Imagine yourself walking in the mall during lunchtime. As you walk by the food court, you receive a notification on your smartphone from a Japanese restaurant stating that if you drop by within the next 15 minutes, you’ll receive a 30 percent discount off their lunch menu. Meanwhile on the other side of the mall, a woman walking near a shoe store sees a personalized message pop up on her phone, alerting her to new sales in the spring boots collection, something she was interested in.
If this situation has happened to you, then you are in the realm of location-based advertising. A new technology that marketers and advertiser are using to show their ads to the right people, at the right time and at the right place. This means that mobile users, like you and me, will be able to see ads based on our genuine interests along with places and businesses we frequent in the physical world.
Currently, several companies are working on the development of this new technology in which most of them are partnering with 3rd party apps and publishers to get access to mobile users’ location data. Advertisers and marketers use this data to analyze customers’ location and context so they can build consumer profiles based on their behaviors in the real world.
With all this in mind, this technology doesn’t sound all too bad, but let’s take a brief look at the financial perspectives, benefits and downsides in location based advertising.
First of all, it is worthy to mention the results from a recent report by Interactive Advertising Bureau (IAB) and PwC. This report showed that in the United Kingdom mobile ads make up 23 per cent of the £7.2 billion that was spent in 2014 on digital marketing. Perspectives are not less favorable in the United States, in which according to BIA/Kelsey location-targeted mobile ad revenues are projected to grow 35% annually from $4.3bn to $19.3bn during the 2014-2018 period. According to estimations made by eMarketer, it is expected that in 2015, global mobile ad revenues will hit $65bn with $28bn coming from the US alone.
Considering the financial perspective, this will not only benefit big marketing companies and brands, but will also be favorable for small to medium size businesses that want to drive more in-store visits and increase their brand awareness.
On the other hand, everybody is getting benefits in the game of accuracy; including mobile users like you and me, who will receive relevant ads that will match our interests and desires with discounts and coupons. With this in mind, location-based ad technologies will enhance our shopping experiences through a more personalized service and access to discounts and deals.
As a matter of fact, users are already showing a growing acceptance towards location-based targeted ads in exchange for relevant shopping benefits . In the most recent report from Cayan “State of Payments Industry”, 78 percent of consumers are interested in using their mobile phones while shopping to get deals and coupons. In another study, conducted by ReasearchNow and Swirl, 77 percent of individuals would be willing to share location data with merchants in exchange for something valuable whereas, 50 percent of people polled by Cisco assure that discounts represent an incentive to share personal information.
All together this technology sounds like a great deal for businesses and mobile users but there are still many challenges to conquer. One of them is concerning privacy, especially for those who are non technology natives or half technology natives; who tend to perceive location-based targeted ads as intrusive and invasive with their personal info. The other issue is accuracy, even though many companies have invested time and money in the development of different platforms and proprietary algorithms to narrow location accuracy, ads are often sent to the wrong people at the wrong time and hence, budgets are being wasted as a consequence of this.
The solution to these problems could be laying in the capability of matching the right customers to every product and also offer marketers the tools to refine their campaigns so they show meaningful ads that connects to their customers’ interests and needs. It is also key to understand that not only is location accuracy important but content as well. Mobile users want to know what deals are available but they also want to feel connected with merchants and the brands they root for. For this reason, analytics and insights are as relevant as location accuracy.
With location based advertising, we will be able to receive ads, discounts or coupons based on places we go as well as our behavioral and search interest. In this way, merchants and brands can measure, analyze and create customer profiles to drive us into the right stores. This is a strategy to compete in the growing online market and connect more with customers.