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Summary:

If in the first eight years of the 21st century contextual text advertising has proven to be the magic potion, then it is safe to say that the next decade or so is going to be about location-relevant advertising and marketing messages. LBA (location-based advertising) has been talked about in hushed tones for so long that it’s hard not to roll one’s eyes. I have been skeptical for a while, but more recently my opinion has started to change.

viewrangermap-nokian95b_resized.jpg Google’s preeminence in Silicon Valley is largely due to its ability to offer advertisers a way to hawk their messages against contextually relevant keywords. The plain-text advertising messages, which aim to peddle everything from broadband connections to litigation services, have worked well enough to make Larry and Sergey mega-billionaires (the current nosebleed-inducing decline not withstanding) of the rarest kind.

If in the first eight years of the 21st century contextual text advertising has proven to be the magic potion, then it is safe to say that the next decade or so is going to be about location-relevant advertising and marketing messages. LBA (location-based advertising) has been talked about in hushed tones for so long that it’s hard not to roll one’s eyes. I have been skeptical for a while, but more recently my opinion has started to change.

Why? Because the mobile phones of today are getting increasingly sophisticated, and are coming to market fitted with geopositioning systems. Every single chip maker catering to the mobile market is rushing to add location-based functionality into their chipsets; it’s something I’ve written about on many occasions.

Sales of mobile devices with integrated GPS are forecast to grow to 720 million units in 2011 from 180 million units in 2007, according to research firm In-Stat. Even if those numbers are just 50 percent accurate, it’s clear that location-based advertising is becoming quite real.

While quite a few companies have started to dabble in this arena, it’s still not clear who is going to be the champion here. Google, for example, is pushing its mobile agenda via Android and deals with phone companies; Yahoo appears to have a coherent strategy (if not execution) as well (for once). And then there are the startups.

One of them, Loopt, has made its plans obvious by partnering with CBS Mobile. The two have embarked on what seems to be an interesting experiment in location-based advertising, according to the New York Times. The reason I call it an experiment is because Loopt is available on Sprint (and its affiliate carriers) and there is a limited number of handsets out in the market that are Loopt-capable. Consumers are likely to see a handful of location-relevant ads pop up on their screens, the Times explains.

However, the bigger story however went unnoticed yesterday. NAVTEQ, the Chicago-based digital map provider that’s in the process of being acquired by Nokia (NOK), has made an equity investment in Greenbelt, Md.-based startup Acuity Mobile, which specializes in mobile location-based advertising delivery. NAVTEQ, which licenses Acuity’s technologies, is pretty high on LBA.

Using Acuity’s EMAP technology, NAVTEQ will enable clients to target consumers with real-time and geographic precision. In turn, consumers will have advertising move with them, as their mobile mapping applications unobtrusively present ads, offers, coupons, or other promotions, based on their opted-in preferences. The ads might feature audio, rich graphics, or calls to action such as routing to the closest advertiser storefront.

With NAVTEQ likely to become part of Nokia, LBA could become part of millions of Nokia phones that ship every year. In other words, Nokia could become a big player in the LBA business going forward.

After all, no marketing message is more effective than subliminal location-based relevance. It’s like going to the movies and realizing that you need to eat candy and popcorn, even though normally you never touch the stuff. In my case, given my weakness for shirts, a coupon offering a 10 percent discount on Thomas Pink shirts while walking around Union Square in San Francisco is pretty likely to result in a sale.

  1. Hmm… “Hawk” is NOT a verb, it is a noun. Do you mean “hock”?

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  2. Hawk: To peddle goods aggressively, especially by calling out.

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  3. Location based ads and marketing? Only if the phone (and service) is FREE!!!

    http://pa-2.blogspot.com/2008/01/open-free-phones.html

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  4. Nokia also bought Enpocket last year, which I suspect would be involved in any kind of mobile ad business.

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  5. Very interesting article – I remain one of the non-believers but recently at Mobile and Advertising Forum in London when I moderated the event I asked two questions.
    1. Who believes that this is the year of LBS and advertising (40% raised the hand – out of about 100)
    Then I asked,
    2. Will LBS be huge in the next five years – nearly everyone raised their hand.

    In 2002 at the Informa LBS conference in Amsterdam I posed the same question and got the same response.

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  6. Om

    Interesting post.

    As one of the early pioneers of location based marketing, I can promise you it’s not the no-brainer it might appear. Back in 2000/1, I was part of the founding management team for ZagMe in the UK, a pioneer in this space. We recruited 85,000 consumers and ran 1500 campaigns for the likes of The Body Shop, Reebok and Burger King. the medium was via sms delivery.

    Lots of lessons were learned and because I realised that we were about 10 years too early, I wrote a White Paper outlining the main learnings – mainly so that the next generation wouldn’t end up making the same mistakes. I’ve made it available for a long time (free) via my blog at http://www.mobhappy.com and would be happy to extend the offer to all your readers too. Just email me at russell AT mobhappy DOT com.

    The main surprise? People always under-estimate the massive amount of advertising you need to sell to ensure that an offer is available at the right time to the right targeted segment. The logistics are truly mind boggling. And the engineering challenge of handing this amount of data on the fly is certainly non-trivial, even today.

    Toodle pip.

    Russell

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  7. Om, I just saw this:
    - Online Video Yellow Pages Site Pays Video Maker For Local Reviews
    http://www.emediawire.com/releases/2008/2/prweb651201.htm

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  8. Krishna Chodavarapu Wednesday, February 6, 2008

    Perhaps someone can explain to me what LBA means. I can’t seem to picture a scenario where LBA would work.

    Who is walking around town staring at their phone?
    The phone ringing every time I pass Starbucks or a MickyDs doesn’t sound very nice.

    No. I imagine LBA being more “pLBA” (primary location) where they advertise that a Starbucks is nearby where you live. But they do this already; I get local circulars for Best Buy, Circuit City, heck even Michaels, every Sunday.

    I am not sure what else they can do? Perhaps searching for a store on maps comes with “preferred” stores, or notices of deals? But why do you need a GPS in your phone for that? I have a Palm Centro and Google Maps works fantastically (no ads as of yet), just search “Best Buy 900xx”.

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  9. Writing here after a long time…

    Anyways, there’s way too much “Advertisers, advertisers, advertisers.” First of all, no phone can have the viewing window more than around 320px wide by 450px high. The main question is: How can you display advertisement in such a tiny area without messing up a user’s experience? For example, if you’re viewing a map, should ads pop up on the same map? Would you then have enough room to do what you want to do?

    I don’t want anyone to feel like I’m bragging or anything, but my company, hobnobLover is very related to location based service by users and so this article. And, I might be launching a mobile version: hobnobLover.mobile. Again, displaying ads can be very tricky. Like Mr. Malik said, showing “sponsored items” first could definitely push advertising to the next level. (I hope I get a chance to push the mobile version…)

    Anyways, the last few sentences of this article, I completely agree with! 100% true! LBA will definitely be a huge thing, if we don’t mess it up badly, that is!

    Kandarp.
    - http://www.hobnobLover.com/

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  10. [...] eyes. I have been skeptical for a while, but more recently my opinion has started to change. Read the rest of this post Print Sphere Comment Tagged: GigaOm, Om Malik, Voices, advertising | [...]

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