Where Are You Going, Where Have You Been?

Location-based technology will redefine behavioral targeting, maybe sooner than you think

That future in which a bus-shelter ad equipped with geofencing technology scans your smartphone as you stroll by—inviting you to, say, a free latte or a cut-rate back rub—may not be so far off after all.

“2012 is going to be a huge year in terms of innovation—not just with respect to being able to leverage location to contextualize the types of advertising and offers that a consumer receives, but also then to turn the corner on that and turn it into actual commerce in the physical world,” said Walt Doyle, CEO of the location-based service Where. Last spring, eBay bought Where to facilitate its mobile transactions. It will figure heavily in the forthcoming mobile-commerce initiative of eBay’s electronic payment service PayPal, which has already been tested with Best Buy and Home Depot.

And geotargeting doesn’t stop with the widely cited example of a free cup of Starbucks. While often accused of not living up to its promise, we likely will see the day, and soon, when location-based technology redefines behavioral targeting as we know it, when a consumer packaged-goods company recognizes that a shopper is in the cereal aisle and sends a Wheaties coupon to her phone. What’s more, in the not-so-distant future, a marketer could use technology like that of Where to track a person’s daily routine so precisely that it knows when she’s on her way to the office, the gym or home for the evening.

To be sure, the future of location-based marketing is about more than just check-ins.

While Foursquare, the most famous LBS, certainly opened our eyes to the potential of marketing via GPS-enabled devices and made check-ins part of the language, the category is much bigger than one company. In fact, in its current life stage, location-based advertising is far more likely to involve a brand testing mobile banners that factor in a user’s location than any single location-centric social network or app.

Foursquare may have given way to countless marketing campaigns, but it’s a mistake for marketers to equate location-based mobile marketing with a mere check-in campaign, said Forrester Research analyst Melissa Parrish—especially considering that, despite its high profile, Foursquare is not all that big.

According to a Forrester report last December, only 6 percent of U.S. adults online have used an app like Foursquare or the now-defunct Gowalla (which Facebook acquired in December), representing just 2 percent growth year on year. Compare those stats to a 2011 Pew Research Center Internet and American Life Project survey which found that 55 percent of smartphone owners had used their devices for location-based information such as restaurant recommendations or driving directions.

The biggest obstacle to a check-in campaign may be the check-in itself. Plenty of brands display signage in retail locations to remind shoppers to check in, but consumers can easily ignore the call to action.

For some brands, location-based marketing remains a work in progress.

Take JetBlue Airways. Members of JetBlue’s TrueBlue loyalty program can link their accounts to an app on the company’s Facebook page. Then, by checking in at various JetBlue terminals, they automatically received TrueBlue points or special offers.

To encourage customers to participate, the airline’s agency Mullen executed a campaign in which travellers automatically received text messages when they entered an airport, reminding them to check in—a tactic known as geofencing. But as the airline shifted focus to updating its digital platforms (JetBlue unveiled redesigned mobile and desktop sites as well as an iPhone app last week), the check-in campaign went dormant.

Jonathan Stephen, head of mobile at JetBlue, says it’s not dead, however. “We started to focus on our digital refresh program where we introduced some newer technologies such as push notifications in our iPhone application,” he said. “We felt that with the tremendous number of iPhone users that we have, we wanted to leverage the push notification service to send them, perhaps, location-based messages. It’s something that we’re looking into at this point. It’s sort of a crawl, walk, run approach.”

JetBlue doesn’t run location-based mobile ads, says Stephen. One brand that does is The Weather Channel. Its mobile app, which specializes in local weather information, helps brands target users based on their location. Westin Hotels and Resorts teamed with TWC on its “Wipe Away Your Weather” campaign last fall. “It knew where the user was and then allowed them to wipe away from the screen elements of their local weather,” said Pat McCormack, TWC’s vp of mobile sales and strategy. “So if it was [snowing] in Vermont, you wipe away the snow and reveal resort destinations in warm weather climates.”

Delivering an ad based on whether it’s snowing in Vermont is one thing—delivering an ad based on whether it’s snowing on a given city block is another. McCormack says that this year, TWC will roll out a new location-based function enabling advertisers to target a consumer below the ZIP code, potentially factoring in a person’s behavior or intent.

The Weather Channel isn’t the only company experimenting with location-informed ad content. Forrester’s Parrish points to Victoria’s Secret. A user clicking on one of the retailer’s rich-media display ads expands to reveal the message: “The closest Victoria’s Secret to get this set of pajamas is 0.4 miles away. Click here for directions.”

But location-targeted mobile display ads face a familiar obstacle: consumer action, or the lack thereof.

Generally, consumers don’t have to check in to a location to receive an LBS ad, but they do have to open an app to see one. Geofencing sidesteps that. After the consumer completes an initial opt-in—usually through a third party operating the geofence for a brand—all that’s required to participate is for his phone to be turned on in order for a marketer to target him with a local ad.

“If geofencing allows [consumers] to not have to download an app to check in, the barrier to entry is lower,” says Parrish.

The problem, Parrish says, is that most marketers perceive geofencing as lacking scale. “Somebody’s going to have to lead the market,” she said. “It’s either going to be the marketers offering real value or the consumers being willing to try to see what will happen. I feel like it’s in marketers’ best interest to go ahead and try to set the stage.”

Another major concern: privacy. Congress grilled reps from Apple and Google last spring following reports that the companies were logging the location history of devices running their respective mobile operating systems. The issue was reignited in November after the mobile software company Carrier IQ was discovered to be storing data such as device-location history. That led Rep. Ed Markey (D-Mass.) last month to introduce the Mobile Device Privacy Act, requiring companies to get a consumer’s consent before collecting location information.

When it comes to privacy, location-targeted mobile ads sound fewer alarms since they run in apps that already require consumer consent—Westin’s ads via The Weather Channel’s app, for example. But messages via geofencing technology are where things can get really creepy, which is why companies like location-based marketing firm Placecast require consumers to opt in.

Privacy concerns could actually facilitate the entry of highly regulated verticals that are generally hesitant about testing newer technologies but that are persuaded by the adoption of safeguards to address privacy concerns. Pharmaceutical and healthcare companies are among the most legally constrained when it comes to consumer privacy, but Carat svp and head of mobile practice Jason Newport hopes to see those industries expand their use of location-based mobile campaigns this year.

“You can imagine geofencing campaigns around pharmacies for vaccination reminders or something like that,” he said.

Likewise, JetBlue used Placecast’s ShopAlerts program to geofence airports.

Placecast CEO Alistair Goodman says more than 6 million consumers to date have opted in to receive ShopAlerts, while more than 130 brands used the company’s platform last year. North Face uses Placecast to geofence ski resorts and deliver snow reports to skiers on their way to the slopes. “It creates ways for the brand to interact with those consumers in meaningful ways tied to location,” Goodman said. “It doesn’t just have to be deals.”

Not that deals don’t work. Among purchases based on a ShopAlert message, 19 percent are the result of a reminder while 49 percent weren’t planned at all, according to Goodman.

More than 90 percent of ShopAlert messages are opened within three minutes of being delivered, Goodman points out. That is all well and good as long as a consumer enrolled in the program only receives five offers a week. But as the number of brands that set up geofences swells, consumer adoption could actually shrink because of the very real possibility of geofence overload.

As location-based marketing has become more commonplace, consumers have come to expect that marketers will use the latest technology to track them down wherever they are, whatever they are doing, to offer them that coffee or back rub.

“From a consumer perspective, location is just something that’s expected,” Where CEO Doyle said. “It’s become almost like a dial tone where you expect [a mobile service] to contextualize to where you are.”

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