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Wednesday, May 16, 2012

Social Media and ID Scanners

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Interesting ID Scanner concept in the press lately.  Use an ID Scanner to collect information about a bar's customers, let a 3rd party collect the data and then let the 3rd party sell the data via an Apple iPhone app.  The premise is consumers will want to pay a fee to find bars with certain male/female ratios or age groups or perhaps social economic status based on their zip codes.  It’s an interesting idea.

But like many Internet Businesses, one needs to understand the value proposition from all perspectives; the consumer, the nightclub owner and the 3rd party data service provider.  Lets look at the Night Club owner’s value proposition first.

Night Club owners value proposition.

The bar owner needs to purchase the ID Scanner and is not paid for selling his customer data.  So the Night Club owner does not directly benefit from participating in the system.  What value and risks does providing this data have to the establishment?  Its basically in how consumers using the mobile app respond to the data generated from the establishment.  If consumers flock to the business because the data makes the club look hot, great.  If they go else where, trouble.   

Night Club Owner Risks

  • Customers may not like having their data sold without consent.  If clients understand that they are now a data point in some mobile app, will they still want to be scanned?
  • What safeguards ensure to protect customer's data?
  • What if a virus gets into the ID Scanner and starts sending client data to a competitors or worse to identity thieves.
  • What happens if the data shown to consumers is not accurate?
  • How is fairness ensured?  What prevents other bars from manipulating their demographics by only scanning young girls and manually reviewing male clients? 
  • Why should a bar let itself become a dot on some mobile app where it can't control the data presented to the public?


Mobile App Users.

  • What prevents a bar owner from accurately scanning?  Say a bar owner scans all females and skips every other male?
  • What prevents bar owner from skipping older people and scanning just younger clients?
  • What prevents a bar owner from having a stack of female IDs and scanning a bunch at the start of the night to make the club look hot?
  • Critical Mass - say only 5% of the bars in a city participate?
  • How timely is the data?  Since the ID Scanner only scans people on the way in, it can grow stale by the time I get to the bar. 

Night Club Patron

  • Where is my data going?  How is this system using my data?  The club owner is not in control.  I may trust the club owner, but he may not even understand what the ID Scanner is doing with my data.  Will he know if the 3rd Party provider changes terms of service?
  • If there is a data breach, who is responsible?


3rd Party System Provider

The hope if the system provider is that all players in the scheme are honest, participate and they make money from selling this data to consumers via the app.  The challenges of launching a scheme like this are:

  • Gaining critical mass - how does one get all bars in a city to join?  Especially the bars, which have an ID Scanner from another company.  Why spend the money on a new scanner?
  • Developing the Technology - One has to build and manage a system which operates in a real time and serves thousands of clients.  Its no trivial task to collect data from hundreds or thousands of ID Scanners, process the data and then serve it up to consumers using a mobile app.  Its easy to do when there are 10 bars and its just one laptop acting as the backend.  Scaling it is non-trivial.
  • Ensuring security of a giant networked system.  What if a virus gets into the system and then start sending data from the scanners to a third party.
  • Ensuring the systems stay on WiFi and connected.  Some bars may just unplug from the system.  
  • Liability for Identity Theft.  Insurance should be purchased in the event this system inadvertently starts disclosing personal information.
  • How many cities are worth targeting.  Will the system work in Houston Texas?  How about Albany New York?  Clearly its harder to justify in smaller population centers.

So like many Internet Business Cases, if one starts looking at the value proposition from all perspectives, one can better understand its viability.  Any investor in such a scheme should understand these risks




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