Apple (NASDAQ:AAPL) rolled out iBeacons as part of iOS 7 last year. The idea is that iPhones and iPads can use their built-in Bluetooth chips to talk to each other or other Bluetooth-enabled devices within range of one another. This would allow retailers to push notifications to shoppers based on their location within a store.
There's only one problem: Shoppers need to install a retailer's mobile app on their iPhone to take advantage of the technology. That's a major hurdle for retailers to overcome, but there's one app that just about everyone has installed on their smartphones: Facebook (NASDAQ:FB).
There are many reasons Facebook would be interested in partnering with retailers, and the result could be mutually beneficial.
Wide adoption; little use
More than half of the U.S.' top 100 retailers are experimenting with beacon technology, according to a recent eMarketer article. Most will get very little use out of their beacon systems without a strong presence on mobile devices, though.
Even if a store does a good job informing shoppers through in-store displays that they can get exclusive deals by installing the app, there's some friction involved in that interaction stopping shoppers from following through. On the other hand, shoppers are much more likely to follow through on taking that deal if it only requires them to receive a notification from Facebook upon entering a store and then push a button.
Facebook could do this in a couple ways. First, it could simply ask users to "like" the retailer in exchange for exclusive in-store promotions. This method would allow Facebook to gather more data on its users that it can use to advertise to them based on retailers they like and items they likely saw in stores. The drawback is that Facebook would have to build that functionality into its own app.
The second method would be to push a special app-install ad to users that allows them to start downloading the application. This isn't quite as streamlined as the first method, but it would save Facebook a lot of work. It also would bring in more revenue up front from the app-install ad, instead of making money on the back end using data (although there is at least some expressed interest in a retailer).
Facebook has over 1 billion monthly active users on mobile. Not only would partnering with Facebook allow retailers to increase beacon engagement, it would improve the social media giant's ability to target its advertisements among those users.
Apple could use the App Store as leverage
If a retailer wants to get its app installed on an iPhone, it has to go through Apple's App Store. That makes Apple another potential partner, but Apple won't see much benefit from improved retailer app adoption. It doesn't actually sell beacons.
It could leverage the App Store, however, in exchange for adoption of Apple Pay -- its new mobile payments platform. This seems like part of Apple's goal with iBeacons.
Adopting Apple Pay has other benefits for retailers, particularly those that incorporate a rewards program in their apps. Apple Pay can store loyalty rewards cards and coupons in Passbook. It also uses them automatically, thus increasing their use. If a shopper has been walking around a store collecting coupons in Passbook, the easiest way for him or her to use them would be with Apple Pay.
The biggest disadvantage is that Apple's App Store and Apple Pay are only available on iPhones. And while iPhones account for over 42% of smartphones in the U.S., Facebook reaches more users than any other app by far.
Unlocking the potential of beacons
This holiday season might see retailers adopt beacons much more than last year. Getting more app installs is key to getting the most out of beacons, and Facebook is more than capable of facilitating those installs. Facebook would benefit from collecting revenue from the install and gain the knowledge that its user was shopping at a specific retailer.
Apple also offers retailers an opportunity to push app installs on store visitors. The cost might be higher for retailers, since Apple would likely want them to install new payment terminals in exchange for pushing app installs. The rewards could be much higher, too, considering Apple conveniently collects loyalty rewards cards and coupons for use in Apple Pay.
For now, Facebook looks like the most cost-efficient partner, especially looking at this holiday season. Apple Pay is just rolling out, and it takes time to overhaul payment terminals. Facebook could solve the problem much more quickly and has wider adoption than the iPhone.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple and Facebook. The Motley Fool owns shares of Apple and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.