The latest trend to drive the wave of consumer marketing is location based mobile advertising. Research firm Borrel forecasts that location-based mobile spending will hit $4 billion in 2015, an increase of nearly 12,000% from the $34 million spent in 2009. Ad Age reports that Google will soon roll out new types of location-based mobile ads that can navigate consumers toward a store. And location-centric announcements also expected from both Facebook and Apple.
Generating a conversion is directly linked to the ad relevance to the consumer. For this reason, behavioral targeting, remessaging, ad content preferences and customization are attractive to digital advertisers.
Why is location king?
- Mobile has a unique approach to advertising: a pay-for-performance model, not a CPM or pay-per-click. This is possible due to tracking capabilities; advertisers can measure exactly who used a location-based coupon
- Surprisingly, 94% of retail transactions still take place in physical stores
- Over half the world’s yearly $458 billion advertising budget is spent on local advertising
- Consumers accept advertising in exchange for free content
- The objective of mobile advertising is to drive traffic to physical stores
Using your GPS location, these mobile ads have the potential to represent anything from a coupon for a restaurant around the corner from where you’re currently waiting for the bus, to details of a nearby house for sale that you’ve been looking at on real estate site. With LBA, a mobile application developer could customize the ads it displays based on a user’s location, or an advertiser could target a mobile banner ad so that it would only appear to users who are in the vicinity of its business.
In an effort to capitalize on this opportunity it’s no surprise that Apple has launched the iAd. Like iPhone applications, the ads will only be served in association with Apple products and the company claims they’ll be entertaining, increasing the potential for interaction and a click. Consumer targeting won’t be based on location alone; interaction with iTunes and the App store will also serve to provide data that can be used by advertisers, allowing them to customize ads based on users’ media preferences.
Sounds great however the solution may currently be too pricey for most agencies and clients. Apple is requiring its first advertisers to spend as much as $1 million in media. They’ll also have to pay both a $10 CPM (define) and a $2 cost-per-click fee.
Since it’s acquisition of AdMob last year, there has been much speculation that Apple’s rival in mobile technology, Google, is also a likely candidate to enter the location-based mobile advertising space. Google also recently won a broad patent for “using location in an advertising system;” how this will affect Apple remains to be seen.
While the market seems relatively small now, the potential for growth is huge. Most mobile phones (at least those sold within the past few years) include GPS technology or something comparable that can be used to pinpoint the user’s location. According to Mobile Marketing Association’s survey consumers may actually be willing to admit an ad format has value.
