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How to master the location-based ad game

How to master the location-based ad game Susan Kuchinskas

You've been hearing this since the turn of the century: "You're walking past a Starbucks when your phone pings you with a coupon for a dollar off a latte." And you've probably tuned it out. 2009 won't be the year that mobile coupons become reality, but it is time for you to get on the ball before it starts rolling.

Why now?

The slogging evolution of mobile devices and mobile internet penetration have kept location-based advertising a gleam in marketers' eyes. But this year brought several announcements that could put location-based ads over the top.

  • Verizon signed Microsoft to provide location-based services and advertising for mobile customers.¬†Under the five-year agreement, Microsoft will manage search and display advertising for the mobile web, creating a one-stop shop for advertisers and ad agencies. Announcing the deal, Microsoft CEO Steve Ballmer promised to help advertisers reach consumers who are on-the-go more effectively.

  • Google followed up last year's provision of opt-in location awareness with Google Latitude, a feature that lets you see where your friends are. The search company has refused to comment on the prospects for advertising, but experts see Google as ideally placed to add a location layer to its ad algorithms; think Gmail ads on steroids.

  • NAVTEQ released LocationPoint, an advertising platform that can deliver both display and interactive ads to mobile phones, personal navigation devices, and in-vehicle navigation systems. It's working with Interpublic Group's Emerging Media Lab to demonstrate location-based ad targeting. By the way, in 2007, Nokia bought NAVTEQ, one of the top providers of location info, for $8.1 billion, saying that the deal made sense because of the swift growth of location services.

  • Ford Motor Co. announced Sync, technology that will connect cars to the mobile internet in order to receive traffic, directions, business search and other information. Ford expects to have 1 million SYNC-equipped vehicles on the road by the third quarter of 2009. Microsoft is its partner, so Ballmer's boast likely covers the service: If you can search for an Italian restaurant, you can bet Microsoft will try to sell paid listings.

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Ahead of the curve
"As the audience grows, we will see a dramatic increase in the number of people using GPS-enabled devices," says Chris Rothey, vice president of market development and advertising for NAVTEQ. "Agencies need to be ready to know how to do location-based advertising. Agencies will be critical in making this new space really comfortable for their clients. Understand and encourage new media in order to provide better results."

A February 2009 poll of media and advertising execs by KMPG found that 40 percent of them thought smart mobile devices were the most disruptive force in media today -- and 48 percent said the greatest marketing opportunity for mobile is location-based advertising.


"What we're doing is extremely nascent," admits Brian Levin, CEO of Useful Networks, a service that takes location feeds from partners including NAVTEQ, iPhone, Spring, and Vodafone, and makes them accessible to application developers. "Because you can't buy across any of the different carriers yet, it's still on a case-by-case trial basis here in the U.S."

But Levin says the iPhone, as well as Google's Android, have changed the game, in part by making an end-run around the mobile carriers.

Penetration of GPS-enabled devices is still the biggest barrier, according to Katelyn Watson, online marketing manager for La Quinta. She believes many would like to test location-based advertising now, but trials are on hold until there's critical mass.

Search in 3D
So, maybe you're on a road trip, driving down the Interstate, and you really need a cup of coffee. You don't even care about a coupon, just knowing where to find a Starbucks would be enough to make you hit the brakes. This is the kind of opportunity available today, something that national or large regional advertisers with many locations are testing: gas stations, drugstores, quick-serve restaurants, lodging. (As far as we know, Starbucks is not testing location-based advertising; we're just following the familiar example.)

Consumers are already getting comfortable with mobile search; the location overlay takes this highly effective ad medium off the screen and onto the street. Tech providers hope to give advertisers a targeting trifecta: combining behavioral data from anonymous profiles, factors like time of day and a person's location to deliver ads that can push an individual into a sushi restaurant, motel, or mall.

"With location-based advertising, it's an electronic medium consumers are really using to find things," Watson says.

David Berkowitz, director of emerging media and client strategy for marketing agency 360i, sees mobile search expanding year over year. "Every major carrier has much better devices for searching, so it's just going to be a much more natural extension of what consumers do," he says. "Using GPS devices will be a fantastic marketing platform."

For lodging marketers like Watson, being able to influence someone's decision at just the right spot would be nirvana. "The typical person on the road is probably not planning in advance," she says. "So the closest to the booking decision they can be influenced, the better."

Sure, that's what billboards are for, but even the ones with LEDs showing variable price points or offers aren't flexible enough. "One thing that's so great about location-based advertising is the rate at which you can change and optimize offers," Watson says. "You can also test multiple offers in one market. And the cost is very, very different."

Josh Lovison, practice lead for gaming and mobile in the IPG Emerging Media Lab, says his group is testing the effective range for ads that can make a driver pull off the freeway, for example. Should the consumer get the offer for a discount room a mile before the exit? Five miles? Twenty-five miles?

Useful Networks recently completed two trials of its Storefinder services involving fast food and automotive brands advertising over a mobile carrier and analyzing the lift the brands got. Although results haven't been announced, the company said they were promising.

"The real opportunities are within two-way advertising," Lovison says. That is, when the GPS user can click for more information, click to call or click to buy. This functionality is probably a few years down the road. "If that becomes the status quo, there are other questions that need to be answered before I'd be comfortable encouraging an agency or client to invest," he says.

For example, acceptable response rates might be very different from online advertising. Also, the driving experience is quite different from receiving data on a phone or the computer. Lovison says an advertiser needs to understand, "If I'm actually driving, what is the right mix of brand presence and promotion, where it's not obstructing my ability to navigate but is still giving me enough incentive to re-route my trip?"

My ads everywhere!
Location-based services allow for a different type of contextual targeting, using the consumer's context instead the ad's. Maybe you're not a nine-to-fiver. You always pick up your Starbucks fix around 10 p.m. Wouldn't it be nice if the location-based ad server could send you that coupon around 9:30?

Researchers in the PARC Ubiquitous Computing Area are already crunching through the problems in taking this personal contextual targeting to the next stage -- taking into consideration an individual's behavior and history.

They're building a demonstration system that they hope will be able to identify not only advertising opportunities that are easily inferred -- needing lunch slightly before noon -- but also more general states that could lead to better conversions, such as the state of deciding what to do for the evening. They call these "branching points," moments that could take someone in a variety of different directions.

"If you look at not just the snapshot of a current location, but also a person's traces, it's possible to identify patterns that indicate where people are making decisions," PARC's Kurt Partridge says. "If you target an ad about a restaurant, you want to make sure the ad comes before the decision point. It's much harder to get them to change their mind than to make a decision in the first place."

These kinds of patterns can be useful for identifying situations where an ad would be more effective, increasing the advertiser's ROI. Another example of how location information combined with behavioral info can increase ad effectiveness is understanding when a person is outside their usual neighborhood or city.

According to Bo Begole, manager of PARC's Ubiquitous Computing Area, "If someone habitually goes to Starbucks, Starbucks doesn't need to advertise to her, but a competing coffee shop would want to. If she's in a new place, all the coffee shops want to advertise."


You can't hide -- but why would you want to?
Most of us, in our roles as consumers, have gotten used to the idea of being stalked by behavioral targeting as we navigate the web. But the thought of our travels around town being noted by ad-servers has a Big Brotherish tinge. As in other forms of advertising, allowing consumers to opt in is a best practice for location-based advertising.

There are several ways to allow us to opt into being located. With an in-vehicle navigation device, being located is the whole point. Advertisers can show a banner with the offer to click for more information, providing an implicit OK to use the location -- while providing better results for the advertiser.

Mobile services that take advantage of location can include a simple check box allowing the app to use the individual's coordinates. Many existing phone applications only locate the person when they launch the app; some explicitly prompt for an OK.

There's also the ultimate opt in: free content and services in return for seeing ads. NAVTEQ plans to offer an ad-supported alternative to paid subscriptions for premium services on in-car GPS devices. Already there are ad-supported apps for the iPhone, and IPG's Lovison thinks adding location targeting is a no-brainer.

"You give it permission whenever you access the application, and the software will use that info to deliver relevant ads," he says.

Susan Kuchinskas is a freelance writer who has written for Adweek, Business 2.0, M-Business and internetnews.com.

Susan Kuchinskas has covered internet technology since the mid 1990s, when e-commerce was kind of a wacky idea. As a senior writer for Adweek, Business 2.0, M-Business and internetnews.com, she's watched the interactive advertising grow from a tiny...

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