In December, JUICE Mobile spun off its beacon network into a standalone ad tech company called Freckle IoT. Already the largest beacon network in the Canada marketplace, the company describes itself as “a testing ground for the activation of next-generation connected devices." The Toronto-based firm’s goal is to build a platform capable of talking to a variety of devices with the aim of driving store visits. “Beacons are first but they’re not the last" focus area for Freckle, CEO Neil Sweeney said. “We’re modifying our SDK to move it into wearable devices already, including the Apple Watch.” Sweeney spoke to AdExchanger. ADEXCHANGER: What led to the spinoff of Freckle IoT? NEIL SWEENEY: The genesis of Freckle IoT started well over a year ago. I believe that mobile is moving toward activation and beacons are a way for us to participate in that. The ad units that we’re using today in mobile are going to change. They’re not necessarily going to become obsolete, but I do believe very strongly that the 320 x 50 banner, for instance, is not going to be the dominant advertising medium for mobile in the future. So if you subscribe to that same sort of thinking, the question becomes, “What is the next ad format?” I don’t think it’s going to be a traditional ad unit at all. I think mobile is moving very quickly from a medium that’s dominated by a traditional ad unit to a medium that’s going to be driven by activation. Activation is really one degree removed from the traditional ad unit. So we need to pinpoint the tactics and the technologies that can allow for activation. At its core, mobile advertising is about location. Location is the cookie of mobile. And the beacons that have already come into play have begun to solve some of the inefficiencies within mobile advertising. How do beacons solve the problem of evolving mobile ad units? You hear people talking about Wi-Fi or lat-long targeting in traditional mobile advertising. But we all know that there are flaws in that. However, beacons are a very legitimate location source because they can be accurate up to 1 foot. We started with beacons but that will evolve. Beacons are the gateway drug to IoT. What’s the advantage of separating Freckle IoT from JUICE Mobile? Freckle entered into a sales relationship with JUICE, and JUICE builds products for mobile. We have Nectar, a programmatic-direct platform for mobile that has its own data, and Swarm, a mobile DSP that has its own data. And now we have Freckle IoT, a proximity company with its own data. By pooling all the data together, we’re able to create a much more robust profile of an individual. If you’re relying entirely on beacon data, there’s no scale. A beacon has the ability, just like a device, to give off certain pieces of information. But that information in isolation is only so good. But combined with bid request data you’re using for an existing advertiser, it starts to really get interesting. What sets Freckle IoT apart from other beacon networks? At Freckle IoT, we’re doing both the in-store and the out-of-store components. For example, imagine you’re Target. You have a Target application, you put a bunch of beacons inside of Target stores, you implement the specific SDK inside of the Target application, which is owned by, say, 350,000 people, and you can market to consumers who have the Target application when they’re inside a Target store. But as a marketing initiative, that sucks. In that instance you’re preaching to the converted. You’re talking to a Target shopper about shopping more at Target when they’re already in a Target store. That’s not to suggest that model is wrong. But if you were Target, wouldn’t you be more interested in having a Wal-Mart or a Macy’s shopper come to Target? You can’t do that in-store, you have to do that out-of-store. So we’ve focused on trying to drive “door swing” by taking individuals that are within proximity of the store and driving them into stores. What should advertisers and brands be cognizant of when using beacons? Communication in this format needs to be fundamentally different from communication in a traditional mobile advertising format. Sending a branded notification to an individual in a hyperlocal environment doesn’t do any good. If anything, it’s doing more harm than good because it reads like spam. And if mobile is moving toward activation, then marketers have to think differently about how they’re communicating to customers on mobile devices. In the last two or three years it’s always been about pumping behavioral and targeting data into traditional ad formats. But when you send a personalized notification to an individual within a 100-meter radius of a store, that message isn’t going to work. It has to be more conversational and it has to have more utility. What about privacy? Everything tied to Freckle IoT is opt-in, and that ties back into the scale issue. We’ve seen companies in the US get fast and loose by installing beacons in stealth, because their revenue depends on it. If your business model is not entirely dependent on that, you can look at things a little more holistically and not be tempted to push the envelope. People are freaked out about proximity on the privacy side. So we’d rather overdo it on compliance, privacy and opt-in tools than underdo it. It’s also necessary to be diligent about the types of messages sent and to set frequency caps. What kinds of campaigns are you running? We’ve got a number of campaigns running right now with a number of CPG firms and convenience store firms, but I can’t share names. We’ve also licensed our SDK to a number of premium publishers, which turns those publishers into proximity-enabled applications in addition to being content applications. So notifications originate from those publisher apps. The reception’s been really high and the interactions with these notifications have been really high. The benchmark for most people in mobile is about .4% CTR. But we’re seeing engagements rates of 2%, 4% or 6%. Though we’re dealing with a small base, the engagement numbers are incredibly high. What next for IoT? Conversations about the connected home and wearables are interesting, but the challenge with wearables is that there are a lot of single-use case devices that don’t connect to a larger platform. The notification originating on your handset is going to port, and it’s going to move to other wearable or connected devices that consumers will wear on their body or have in their home. The Apple Watch is also going to be interesting, because it’s going to have a ton of scale in its early form.