Advertisers have long talked about the mystical possibilities of using real-time location data to target customers. The technology existed; most cell phones have a GPS receiver in case of emergency. But real-time location data was off-limits to advertisers until Web-centric phones introduced people to the concept of sharing their location in exchange for utility. Soon, along came apps like Foursquare and Gowalla, which essentially trick users into sharing their real-time location with advertisers. Suddenly, location-aware marketing is red hot.
Foursquare dashboard showing the results of member check-ins
"It's huge and it's increasing," said Michael Becker, a director at the Mobile Marketing Association. "Location is going to play an increasingly critical role in enabling successful consumer engagement through and with the mobile phone."
Favorite location-based social network of members
For advertisers, the growth of real-time location data felt like an explosion that "blew up overnight," Becker said.
Big name advertisers seem to be throwing money at location-based services. Brightkite is reportedly charging between $10,000 and $20,000 for local promotions.Foursquare seems to be announcing a new A-list corporate partner every week, including Starbucks and MTV. And Shopkick, the treasure hunt of consumption, launched with Best Buy, Macy's and American Eagle among its sponsors - which had to install special audio transmitters in all their participating stores just so the app will know when a user walks in.
Only 4% of Americans have ever used location-based marketing according to Forrester Research
Advertisers are excited because location-aware ads really work, Becker said, citing a study that showed nearly 50% of users who are shown a location-aware ad on a mobile device will "take some action," beating out text messaging (37%) and Web display ads (28%).
How often do location-based social network members use the check-in feature
Where location-based social network members check-in
Why consumer's don't consumers use location-based social networks
But isn't that because location-savvy ads are fairly novel? Advertisers were also excited about display ads in the early days of the Web, when users were so unaccustomed to browsing that they clicked on anything that caught their attention. Doesn't it seem like the higher engagement reported for location-aware ads could be because a user is not used to seeing her city or neighborhood mentioned in an ad on her phone?
Newness may be inflating the numbers a bit, Becker acknowledged, but advertisers will just create more engaging and sophisticated ads as time goes on. But location is just one of many important factors in mobile marketing. Advertisers also consider a consumer's age, type of phone, even time of day.
"Location is not necessarily the goal of the interaction. Rather, location is a piece of information that provides context to the user experience and can create a more relevant and engaging interaction with the consumer," Becker said.
Advertisers in the U.S. will spend $1.8 billion on location-aware marketing in 2015, according to a recent report by market research firm ABI Research. (By comparison, advertisers in the U.S. spent $10 billion on search advertsing in 2008.)
Not every advertiser will care about location, said Neil Strother, a director at ABI Research who put together the report. For restaurants and bars, real-time location is crucial. But for NBC or Coke, not so much.
And there are lots of companies hesitant to join in the location game, Strother said. That's because of inexperience and fears about threatening consumers' comfort level. "The next few years will be very important for companies to get it right and not abuse the location information they're getting," he said.
COMMENTARY: ABI Research recently forecasted that location-based marketing revenues will hit $43 million for the year 2010, hardly an impressive number. It is just too early to tell how effective location-based marketing is going to turn out. Location-based marketing is still in the early adopter phase. Consumer's are jumping in, experimenting with this new technology, more out of curiosity than the overall experience and value it offers. The offer still has to be compelling to trigger consumer action. Consumer's are more likely to respond to a "Buy One, Get One FREE" restaurant deal, than one offering "Buy One Meal, Get a FREE Slice of Pie" deal.
The other issue which hasn't been addressed, is how to increase the number of females participating in location-based social networks and using the check-in feature. There are also privacy issues which need to be addressed. Facebook is one of the biggest violators and recently paid out $5 million stemming from a class action lawsuit to several individuals and consumer privacy organizations Female's also have a fear of being stalked.
Having said this, I still believe that until the above issues have been resolved to the consumer's satisfaction, and there is more conclusive data gathered over a period of several years on consumer behaviors that measure the effectiveness of location-based marketing, marketer's are going to have a wait and see attitude towards location-based marketing.
Courtesy of an article dated September 8, 2010 appearing in ReadWriteWeb
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