Location-Based Ads: Big Potential, Little Success

snap: Foursquare map -thumbnailLocation-based advertising (LBA) and marketing (LBM) could be of great benefit to local merchants, though there are some things that need to happen before widescale adoption of mobile campaigns will come about. Primarily, merchants need to know why mobile campaigns are beneficial to themselves and their target market, how to measure return on investment, and have access to smartphone owners regardless of application, device, or mobile platform.

For years, merchants have reached local customers through local daily and weekly print publications and other traditional media channels. However, with the growing number of smartphone users and the decrease of consumer use of print and other traditional media, merchants need another way to reach their target market. In many ways, smartphones and mobile devices such as the Apple iPad are an even better way to reach local customers, offering the ability for short-term, time-sensitive, location-based offers.

Consider that mobile advertising is expected to be $7B+ market in the next four years, with LBA potentially having a significant slice of that. TheWhereBusiness.com outlined some of the current problems hampering LBA’s growth, with one of the biggest being the relative lack of smartphone users to target. Be sure to take note of their explanation outlining the difference between LBA and LBM. This post, since it focuses only on local merchants, refers to a more general grouping of mobile campaign services, say LBAM (Location-Based Advertising and Marketing), as local merchants are less likely to make a distinction between the two terms.

Sure, there are a growing number of smartphone owners out there, but how many of them are using LBS (Location-Based Services) — aka location-sharing — apps such as Foursquare, MyTown, Gowalla, and dozens of others? There are many reasons people do not use location-sharing apps, including there really being no incentive to, beyond amusement. Why would merchants want to spend money on campaigns with little or no audience? Other issues that limit merchant use of LBAM include the lack of standards for running mobile campaigns, and the means of measuring ROI.

Here are just a few things that need to happen before local merchants take advantage of location-based campaigns:

  1. Create mobile campaign bellwethers. Applying the “law of least resistance” that humans tend to follow means that the average merchant is not going to adopt LBAM campaigns just because they can. They need to see the value. Someone or some group has to be a bellwether and define standards and metrics, create methods of measurement, define best-practices for mobile campaigns, run some successful campaigns, and then educate and influence anyone who can help propagate these standards. Then and only then will merchants start to buy into LBAM with confidence. When merchants start to make useful offers via mobile devices that appeal to consumers, word of mouth will also help spread the reasons for consumers to use LBS apps. E.g., most merchants know what a loss-leader is, when you offer something at a loss in a sale, in hopes of selling a shopper something at a greater profit margin. If merchants knew how to do that via mobile devices, they and consumers would both benefit.
  2. Agnostic channels: aggregation of apps and smartphone owners. Merchants want to reach consumers. They don’t care which phone, mobile platform or LBS app a consumer is using. Otherwise there’s just too much fragmentation. App-specificity might be part of Location-Based Marketing, but I think it’s a bad idea from a local merchant point of view. Maybe if LBS apps developers teamed up to follow some open standards, a merchant would not have to create diffferent campaigns for different LBS apps.
  3. Consolidate ad networks. As with device/ app fragmentation, there’s a similar problem with merchants having to deal with multiple networks. Ideally, merchants should just be able to go through some sort of mobile ads brokerage (maybe MobClix) that is platform- and ad network-agnostic in the sense that running campaigns become simplicity: setup your ad specifications, content and campaign details, then publish and measure. The less fragmentation of target market that merchants have access to, the sooner they’re likely to adopt LBAM campaigns.

It’s not clear whether any of these “necesssities” are likely to happen anytime soon. Several big players, including Google and Apple, have their fingers in the mobile advertising pie and like to define things on their own terms. There are some consolidations of networks and companies going on in the LBA space, which might be ultimately beneficial. On a side note, based on recent patents that have been granted, namely iGroups and Concert Ticketing +, Apple seems to stand the best chance of implementing some powerful LBAM features into their iPhone platform, possibly via the recently announced iAds platform.