Beacons Create R&D Tax Credit Opportunity
Beacons represent a new paradigm in indoor
communication. They have the potential to completely
revolutionize the way people behave and interact in indoor
spaces. With a myriad of prospective applications that go from
in-store marketing to home automation, beacons should create
major opportunities for innovation and, consequently, generate
significant R&D tax credits.
The Research &
Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
Eligible costs include employee wages, cost of supplies, cost
of testing, contract research expenses, and costs associated
with developing a patent. On January 2, 2013, President Obama
signed the bill extending the R&D Tax Credit for 2012 and
2013 tax years.
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
According to the U.S. Environmental Agency,
Americans spend an average of 90 percent of their times
indoors. In the era of smartphones, the frequent lack of
cell signals and difficulties using GPS in indoor spaces are a
major shortcoming. However, a new and emerging technology
promises to change this scenario.
Beacons are low-cost, low-powered transmitters that
communicate with smart devices via in-built Bluetooth Low
Energy (BLE) technology. When in proximity with such devices,
they trigger activity in mobile applications, allowing them to
understand their position on a micro-local scale level and to
pull specific, context-oriented data from the web, based on
In comparison to other technologies, Bluetooth is considerably
more efficient. Different from near field communication , it
does not depend on consumer’s actions, such as tapping a phone
to a tag. It is also better than GPS, which is often
inaccurate for indoor locations. As the successor of classic
Bluetooth, BLE, also known as Bluetooth Smart, brings major
advances, both in cost reduction and power efficiency. In
addition to being 60-80% cheaper than its predecessor, it can
last up to 3 years on a single coin cell. BLE is ideally
suited for simple applications involving small and
periodic data transferring.
BLE-enabled beacons have a broadcast range of around 100
meters and are therefore ideal for indoor tracking and
awareness. All beacons have a unique identity and offer
non-invasive, one-way communication. They require users to
download specific apps and agree to the delivery of
self-contained packets of data, which are then used by the
same apps to trigger actions, such as push messages and
Beacons have the potential to transform the
way retailers, event organizers, transit systems, enterprises,
and educational institutions interact with people in indoor
spaces. Additionally, they can become an integral tool in the
Internet of Things ecosystem.
Even though potential applications of beacons are multiple,
they have been primarily used as marketing and retail tools.
In-store applications include targeted notifications based on
the consumer’s location in the shop. These can consist of
product details, flash sales or deals, and helpful
Another aspect of the first wave of in-store beacon
applications is offline payments. When integrated with a
store’s point-of-sale data, they can speed up the checkout
process by enabling hands-free, mobile payments. By saving
time and effort this contactless payment system could
significantly increase sales.
Off-line payments, much like the ones we make on websites can
provide retailers with information on consumers’ preferences
and allow for follow-ups and recommendations of future
purchases. This technology gives in-store transactions the
same data sophistication of digital ones, opening the way for
Big Data analytics.
Recent studies show that nearly half of American consumers
already use smartphones when shopping. Common behaviors
include looking up product reviews and checking its pricing.
Therefore, expectations are that beacons should be easily
integrated into the shopping experience and widely accepted.
In fact, beacons are expected to have major impact over
retailing environments in the near future. A recent study by
Deloitte Digital predicts that mobile-influenced on store
sales will soon surpass eCommerce, generating an average of
$689 billion by 2016.
Besides enhancing consumers’ in-store experience, beacons can
be used in other contexts, acting as a digital extension of
the physical world. Outside stores, the transmitters should
become important enablers of the Internet of Things.
They can provide relevant information in a wide variety of
environments, from museums to airports and ground
Beacons can also be used as tools for home automation.
Examples include using the transmitters to turn on lights or
HVAC systems and to open doors and window shades once in
proximity to predetermined smartphones.
Apple has championed the beacon technology
with iBeacon, which was introduced as part of iOS7. Offering a
new paradigm for indoor communication, it works with a
standard format, made out of four levels of information.
|How Do iBeacons
Work? Communication in Four Levels
Source: iBeacon Insider
is a 16 byte string used to differentiate a large group
of related beacons. For example, if Coca-Cola maintained
a network of beacons in a chain of grocery stores, all
Coca-Cola beacons would share the same UUID. This allows
Coca-Cola’s dedicated smartphone app to know which
beacon advertisements come from Coca-Cola-owned beacons.
is a 2 byte string used to distinguish a smaller subset
of beacons within the larger group. For example, if
Coca-Cola had four beacons in a particular grocery
store, all four would have the same Major. This allows
Coca-Cola to know exactly which store its customer is
is a 2 byte string meant to identify individual beacons.
Keeping with the Coca-Cola example, a beacon at the
front of the store would have its own unique Minor. This
allows Coca-Cola’s dedicated app to know exactly where
the customer is in the store.
This is used to determine proximity (distance) from the
beacon. How does this work? TX power is defined as the
strength of the signal exactly 1 meter from the device.
This has to be calibrated and hardcoded in advance.
Devices can then use this as a baseline to give a rough
It is important to note that iBeacon is a technology standard
and, therefore, a general term for any device built to these
specifications. In other words, it is a trademarked term that
refers to the protocols, devices, and uses of BLE. Apple
itself has not manufactured physical beacons, which are
currently produced by third-party manufacturers.
Beacons and Nearables
A growing number of companies provide
iBeacon hardware and software platforms. Headquartered in New
York City, technology startup Estimote has gained prominence
as the creator of one of the most popular iBeacon-compatible
hardware currently on the market.
Estimote has also developed indoor location software used by
more than 25 thousand developers around the globe. The
company’s most recent creation is the Estimote Sticker, an
innovative, super tiny beacon. Working complementarily with
traditional beacons, which add a layer of contextual
intelligence to static locations, such as stores, the stickers
extend that context to objects within those
According to the company, Estimote stickers have the power to
transform everyday objects into “nearables” - smart, connected
objects that broadcast data when in proximity to smart
Advertising and Analytics
Beacons promise to enable the next
generation of mobile advertising and analytics. Companies
throughout the country are developing innovative solutions
that experience increasing adoption.
Based in Chicago, Illinois, GPShopper is a mobile commerce
platform for beacon management and reporting. It offers
store-layout tools for location-based notifications and a
reporting mode that track floor traffic in different sections
of the store.
Additional store-level analytics capabilities enable access to
a large set of location-based data. The company also offers a
development kit that allows retailers and brands to integrate
GPShopper solutions into existing applications.
Forbes recently named GPShopper one of ten companies
disrupting their industries through technology. With a growing
client portfolio that includes Best Buy, bebe, Express,
Grainger, and The North Face, the platform engages tens of
millions of shoppers on a monthly basis.
Through the delivery of context-oriented messages to
distracted and harried customers, GPShopper has successfully
targeted and engaged numerous would-be customers, acting as a
valuable provider of sales support.
Located in Boston, Massachusetts, Swirl also leverages the
power of beacon technology to enhance proximity-based indoor
marketing. Swirl Ad Exchange is a programmatic solution
that allows retailers, brand advertisers, and publishers to
digitally engage with and influence in-store shoppers at the
precise time and place they are making purchase decisions.
Swirl’s technology is used by major companies, such as
Lord&Taylor, Hudson’s Bay, Marriott, Alex and Ani,
Timberland, Kenneth Cole, etc. The company works in
partnership with Motorola Solutions, which provides beacon
hardware. The “bring your own beacon” option is also available
for retailers willing to integrate third party hardware into
the Swirl platform.
The Beacon Boom
The New York Times recently pointed out
that tens or even hundreds of thousands of beacons have
already been installed throughout the country. Locations
include outdoor spaces, stores, and even National Football
League, and Major League Baseball stadiums.
Silicon Valley-based Shopkick was one of the first companies
to implement the beacon technology in retail settings. Among
its most important clients is Macy’s, which, after a test run
at its flagship stores in New York City and San Francisco,
announced plans to use the ShopBeacon in all its stores
nationwide. The decision is part of an effort to attract more
Over the next weeks, Macy’s will add 4,000 devices to its 786
locations across the country, in what should be the largest
retail rollout of beacons to date. Initial applications should
be restricted to digital, storewide coupons that will be
delivered to customers’ phones when they enter a store. In the
near future, however, beacons will be used to track customer
movements, inform about sales items, and deliver
recommendations and relevant information to shoppers.
Other Shopkick retail clients that should soon adopt the
beacon technology include American Eagle Outfitters, Crate and
Barrel, JCPenney, Old Navy, The Sports Authority, and Target.
The innovative iBeacon has shed light on
major business opportunities. As a result, a growing number of
companies are entering this emerging market and offering
alternative beacon solutions.
This is the case of the PayPal Beacon, a BLE-enabled device
that allows for hands-free check-ins and payments. Unveiled in
late 2013, PayPal’s technology works in any smartphone,
including Android systems.
Consumers that have downloaded the PayPal app are
automatically checked-in when entering a store equipped with
PayPal beacons. The checkout process is also simplified:
paying only requires a verbal confirmation. Even though Apple
has a similar payment technique, it is limited to its own
physical stores. By expanding this convenience to all
retailers, PayPal should strengthen its position in the mobile
In April, PayPal began piloting a beacon-enabled payment
system linked to Samsung Galaxy smart wearables, such as the
Gear 2 smart watch and the Gear Fit fitness band. If
successful, this technology will not only make credit cards
obsolete, but it will also make smartphones a dispensable
element in mobile payment.
Another emerging challenger to the iBeacon is Qualcomm’s
Gimbal. In addition to providing low-power geofence-based
location awareness, Gimbal’s beacons offer additional
capabilities that are not included in the iBeacon
specification. These include encryption, which makes sure that
a store’s beacons are only detected by the same store’s app.
Gimbal also offers an Interest Sensing function, which creates
inferred lists of users’ interests that can help customize
notifications and messages without the need for end-user
input. In other words, Qualcomm’s unique solution offers a
combination of geo-fencing and analytics that is able to
identify user behavior across apps.
Gimbal’s beacons have already been deployed in multiple
locations, including major sports venues. The Miami Dolphins,
for instance, used the technology at their Sun Life Stadium in
order to notify fans standing in long concession lines that
there were shorter lines a few feet away.
In May 2014, Qualcomm decided to spin-off Gimbal, which is now
a standalone company, based in San Diego, California.
In addition to offering innovative functionalities, iBeacon
challengers also combine different technologies. An example is
Motorola MPact, a hybrid location-based marketing tool that
uses both Wi-Fi and BLE.
The combination allows for different levels of detection –
Wi-Fi is used for rough location detection while Bluetooth
offers a finer pinpointing. Wi-Fi is also used to share
information between phones and back-end servers.
Motorola’s MPact Platform also provides analytics on
customers’ in-store behavior. With a hadoop back-end, it
allows for scalable big data crunching. Experts believe that
this built-in data muscle can be an advantage in relation to
other competitors in the beacon market.
The emergence of beacon technology opens
the way for major innovation opportunities, which range from
novel applications to new beacon-based smart systems.
BLE indoor location devices are expanding to unusual
environments. An interesting example comes from Dutch digital
marketing and technology agency DigitasLBi, which installed
120 beacons in its Boston office. The idea is to identify how
and where employees congregate in order to learn how to
improve office design and meeting scheduling.
This effort sheds light on the possibility of using beacons
not only as marketing and information tools but also as
promoters of productivity. Improved office spaces can also
help companies attract and retain talent, particularly among
The creation of beacon-friendly
applications and the incorporation of beacon capabilities into
existing applications should also be an important area for
innovation. Retailers willing to take advantage of this
emerging indoor marketing tool must be able to perform a
seamless integration with existing systems in order to favor
customer acceptance and facilitate operations.
Similarly, the beacon boom should boost demand for analytics
software that help leveraging the data collected. Previously
inaccessible information about customers’ in-store shopping
experiences (such as visits, dwell times, time spent on each
section of the store, etc.), can help create an
ultra-personalized, innovative approach to marketing and
Finally, innovation should lead to the development of
beacon-enabled smart systems, particularly for building
automation. Beacons can be embedded with sensors that monitor
movement, humidity, and temperature, among many other
Beacons can also allow for multifunctional systems. With a
tradition in lighting innovation, Philips is piloting an
intelligent lighting system with built-in beacons. Different
from traditional beacons, Philips’ solution works via visual
light communications – it transforms the lighting
infrastructure into a type of positioning grid, which is then
used by smartphones to determine location.
Using high rate flickers of LED light that are unnoticeable to
the human eye, the system communicates with smartphones’
cameras, enabling data transfer or triggering. Such
multifunctional systems eliminate the need for special spots
for beacons and provide an enhanced coverage due to the
privileged location of lighting units.
Recent research shows that 90 percent of
retail sales still take place in physical stores. In
this scenario, beacons emerge as revolutionary tools for
indoor marketing, enabling an enhanced and personalized
In spite of their growing popularity among retailers, beacons’
potential applications go far beyond in-store marketing and
analytics. BLE-enabled indoor location devices are already
expanding into sports venues and other public spaces, as well
as into households and commercial buildings.
Beacons represent a growing market and a unique opportunity
for innovation. Companies investing in such technology should
take advantage of federal R&D tax credits.