The Future of Mobile Advertising – Location, Location, Location

The degree to which an ad is relevant to a consumer is often directly proportionate to its likelihood of generating a conversion. For this reason, behavioral targeting, retargeting, ad content preferences and subsequent customization, and other such techniques are attractive to digital marketers.

This bodes well for the newest alternative to garner industry buzz. If you think you’ve experienced the highest level of performance you’re apt to get from a digital ad, wait until you see what location-based advertising (LBA) can do.

These mobile ads, which target users wherever they are based on their GPS location, have the potential to represent anything from a coupon for a restaurant around the corner from where you’re currently waiting for the bus, to a notice of a nearby car dealership that carries the very make and model you’ve been looking at on an automotive research site. With LBA, a mobile application developer could customize the ads it displays based on a user’s location, or an advertiser could target a mobile banner ad so that it would only appear to users who are in the vicinity of its business.

A new study from the Mobile Marketing Association (MMA) and Luth Research assesses the potential of this advertising market with some promising results. According to the MMA, one in four U.S. adults (26 percent) have used a “map, navigation or some other mobile phone service that automatically determines your current location,” with 10 percent doing so at least once a week. Of the consumers who use location services overall, half of those who noticed an ad while using a location-based service took some action.

Although the market seems relatively small now, the potential for growth is inarguably huge. Most mobile phones (at least those sold within the past few years) include GPS technology or something comparable that can be used to pinpoint the user’s location. And Apple iPhone users are considerably more likely to use mobile location services; 63 percent of iPhone owners do so weekly.

No wonder Apple has launched the iAd in an effort to capitalize on this opportunity. There has been plenty of speculation that Apple was on the verge of releasing its own location-targeted mobile ad product, in no small part because of its acquisition of mobile ad network Quattro Wireless earlier this year. The iAd platform certainly fits the bill. The ads will only be served in association with Apple products, like iPhone applications, and the company claims they’ll be entertaining, increasing the potential for interaction and a click. Targeting won’t be based on location alone; interaction with iTunes and Apple’s application store will also serve to provide data that can be employed by advertisers, allowing them to customize ads based on consumers’ media preferences.

The solution may currently be far too pricey for many agencies and clients. Apple is requiring its first advertisers to spend as much as $1 million in media. They’ll also have to pay both a $10 CPM (define) and a $2 cost-per-click fee. On the flip side, they will benefit from having Apple’s creative geniuses develop their ads for them – at least for the time being – to ensure they’re up to snuff.

Apple’s rival in mobile technology, Google, is also a likely candidate to enter the location-based mobile advertising space. Its acquisition last year of mobile technology provider AdMob means that it too could be planning a new ad product launch (it’s interesting to note that Google’s Android phones outsold iPhones for the first time in Q1 of this year). Google also recently won a broad patent for “using location in an advertising system;” how this will affect Apple remains to be seen.

What happens next is anyone’s guess, but one way or another mobile marketing will be making room for location-based advertising in its new role as the ultimate in digital advertising relevance. If the Mobile Marketing Association’s survey holds true, our industry may have finally stumbled across an ad format that consumers are actually willing to admit has value.

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