The spread of smart phones that track their owners’ precise location seems like a wonderful development for advertisers. These devices could enable completely new kinds of digital marketing that make ads more relevant, meaningful, and effective. At the Location Based Marketing Summit, held last week in New York City, experts discussed the promise–and teething problems–facing this new section of the advertising industry.
Search engines already use positioning information from smart phones to deliver search results–and search ads–that are more relevant to a person’s location. And location-based games, such as Foursquare and SCVNGR, which let users “check in” or perform other activities at locations to earn points or rewards, could enable new ways of reaching customers. These companies can make deals with local businesses to show users special offers when they are nearby.
According to a March 2010 survey conducted by the Mobile Marketing Association, 10 percent of all cell-phone users access location-based services at least once a week, and about 50 percent of those people have clicked on a location-based ad, or interacted with it in some other way.
Some early results suggest that location-based marketing could be every bit as effective as the industry dreams. A survey conducted in May 2010 by Placecast, a location-based advertising company based in San Francisco, found that 80 percent of consumers who have opted in to use a location-based service were receptive to being contacted by companies with offers based on their location. Placecast’s data suggests that one-third of those who use location-based services have entered a store in response to a mobile ad, and 27 percent have been influenced to buy something.
Placecast’s CEO Alistair Goodman notes, however, that the type of product being offered and its cost can have a huge impact on how effective a mobile ad is. For example, 33 percent of Placecast’s survey respondents expressed interest in getting offers related to fashion and beauty, but 50 percent were interested in restaurant promotions.
Big brands such as Starbucks and Charmin are already exploring location-focused phone apps. Charmin has created an application that locates public bathrooms and lets users rate how clean and well-maintained they are. But experts at the New York event note that it’s hard to determine whether many apps actually influence consumers’ buying decisions.