Location, relevance drive next generation of mobile ads
By Tammy Parker
May 11, 2010 – After years of false starts, location-based and contextually relevant mobile advertising finally appears ready to reach critical mass and become a preferred mode of targeted marketing.
Pundits have touted the promise of location-based mobile ads for more than a decade, since the first E911 tracking regulations were adopted by the U.S. Federal Communications Commission during 2006. But the combination of location with advertising on a mobile phone was a relatively stagnant business until the advent of GPS-enabled smartphones and highly capable feature phones, combined with all-you-can-eat mobile data plans.
“From my perspective, there’s an absolute market here, and it’s real. There are hundreds of thousands of merchants in North America alone that are advertising today on mobile phones,” said Dan Gilmartin, vice president of marketing at Boston-based Where, provider of a location-based search-and-directory application.
Formerly known as ULocate, Where recently adopted its new moniker and launched Where Ads, “a hyper-local advertising network” of banner ads and interstitials that Where is using to support its app, which can be downloaded to the Apple iPhone, BlackBerry and Android devices and the Palm Pre. Where’s ad network, which aggregates ads from third-party companies that have relationships with local merchants, is also running on other mobile services, including Geocade, Jambase, MocoSpace and Superpages.com.
“Our goal is to connect a local merchant with a local audience,” said Gilmartin.
Where is among numerous mobile players starting to ride the wave of location-aware apps and services, which only function when location is revealed. “As consumers become more comfortable with this type of functionality, marketers and vendors will move to take advantage,” said a recent report from Forrester Research.
Alcatel-Lucent recently introduced the Open API Service that brings developers and operators together to support the rapid creation of new applications. One of the initial APIs available to some 14 million developers worldwide is a location-based services API capable of adding location and geofencing capabilities to any application.
The latest crop of location-based mobile ads is already proving its worth. Results from a survey announced in April 2010 by Luth Research, official research partner of the Mobile Marketing Association, indicate that U.S. consumers are significantly more likely to respond to location-based mobile ads than other mobile ad types. Nearly half of those who noticed any ads while using a location-based service took some action regarding the ads. “This was a significantly higher rate than for those who noticed advertisements while sending/receiving text messages (37 percent) and almost twice the rate of those who saw an ad while browsing Web sites (28 percent),” according to Luth.
Becky Wu, Luth’s vice president of research, said 15 percent of those who acted on a location-aware ad actually visited the store that was advertised.
Gilmartin said Where’s click-through rates “went through the roof” and its effective cost per thousand impressions (ECPMs) improved dramatically when the company first inserted location-based advertising that promoted local businesses in its app, replacing the broad-based ads that had promoted products such as ringtones, wallpapers and singles chat rooms.
“There’s a consumer reaction to the (location-aware) ads because they’re relevant, so the consumers are engaging with them,” he noted. “But the consumers also came back to us and said, ‘Hey, thanks for getting rid of the ads.’ We hadn’t gotten rid of the ads: We just replaced them with something that was contextual and location-relevant.”
According to Wu, 32 percent of those surveyed by Luth are interested in allowing their handset to automatically share their location in exchange for free use of mobile apps, while 26 percent are willing to share their location in order to receive mobile coupons to redeem in nearby stores. Other perks such as directions to nearby merchants were also considered attractive enough for cellphone users to justify the automatic sharing of their location.
Going forward, Wu cautions that advertisers should consider the subtle differences among different segments of the mobile population. For one thing, LBS users skew younger, with 22 percent of adults aged 25-34 using LBS at least once a week. Further, Luth’s research shows marked differences in customer response to location-based ads depending upon geographic region as well as the mobile network being used. There are also gender differences, with women being more likely than men to visit and make a purchase from a store that has been advertised on their handset.
While LBS is still mainly used as a tool for location or navigation, Wu noted that vendors are working to integrate LBS, social networks and mobile advertising. “Obviously, right now the social aspect of LBS is still quite untapped,” said Wu, but she predicted that will change as marketers seek to exploit more social-marketing opportunities.
