Mobile Marketers Are Starting to Only Charge Brands for Ads That Drive Foot Traffic to Stores

Four screens mounted to the walls of xAd’s headquarters in New York's One World Trade Center flip through the location-based advertising player’s 100 million mapped stores and locations, constantly refreshing to show brands where smartphone-toting consumers are currently looking at advertisements on their devices. Troves of data are displayed and mapped out in real time in one room, while the company collects data that’s used for ad targeting in the background. Making sense of so much data may seem intimidating for brands, but xAd wants to make it as easy as flipping the switch on a search campaign. Today the company is launching a new pricing model for mobile ads called cost per visit. Instead of charging brands on a cost-per-thousand (or CPM) model, advertisers now have the option to only pay for ads that actually result in someone going into a store. Home Depot, Applebee’s and IPG-owned media-buying agency Universal-McCann are testing the new pricing model. In theory, it means advertisers will run mobile campaigns the same way they’re accustomed to running highly targeted “always-on” campaigns, explained Shashi Seth, xAd’s chief product officer. XAd has previously let advertisers zero in on the locations where ads are served. Now, they'll only be charged for promos that actually get someone to step foot in a location. “It’s a performance product, and you only pay us for people that we send to your locations that have been verified by an independent third party—that takes away all the noise from the system,” Seth said. “You don’t have to worry about any of the other things. You know when a person shows up, and we get paid for it.” [kickout id="1"] Marketers have previously paid for mobile ads based on impressions and then analyzed stats like store visits after the campaign is over. The new pricing is similar to how search marketers buy ads. Instead of setting up individual campaigns, brands have always-on budgets that are used to run highly targeted, ongoing campaigns through Google or other search engines. “We expect for spend to be continuous,” Seth said. For example, an advertiser’s goal may be to drive 100,000 people into a store in New York. XAd’s mapping and location technology then uses anonymous mobile IDs to track 100,000 people who saw an ad and went to the store that was advertised. On top of location data, xAd acquired weather app WeatherBug in November and is now using weather for ad targeting. With cost-per-visit pricing, brands like Home Depot can constantly run weather-triggered campaigns, Seth said. The home-improvement retailer could turn on location-based ads around its stores when there’s a hurricane, for instance, to promote items like flashlights or batteries. In another hypothetical example, Claritin could automatically flip on a campaign around a pharmacy when there is high pollen count in a certain area. Only charging for ads that result in foot traffic “takes away all those questions that people have in their minds,” Seth said. “[Advertisers] don’t have to worry about, 'What targeting methodology should I use?'” Seth said, addressing lingering questions about the quality and effectiveness of location-based advertising as well as more complex issues like viewability and fraud. For years, location-based advertising has promised advertisers the ability to serve ads to the right person at the right time, but living up to such hype has been a challenge. When asked where advertisers are getting the money needed to run long-term mobile campaigns, Seth said, “Traditionally more location-based spend has come from display, but more and more we’re starting to see it come from performance.” Joshua Lowcock, evp and chief digital officer for USA at UM Worldwide, agreed for the most part and said he expects the money to come from search, display and video budgets, pointing toward automakers and retailers as examples of potential clients. For instance, automakers already have always-on direct-response budgets set up to drive people to nearby dealerships. “It’s going to take some money from existing, lead-generation campaigns—like campaigns which are driving people to a site,” he said. Lowcock also said shopper-marketing budgets are ripe for location-based ads. “Instead of buying display, it will move to more mobile-based KPIs,” he said, adding that he also expects money to come from mobile search budgets that are currently used for directories and listings. Meanwhile, xAd appears to be positioning itself as more of a data platform than an ad network, much like Foursquare’s recent moves. “We have evolved from being a marketing company to a data company because now we can start doing things like forecasting where the user is going to be [and] what activities [they are] going to do,” said Seth. Forecasting like that can predict when a consumer will go to Whole Foods on a Sunday afternoon based on their previous shopping patterns. XAd also claims it’s then able to tell if that same person then shops at Trader Joe’s. Foot traffic can also help marketers map out their real estate strategy. “People will come and ask us, ‘We think we should open 10 more stores in San Diego, Calif.—where should those 10 stores be?'" Seth said. “We’re going after the $4 trillion industry, which is all offline shopping and helping [brands] get the right people in the right stores at the right time spending the right amount of money.”