of beacons start to look like a huge federated system. When you are in marketing or advertising, size matters. Big campaigns should be national.

Effect #4 – Google makes more money.

So what does Google get out of all this? It has created the Eddystone standard and is operating what could be a hefty cloud service to resolve the identity of all these beacons and host the beacon metadata for free. How generous are they?

Google Maps is arguably its own operating system platform; beacons have the potential to make the best outdoor maps platform the undisputed leader indoors too. Beacons can provide the extra clues as to where the blue dot should be inside a building, but only if Maps can understand which beacon is which. In a world with proprietary beacon conditional access layers, Maps is blind to this treasure trove of indoor location truth. If everyone used EID to protect access to their beacons, then suddenly the lights are turned on, and in the name of helping the end user find their way (which venue is going to deny their customers that), Google can start to learn more about what we are searching for indoors. Once Google know that, then there are any number of ways that this can be used to enhance the targeting and attribution of AdWords. If they serve up an ad for Baskin Robins and they can see a shopper search of that store in the mall and visit it, that’s valuable.

In a law suit against Google, Oracle estimated that Android had generated $31 billion dollars in revenue and $22 billion in profits since 2008. Consider what kind of lift in CPM/click-through rates might be achieved based on knowledge of what stores or products shoppers are near when you are looking at an ad. Now apply that percentage to $31 billion and it looks like Eddystone EID can generate big bucks for Google’s core business.

Effect #5 – Retailers have to decide if the benefits of app availability and vendor independence outweigh having Google know where its customers are.   Retailers are likely to decide EID is worth it.

We have seen retailers are suspicious of any signs that Google are interfering with their business. They blocked the search giant’s mobile payments offering Google Wallet from being used in their stores, despite its merits, long before Apple released Apple Pay, its version of the same offering. So we can be assured there will be a skeptical eye on the Eddystone standard, especially as Google is encouraging app developers to use its Proximity API to store all sorts of useful metadata describing the location of each beacon up in Google’s cloud.

However, this is a different to situation to Google Wallet. If retailers are suspicious about trusting Google with their beacon metadata (such as the type of products nearby), they can decide they will manage this metadata outside of Eddystone. A relatively small number of big retailers could kill Google Wallet, but Eddystone has a broader base of users – airports, stadia, museums and enterprises who can start to seed adoption. Are retailers and shopping malls really going face the frustration of their shoppers by crippling the effectiveness of Google Maps if other venues are using it? Will they give up access to the larger catalog of apps that are likely to focus on doing an Eddystone EID port first? Having the ability to switch out different beacons and to multi-source will be hard for retailers who love to get the upper hand with their suppliers.

Retailer industry groups like the Merchant Advisory Group would be well advised to put Google on notice now that if Google wants its members to adopt Eddystone EID, Google shouldn’t use the technology to “showroom” it’s members, by serving competitors ads based on indoor location fixes. Now is the time to make that deal when Google needs their endorsement the most.

Effect #6 – Beacon vendor consolidation

Few beacon vendors make money on hardware. In an EID environment, where a venue can switch and competitively source throughout the life of a deployment, it just got even harder to make money. There is still room for a good number of beacon vendors, but if you aren’t shipping in five or six figure volumes, it’s going to be hard to justify the investments required to stay competitive. Most beacon vendors are hoping to make money either with the apps (orchestration), middleware or services that run on beacons. EID gives them the same flexibility as venue owners. They can partner with the best beacon vendors and switch if they need to. We aren’t forecasting an increase in Beacon vendors going bust, but we do expect to see more “pivots” (to software and services) than in a Bolshoi ballet.

Effect #7 – Apple decides to compete – iBeacon 2.0 appears at long last

It may not happen this year, but Apple is likely to see Eddystone as a competitive challenge that is too hard to resist. Google coopted an invention Apple elevated out of obscurity and improved it way beyond what Apple now offers. Sure Apple have edged away from the ads business, but they care about user experience, they care about Apple Maps and they seem to want to beat Google. iBeacon 2.0 is way overdue and maybe it takes Google beating Apple at its own game to put iBeacon on the front burner again.

Eddystone EID – A potent cure for Ecosystem Dysfunction

In summary, what some might see as an incremental change to its Eddystone standards portfolio goes well beyond that in terms of its effects on the ecosystem. Eddystone EID has the potential to take an ecosystem that was flagging and re-inject a vitality that has been missing recently.

*The former head of Qualcomm Retail Solutions’ Strategy and Solutions Management groups, industry veteran Stephen Statler is principal consultant at Statler Consulting, writing, training and providing advice on the application of Bluetooth beacon technology to entrepreneurs, investors and venue owners. He is an Advisory Board Member of a number of companies pioneering in the application of proximity technology including: Unacast, Rover Labs and PassJoy. He is also the author of the forthcoming book, The Hitchhiker’s Guide to The Beacosystem.” His past GeoMarketing contributions have included Five Ingredients of Beacon Magic, Is Proxbook the Arrogant Bastard of the Beacosystem?, and Is Google’s Eddystone The Donald Trump Of The Beacosystem?