$1.8B potential for location-based advertising

Location-based services take-up rate may be slow for now, but an ABI analyst says this segment of global mobile marketing revenue may hit US$1.8 billion in five years' time.
Written by Tyler Thia, Contributor

Location-based advertising is still in its infancy, but come 2015, businesses worldwide will be spending US$1.8 billion on it as part of their overall mobile marketing budgets, finds a new study from ABI Research.

"It's still early days and there is no single 'right' approach to location-based advertising," said practice director Neil Strother. "This remains a very fragmented market that is full of experimentation".

The report pointed out that location-based advertisements are enabled by three sets of technologies, namely GPS, Wi-Fi and Cell-ID (location determined relative to mobile phone transmitters). The study added that most successful campaigns use a mix of some or all of the three technologies, depending on the product or service, region, consumers and location accuracy required.

Mobile shoppers are slowing in taking to new location-based services (LBS). Apps such as Loopt, Gowalla, Foursquare and Facebook (and Places) allow consumers to "check-in and self-identify". Others, such as Shopkick, reward shoppers just for visiting certain stores.

But not everyone wants to be tracked.

"Some might be put off by the 'Big Brother' aspects of this," said Strother. "But it is really about value-exchange: if you care about getting discounts or being rewarded for shopping, is the value-exchange high enough so that you'll accept having your whereabouts known to these companies in return for the benefits?"

Strother added that for location-based advertising to work, enterprises will need to establish clear marketing goals; analyze customers' mobile and location habits, and develop a certain location approach; choose location partner(s) and determine the best technologies for the brand; followed by execution of the plan and measurement of results.

While LBS have been making waves in the media, a survey by Forrester Research said that they are not popular with consumers. A July study showed that only 4 percent of U.S. online adults have used apps such as Foursquare and Gowalla, with only 1 percent updating these services more than once per week.

The report added that these heavily-hyped apps currently make sense mainly for brands seeking male influencers, and are too small for major marketers.

Consumers in Asia are already taking to Foursquare, and fashion labels such as TopShop, which targets youths, have also tapped on LBS for marketing purposes. An earlier ZDNet Asia report said that LBS offerings will require collaboration between multiple players in the industry, from operators to sponsors, to applications providers and regulators to ensure greater adoption in the region.

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