Oh, My God– They’ve Tracked Kenny!

Apparently two things are inevitable when you cover new marketing technology as much as I do. First, you become attuned to the point at which technical explanations no longer make sense, and you have to look for help in dumbing it down to their least-geeky essence.

And second, you’re almost bound to become something of a shade-tree legal expert, since almost all of these new tech platforms contain the seeds of class-action suits.

And that’s what is now happening with location-based mobile services. A few weeks ago two security researchers turned up the fact that Apple’s iPhones gather and store data concerning where their users are at given intervals. And we’re not talking about the permission-based geo-location you offer when you say yes to “ABC App would like to use your location.” No, this data is gathered by pinpointing your phone’s radio signal on the grid of cell towers and Wi-Fi hotspots.

The researchers even developed an app that will show how the data collected in this way by Apple can be superimposed on a map and used to plot your location. Here’s what it looks like:

Washington DC to New York from Alasdair Allan on Vimeo.

And here’s where you can get the app if you’re so inclined.

Apple denied that they were tracking anyone in the sense of either using this data to serve up content or selling it to third parties who would do so. The company maintained that the reason for collecting the data—which was also done by the old iPhone versions before iPhone 4, but in a different location—was to keep its database of Wi-Fi hotspots up to date.

Of course, that doesn’t explain why a year’s worth of data is apparently stored on the phone.

So with that uncovered, here’s what’s happened so far:

• Congressmen Al Franken and Ed Markey have requested that Apple and Google, which makes the Android mobile platform (also apparently a location tracker) appear before the privacy subcommittee of the Senate Judiciary Committee next month to explain what’s going on. Apparently they’ve agreed to do so.

• Texas Congressman Joe Barton (R) complained to the Wall Street Journal that Apple must have “lied” when they told him last year that the iPhone doesn’t collect or transmit location data when users opt out of Location Services.

• Attorneys general in Illinois and Connecticut have become the first ones to ask for more information from Apple and Google to determine if they’re doing enough to protect users’ private data. But they probably won’t be the last; numerous states, notably California, have laws against collecting and transmitting data over mobile phones.

• Untold numbers of media stories have headlined the notion that your phone may be watching you.

Some have even suggested that the rollout of the coveted white iPhone 4 was moved up to supplant the tracking headlines with some good Apple news.

• The lawsuits are starting to crop up, most of them bidding for class-action status on behalf of all Android or iPhone and iPad users. (Yes, it’s in there too.) As TechCrunch opines, judges will decide if the user agreements for Apple iTunes and Android are clear enough when they state that “We may collect information such as occupation, language, zip code, area code, unique device identifier, location, and the time zone where an Apple product is used so that we can better understand customer behavior and improve our products, services, and advertising."

• And yes, Apple’s potentially invasive habits were featured in an episode of “South Park” last week. The episode, in which Steven jobs stands in front of a map that shows “where everyone in the world is now”, must have been in the works before the tracking news broke. Just lucky, I guess.

Over the last couple of years, the mobile marketing industry has been enjoy the benefits of being a highly trackable, highly targetable platform, using a GPS-enabled device that people can take anywhere and often don’t mind serving up their current locations to, either via active check-ins or by agreeing to passively receive alerts and ads based on their surroundings. Is this the end of the geo-located dream?

Probably not. It looks like Apple can manage a fix for this data retention service, and presumably Android can too. And some of the ferment around the mobile tracking issue is undoubtedly political podium-pounding. Fill in the blank on what issues you think they may be distracting attention from.

But the rapid spread of the story, both in the mass media and online, indicates something mobile marketers should not lose sight of: that deep down, a large proportion of smartphone users have at best a love-hate relationship with their devices. They won’t leave home without them and will happily update their location by themselves on Foursquare or Facebook Places.

But apparently a number of those same people harbor the nagging fear that they’re carrying a traitor in their pocket, one that might not only be used to ‘sell’ their location to advertisers but perhaps also could be subpoenaed to testify against them in court.

That kind of fear is why marketers need to establish– and then abide by– best practices in handling interactions with mobile users, whether they’re pushing notifications to opt-in users or dealing with ad networks that offer to deliver their messages at relevant times. People spook easily in the mobile space, and not without reason. With mobility comes great marketing power, but also great responsibility.

What do you think/ Are you worried about being tracked from a bunker in Cupertino CA? n the other hand, are you concerned that fear of being followed might dampen the prospects for mobile marketing?