Over the last few years there has been a lot of buzz around mobile location targeting and for good reason: It provides an enormous opportunity for advertisers when it's done right. The mobile phone has ushered in a new era in which advertisers can reach consumers whenever and wherever they are. The enormous growth in mobile device penetration, coupled with the huge increase in mobile content consumption and consumers' increased comfort in sharing location, is leading to increased opportunity in mobile location targeting. BIA Kelsey estimates that $9 billion will be spent this year in location targeted mobile ads, with that number reaching $15 billion in 2018. In this article, I'd like to explore this opportunity, specifically outlining how location can be used to help marketers reach their target, location targeting tactics, and best practices, as well as interesting alternative uses of location services.
Location: An opportunity for marketers to reach the right consumer
It all starts with a location signal. For purposes of advertising, there are three types of these signals. One that comes from a phone's GPS hardware, a second that is derived from the IP address which the phone is connected to, and the third from a cool little device called a beacon. In the case of Wi-Fi, it is important to note that there are two types of IP addresses the phone can be connected to: The first is from an individual's Wi-Fi, the second comes from the cellular network using the consumer's data plan.
It is important to understand that each one of these location signals offers a different level of starting accuracy. Here is the order from best to worst and some color behind each one.
These are a hot topic now in mobile advertising and are very promising. Beacons can be as small as a quarter and have opened up a new era in location targeting. A beacon transmits a simple number via a low-energy Bluetooth signal. Since they have varying ranges, beacons can be installed in aisles of stores, near registers, at entranceways, or anywhere else for that matter. Almost all phones are equipped with a beacon reader that allows advertisers to build applications to serve ads or verify locations.
This is as accurate as it gets. In many cases your GPS will tell a provider that your phone is within a specific three inches. This is derived from a latitude and longitude which is called a "coordinate." The more decimal places at the end of the coordinate, the higher the accuracy will be. For the purposes of hyperlocal targeting described further in the next section, five decimal places is optimal, as this is about three feet.
IP address Wi-Fi
This is the next best choice but limits the accuracy for most advertising platforms to within a few miles of a consumer's actual location in most cases. There are some specialized mobile providers that can provide household level accuracy using an IP address, but this is not the norm.
Cellular IP address
This is about as good as throwing a dart at a map from a mile away. In many cases the derived location of a user isn't even in the same state as the user. Obviously this method should not be used unless you are targeting a specific country with no other geographic constraints.
Location targeted mobile advertising: Tactics and practices
With all of the aforementioned technologies, advertisers have to wade through their options to determine how best to reach their target consumer. It's important to understand the pros and cons of each type of location-based tactic before spending against one or more. Key considerations like brand goals, total universe of unique users, and other factors should be used to determine whether or not location-based advertising should be used and at what level of granularity. Interestingly enough, one way to think about what tactic to deploy is to recognize the more granular your target by location, the further down the purchase funnel the consumer should be.
Pros: This is a great tactic if you are trying to cast a wide net to consumers and you are not seeking a national base. Examples of companies that should consider this type of targeting are state lottery and tourism advertisers and densely distributed brick-and-mortar retailers. By using this tactic advertisers can hone in on making qualified consumers aware of their brand or offer.
Cons: Used by itself without bias to demographics, brands are potentially wasting some spend by hitting consumers outside their target. While this tactic allows advertisers to easily reach scale, it is really a rudimentary form of mobile location targeting and does not take advantage of the granularity that mobile affords advertisers for location targeting.
Geo-fencing (hyperlocal advertising)
Pros: Hyperlocal advertising provides a very granular way to reach a consumer. Using hyperlocal, brands can create virtual fences around any distance they choose. For example, a mall retailer can create a fence around a single mall location to try and drive consumers into store knowing they are nearby. Another use case may be competitive conquesting. For example, an auto dealer may fence their competitor's locations and try to lure consumers to their lot.
Cons: Scale is big issue in hyperlocal advertising. If 1,000 consumers are visiting the "fenced" area per day, the chance of them surfing an app or their browser is low, and the chance they are attentive to that ad is even lower. Also, location data is a huge factor. Advertisers need to know what kind of data signal is being used, and for this they need to make sure their partners are offering transparency.
Pros: The newest wave of local advertising gives brands a way to reach their consumer at the moment of truth before purchase. The technology allows for ads to be served based on the exact point a consumer is within a retail environment. One of the biggest benefits of proximity over hyperlocal is the advertiser can utilize its own app install base to drive messages to consumers. Additionally, since they know precisely where the consumer is, advertisers can deliver extremely relevant and personalized messages. If these are being delivered with a strong and valuable call-to-action, proximity-based advertising deliver great results.
Cons: Like hyperlocal advertising, the biggest issue is getting consumers to pay attention while they are in shopping mode. In addition, this type of marketing can feel invasive to consumers and older Bluetooth marketing models have failed to take off.
Location Services: Interesting Alternative Uses
Most of this article has defined trigger-based location advertising. However, there are some other clever uses of location services brands should consider.
Geo-spatial behavior targeting
Geo-spatial data is a mixture of an individual's geo, time patterns, and behaviors. Geo-spatial data far surpasses the typical latitude and longitude measurements and is much more effective as this information can be analyzed to create audiences and infer possible in-market conditions. Where consumers go everyday combined with other behavioral factors (i.e., what they browse) can go a long way in delivering a message to the right audience at the right time, and in the right location. Many new data companies have begun to allow brands to target consumers using this type of location intelligence. As an example, a big box retailer could buy a segment of "Male Big Box Shoppers Who Travel 30 Miles per Day" to hone in on consumers most likely to be swayed for a certain promotion even though they don't live close to a location. This use of location-based data will likely be more useful to this retailer and drive results more than knowing the typical location-based targeting methods.
Does your advertising do anything to drive someone into your location? Until recently, you had to guess, but things have changed. A few companies have sprouted that allow brands to measure physical store traffic lift during and after ad campaigns. While the methodology is not perfect, in most cases, it is a step in the right direction in basing success off of physical action instead of digital engagement alone.
In summary, there is a lot to think about in location-based advertising because there are a lot of tactics to consider. If the location data that advertisers are using isn't accurate, it becomes a complete waste of ad dollars. Additionally, if they're not using the correct level of location targeting granularity for their goals, it is also ineffective. However, when done right with the path to purchase in mind, it can definitely move the needle. As advertisers move beyond location and use data-driven targeting techniques in conjunction, they will see results. Mobile location targeting is a crucial element of the mobile marketing mix and is one spoke in the wheel that when executed successfully, will create lift for brands. The next few years will lead to even more advancements in using location to increase return on ad spend and make brands more efficient.
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