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Few smart-phone users realize it, but mobile-ad companies track them as they use many free apps. They do this in order to fine-tune the ads the users see. But now that Apple has started to restrict a common way of tracking users, ad companies are scrambling for alternatives, and hoping to “teach” consumers to appreciate the targeted ads that support free apps.

This week, a large consortium of mobile-ad firms launched a new technical approach to tracking users of free apps. The consortium says the new method protects users’ privacy, and will allow people to opt out if they prefer not to have their behavior logged. That opt-out mechanism would be modeled on those offered by online-ad companies for people who do not want their browsing history used to tailor ads.

Previously, mobile ads tracked users on iPhones and iPads by noting their unique device identifier, or UDID, a code assigned to every Apple device and made available to apps installed on them to help those apps store settings and other features. By comparing UDIDs across different apps serving their ads, a company could know how many people had seen a particular campaign. It could also build a database of UDIDs to avoid showing one person the same ads in different apps, or to target users with ads based on the apps they use.

Apple warned late last year it would eventually phase out such use of UDID. Last month, it began rejecting apps that didn’t first get a user’s permission before passing a UDID to ad companies.

Nasdaq-listed mobile-ad technology company Velti this week teamed up with seven other ad companies to suggest a UDID alternative known as an ODIN. An ODIN code is created from a smart phone’s MAC address, a unique code associated with a device’s Wi-Fi chip. “It will ID unique [ad views] but not tie them to devices or to people,” says Velti’s Krishna Subramanian, because an ODIN is a “cryptographic hash”—a scrambled version of a device’s MAC address. Some users might still object, since the ODIN is linked to a particular handset.

Subramanian says mobile users will benefit from Velti’s efforts to reinvent mobile-ad tracking. “It is a critical component of targeting for ad networks,” he says. “We need a solution that allows everything to work without ad dollars disappearing.” Ad revenue is what allows developers to release free apps, says Subramanian, and if Apple doesn’t help ad networks target ads well, then consumers will get fewer free apps. ODIN is intended to be used on Android phones, too, although apps on those devices can still access the unique IMEI of a device, similar to a UDID.

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Tagged: Communications, Apple, mobile, advertising, smart phones, tracking software

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