Matt Compton

Last week, Apple held a big event in San Francisco where Steve Jobs simultaneously introduced a new version of the each of the existing iPod products (the Shuffle, the Nano, and the newly-dubbed Classic), unveiled a completely new iPod called the Touch (with the revolutionary touch-screen interface that made the iPhone a hit), and announced a dramatic price cut for the iPhone — all in advance of the holiday sales season.

The announcement getting the most attention was the price cut for the iPhone. Just two months after the device went on sale, its cost was reduced by $200 completely without warning from the company. The early adapters were pissed, media coverage was sympathetic to their plight, and the next day, Steve Jobs announced all those who paid the original price would be getting a $100 Apple Store credit.

The iPod Touch is also newsworthy. The new interface is the iPhone without the phone — complete with wireless Internet access, the Safari browser, and a miniature version of OSX. You can check email, browse YouTube, and of course, listen to music and watch movies. Jobs also introduced a wireless iTunes store, which will allow owners of the Touch and the iPhone to buy music on the go without ever connecting to a computer.

The final announcement at the event was for another new feature on the Touch and the iPhone — the Starbucks button. While Apple owners are waiting in line to buy their lattes, they can use their devices to get the name of the song the baristas are playing, see the coffee shop’s recent playlist, and of course, buy anything from that list. Compared to the price-cut drama or the new product excitement, it has received very little attention on the press. But long term, this might be as big a deal as the iPhone itself.

As a feature, the Starbucks button is admittedly kind of lame. But that’s not the right way to think about this — it’s not about technology or music. It’s about advertising — specifically, the rise of location-specific advertisement — and that is both fascinating and a little bit frightening.

Right now, real location-based advertising is straight out of science fiction. In Steven Spielberg’s Minority Report, the Tom Cruise character walks into a Gap, the store recognizes him, and a virtual sales associate asks him how his last purchase worked out — that’s a vision of what’s to come.

But this thing with Starbucks and Apple isn’t too many evolutionary steps away. You, proud owner of an Apple device, walk into a Starbucks, the store recognizes you and a new button appears on your iPhone. Like most advertising, you can always ignore it, but you can’t make it go away. Every time you go to buy coffee, you’ll be prompted to buy music, too. How long before the Starbucks button starts flashing notices of the hot new drink? Is it a stretch to think of Disney offering a similar deal with Apple, where you walk into a Disney Store, and a new button appears allowing you to download the new Pixar movie? How about Barnes & Noble — a new button pops up and you’re downloading audio books from their bestseller list?

There are companies working to tie advertising to the GPS-system in your car — you drive by a McDonalds and you hear a Big Mac jingle. Google is developing a service which to put the same technology in your cell phone — walk by the Gap and you get a text message with a coupon. Supposedly, Google will introduce a gPhone sometime before the year is out, and I can’t help but wonder if this is the company’s secret weapon — a slick, feature-packed, ultra-cheap phone in exchange for permission to deliver the advertisements.

On some level, this is a better way for customer to receive advertisements. Like the best of Google AdWords, they can be unobtrusive, relevant, and occasionally exactly what you’re looking for.

But again, this can be scary too. What happens when the advertisers always know where you are, always know what you’re buying, and never stops pushing the ads at you? At what point then, does your privacy completely evaporate?