By Christopher Maag

You’re driving around town. Right as you approach a McDonald’s, an advertisement appears on your car’s GPS device, giving you a coupon for a Big Mac. But the coupon isn’t coming from just any Mickey D’s. It’s good only at the McDonald’s you just passed.

Creepy? Maybe. Proof that McDonald’s and your GPS device are secretly spying on you?

Surprisingly, no.

It’s surprising because lately it seems everybody wants to know where you are, all the time. Apple recently landed in the middle of a mid-sized controversy when independent tech experts discovered that iPhones and iPads secretly record their users’ movements. Frustration over companies secretly tracking consumers’ travels across the Internet prompted two senators to introduce competing legislation in recent weeks to create a “Do Not Track” registry for online advertisers, similar to the “Do Not Call” list for telemarketers.

“This is definitely a growing industry,” says Joe Paiva, a GPS consultant. “There’s a whole portion of the economy that’s trying to develop new location-based services.”

Companies that sell car-based GPS devices have been telling us where we are since the early ’90s. Why wouldn’t they use that information to deliver us ads or other services, especially now that their entire business model is threatened by the spread of map-equipped smartphones?

“There’s no logical reason why they wouldn’t,” said Justin Brookman, director of consumer privacy at the Center for Democracy & Technology.

They don’t do it for one simple reason: In most cases, they can’t.

“For them to collect that data, they need two-way communication,” Paiva says. “They don’t have that. They only have one-way communication.”

[Related Article: Is Your iPhone App Violating Your Privacy?]

A GPS Primer

GPS stands for Global Positioning System. Developed by the U.S. Department of Defense in the 1970s and ’80s, the service operates a network of satellites that constantly send signals to devices on the ground, telling those devices their latitude, longitude and altitude. In car-based systems, that information is layered atop digital street maps.

Those messages are all coming from the satellites — by themselves, the devices cannot communicate back.

“The GPS device in your car is just a receiver. It doesn’t transmit anything,” says Mohinder Grewal, professor of electrical engineering
 at California State University, Fullerton.

OK, So How Am I Getting All These Ads?

The ads that appear on some GPS machines don’t use anything as sophisticated as satellite beams to deliver you ads. Instead they use a more primitive technology: radio. The companies that deliver ads to their GPS devices do it by erecting transmitters on towers and buildings. The transmitters send the ads out as radio wave signals.

And just like an old-fashioned radio or television station, the GPS companies have no idea whether anyone is actually receiving the signal. Any radio-GPS equipped device that wanders into the tower’s transmitting radius will receive the same ad. That’s why most GPS-based ads come in the form of coupons, which require drivers to present a code in order to redeem them. The code is the advertiser’s only way to know whether anyone is actually getting its message.

Magellan has introduced radio-based ads to its system to help pay a third-party vendor for enhanced traffic reporting on its devices, says Bill Strand, the company’s senior product marketing manager for automotive navigation. That replaced a subscription model, where previously customers had to pay $24 a month for the traffic feature.

“Although people don’t like those little banner ads going across the screen, we have found that is a lot less annoying than paying a subscription fee every month,” Strand says.

Magellan’s service is currently available in most major cities and some mid-sized ones in the U.S., but not in small towns or rural areas. That’s because the system requires a certain density of users to make the ads cover the cost. And even with its limited rollout so far, the program is far from an unqualified success.

“It started off very slowly,” says Strand. “We don’t get too many ads, but as it becomes more successful I think we’ll get more.”

Garmin offers a similar service, with similar protections for consumer privacy.

“We do not provide the data we collect from our users to anyone other than our traffic providers,” says Ted Gartner, a company spokesman.  “When we provide this probe data to our traffic providers, it is still anonymous, meaning they can’t trace it back to any device or customer.”

Some Exceptions

Police and fire departments across the country use GPS-based devices to track their vehicles, which helps dispatchers know where police officers and firefighters are during an emergency. Most police and fire systems accomplish this using GPS devices that have radio transmitters built inside, which communicate with headquarters via a local network of radio towers, says Paiva.

Another way that GPS is sometimes used for tracking is in criminal investigations. In perhaps the most famous case, police attached GPS devices to convicted murderer Scott Peterson’s vehicles so they could track his movements after the bodies of his wife Laci and their unborn son were discovered. The data was used to prove that he returned to the scene of the crime multiple times as police investigated.

Railroads and trucking companies place GPS devices on rail cars and semi trailers to watch for theft. Those units stay in touch using cellular signals, Paiva says, or by communicating with satellites outside the GPS network.

“You had railroads or trucking companies and there was a shocking number, like 20 percent or 30 percent of their rolling stock, they had no idea where it was,” says Paiva. “That’s a lot of expensive equipment to lose track of.”

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A Question of Resources

The technology to track consumers’ movements using in-car GPS devices is readily available. And just as websites make money selling ads based on tracking peoples’ travels around the Internet to gather in-depth profiles of their tastes and routines, a detailed record of where people drive could be a treasure trove of information about individuals’ regular commutes and shopping habits.

These companies have “the ability to know where you are, and if they can deliver ads they could do that,” Brookman says.

So why aren’t companies like Magellan and TomTom collecting that data? Perhaps the biggest reason why GPS companies haven’t outfitted their devices with tracking services is cost. Installing a radio or cellular transmitter into each GPS device would cost an additional $50 apiece, Paiva estimates.

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In addition, GPS companies would need some transmission network to send and receive the signals. That means either building their own system of towers, or paying radio or cellular companies every time a GPS device sends a message about its location (which, for the system to work, would mean a nearly constant stream of messages).

“They might not have the infrastructure in place,” Brookman says.

Either option is prohibitively expensive, especially for an industry that’s already in decline.

GPS companies “certainly are having their butts kicked” by smartphones, which can do all the same mapping functions, Paiva says.

A Privacy Concern Remains

If you’re still concerned about the privacy of your GPS data, there is still something to worry about: Theft. Unlike with an iPhone, GPS devices don’t keep detailed records of everywhere you go. They do store addresses that you type in, however. If someone steals the device, he’d be able to access that list of destinations.

“Nobody else can take out that data except if a person steals your car,” says Grewal.

It’s surprising because lately it seems everybody wants to know where you are, all the time. Apple recently landed in the middle of a mid-sized controversy when independent tech experts discovered that iPhones and iPads secretly record their users’ movements. Frustration over companies secretly tracking consumers’ travels across the Internet prompted two senators to introduce competing legislation in recent weeks to create a “Do Not Track” registry for online advertisers, similar to the “Do Not Call” list for telemarketers.

“This is definitely a growing industry,” says Joe Paiva, a GPS consultant. “There’s a whole portion of the economy that’s trying to develop new location-based services.”

Companies that sell car-based GPS devices have been telling us where we are since the early ’90s. Why wouldn’t they use that information to deliver us ads or other services, especially now that their entire business model is threatened by the spread of map-equipped smartphones?

“There’s no logical reason why they wouldn’t,” said Justin Brookman, director of consumer privacy at the Center for Democracy & Technology.

They don’t do it for one simple reason: In most cases, they can’t.

“For them to collect that data, they need two-way communication,” Paiva says. “They don’t have that. They only have one-way communication.”

[Related Article: Is Your iPhone App Violating Your Privacy?]

A GPS Primer

GPS stands for Global Positioning System. Developed by the U.S. Department of Defense in the 1970s and ’80s, the service operates a network of satellites that constantly send signals to devices on the ground, telling those devices their latitude, longitude and altitude. In car-based systems, that information is layered atop digital street maps.

Those messages are all coming from the satellites — by themselves, the devices cannot communicate back.

“The GPS device in your car is just a receiver. It doesn’t transmit anything,” says Mohinder Grewal, professor of electrical engineering
 at California State University, Fullerton.

OK, So How Am I Getting All These Ads?

The ads that appear on some GPS machines don’t use anything as sophisticated as satellite beams to deliver you ads. Instead they use a more primitive technology: radio. The companies that deliver ads to their GPS devices do it by erecting transmitters on towers and buildings. The transmitters send the ads out as radio wave signals.

And just like an old-fashioned radio or television station, the GPS companies have no idea whether anyone is actually receiving the signal. Any radio-GPS equipped device that wanders into the tower’s transmitting radius will receive the same ad. That’s why most GPS-based ads come in the form of coupons, which require drivers to present a code in order to redeem them. The code is the advertiser’s only way to know whether anyone is actually getting its message.

Magellan has introduced radio-based ads to its system to help pay a third-party vendor for enhanced traffic reporting on its devices, says Bill Strand, the company’s senior product marketing manager for automotive navigation. That replaced a subscription model, where previously customers had to pay $24 a month for the traffic feature.

“Although people don’t like those little banner ads going across the screen, we have found that is a lot less annoying than paying a subscription fee every month,” Strand says.

Magellan’s service is currently available in most major cities and some mid-sized ones in the U.S., but not in small towns or rural areas. That’s because the system requires a certain density of users to make the ads cover the cost. And even with its limited rollout so far, the program is far from an unqualified success.

“It started off very slowly,” says Strand. “We don’t get too many ads, but as it becomes more successful I think we’ll get more.”

Garmin offers a similar service, with similar protections for consumer privacy.

“We do not provide the data we collect from our users to anyone other than our traffic providers,” says Ted Gartner, a company spokesman.  “When we provide this probe data to our traffic providers, it is still anonymous, meaning they can’t trace it back to any device or customer.”

Christopher Maag is Credit.com’s Staff Writer. Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics.

The article originally appeared on Credit.com.

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