Privacy Concerns Remain with Smartphone Geolocation Data

The geolocation data emitted by smart phones provides valuable information about consumer spending habits, and companies such as Thasos – with a business model based on analyzing and applying that data to investment decisions – are aggressively pursuing the opportunity.

Smartphones keep their owners more connected than ever in human history, and generate potentially lucrative real-time data in doing so. The Thasos Group, founded at the Massachusetts Institute of Technology in 2011, describes its approach as a combination of applying the latest technology in artificial intelligence, distributed computing and privacy technology to convert raw data into comprehensible trends that could influence companies’ stock performance.

“We process up to three-to-five terabytes of data per day and use that data to measure economic activities, such as how many people visit a store or a commercial property, how many people go to work or travel and how many man-hours are spent in a factory,” said Thasos chief scientist Wei PanOpens a new window .

The data is collected from smartphone apps, many of which require geolocation information in order to run. The providers selling the raw data to Thasos first strip it of individual identifiers, leaving the times plus longitude and latitude coordinates. Given the millions of phones in use, this data provides valuable information about trends of economic habits, such as a rapid growth of interest in a specific car model in a particular neighborhood.

Alternative Data Fuels Investment Strategies

Thasos claims it currently receives data from approximately 100 app companies, and uses the data to analyze, for example, the impact of lower prices on Whole Foods foot traffic.

“Using generic movement patterns, we noted some shoppers started to explore Whole Foods who would never go there before,” said Pan.

Geolocation data from smartphones is a new frontier for “alternative data” that investment strategists, such as hedge funds, use to identify creative and potentially lucrative investment approaches. It also tops wish lists for a large chunk of asset managers and hedge funds, according to a report by Financial News, which notes that spending on alternative dataOpens a new window is expected to grow to $7 billion by 2020.

Not all investors are convinced that the surge of interest in geolocation data is a valid indicator of its possible usefulness.

“It is harder than it’s sometimes portrayed to find valuable, robust signals among the more esoteric sources,” says Geoff Cross, a hedge fund manager with the Winton Group. “Our experience has taught us that, often, marketing presentations offering the latest hot data source have succumbed to basic [statistical errors].”

GDPR Curbs Data Analysis

Stripping personal data may not be enough to comply with the European Union’s recently-passed General Data Protection Regulation, which went into effect in May, 2018. The new rules emphasize transparency, and the burden for demonstrating that permission has been granted may well be on the shoulders of the data parsers.

“The E-Privacy Directive says location data derived from telecoms can only be processed for very specific purposes related to providing and billing the telecoms service,” says Jaap Tempelman, a privacy lawyer with Clifford Chance. “If you want to use it for any other type of service, you need specific consent from users.”

Concerns are also growing about how this use of data impacts individual privacy. Companies selling phone data package it in an aggregated form and strip it of individual indicators. Yet critics say that the information is not as anonymous as sellers claim, because it can be combined with other public data to single out a phone user and location.

Pinning Geolocation Remains Possible

AccuWeather is one such app that has provided the kind of geolocation information used for financial purposes, according to at least one source. It also reportedly did not meet the minimum requirement for ensuring the data could not identify an individual or it meeting consent requirements.

“Even when the (Accuweather) app didn’t have permission to access the device’s precise location, the app would send the Wi-Fi router name and its unique MAC address to the servers of data monetization firm Reveal Mobile every few hours” reports Zack Whittaker. “That data can be correlated with public data to reveal an approximate location of a user’s device.”