iPhone privacy changes lead to layoffs at startup

Apple giveth, and Apple taketh away.

When iOS8, Apple's new mobile operating software, rolls out in the fall, a subtle change in how Wi-Fi networks identify nearby iPhones is set to upend how some retail stores are tracking repeat visits by shoppers. One of the companies helping retail stores do that tracking is already feeling the impact.

Nomi, a startup that has raised $13 million in venture capital, has laid off at least 20 of its 60 or so employees, in part because of these forthcoming changes, according to sources.

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Nomi sold a service to retail stores that allows them to track how many shoppers visit their stores, where they spend time inside the stores, and how frequently they return. Some of this tracking is done by installing video cameras in stores to count foot traffic. But repeat visitor information was mainly gathered by keeping track of an iPhone's MAC address — the 12-character identifier that is broadcast when a phone is searching for nearby Wi-Fi networks.

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The problem for Nomi, and others in the space, is that Apple will start randomizing that number in iOS8, as Digiday and others have reported in recent months. That means that an iPhone running iOS8 that enters a store one day with a certain MAC address, will end up broadcasting a different MAC address if it appears in the store a few days later. So say goodbye to being able to track repeat visits through Wi-Fi.

"On the Wi-FI side, Apple has basically said that they don't like this method of tracking," Nomi CEO Marc Ferrentino said in an interview on Friday morning. "Apple is signaling to the market that beacons are the way that they want this to be done."

Nomi previously announced that it was going to start selling beacons to retailers as part of its in-store tracking system. Beacons are tiny pieces of battery-powered hardware that can broadcast messages to nearby phones via Apple's iBeacon technology.

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Nomi is now doubling down on video and beacons, and not installing any new Wi-Fi systems. It will keep current Wi-Fi systems up and running, since they'll continue to provide information about individual shopper visits, such as where in a store shoppers migrate and how quickly they leave the store after entering.

In the meantime, Nomi cut staff, including many salespeople, in early July in part because the company had a large backlog of store installations that needed to be completed. And, in part, because beacon installations don't require as much time and resources as Wi-Fi installations did.

"We're excited about this," Ferrentino said of Apple's promoting beacon technology. "It takes the privacy conversation off the table and puts it in the end users' control."

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By Jason Del Rey, Re/code.net.

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