Mobilize: The Dawn of Location-Aware Mobile Ads

There are roughly 4,000 total mobile applications that make use of location context today, according to Ted Morgan, founder and CEO of Skyhook Wireless. That’s up from “a year and a half ago, probably only five in the world.” Skyhook, which delivers location information for Apple’s (s aapl) phones and Snow Leopard OS as well as many Android applications, serves up 200 million locations per day, Morgan said.

We should expect to see location-aware ads on the iPhone (s AAPL) in the next six months, said Morgan. WaveMarket founder and CEO Tasso Roumeliotis was even more bullish. “Location will be on every phone by the end of year,” he said.

Context is Money PanelWhat panelists in Mobilize 09’s session on monetizing mobile location disagreed on was how exactly to make use of knowing where a mobile user is. Where Balaji Natarajan, senior manager of mobile technologies for Capgemini, and Sanjeev Agrawal, CEO of Aloqa, said they feel that “push” advertising is the great mobile opportunity, others argued such methods are invasive and ineffective.

“It’s the transition from a reactive to a proactive medium,” said Natarajan. “Push is a relevant model, because the phone is an interruptive device, said Agrawal. “Monetization has to start with engagement,” which will require users leaving their location-based applications running all day. “We need to get to the point where your app surprises you throughout the day — that’s when monetization will happen,” he said.

One example of “push” mobile advertising would be to proactively alert a user browsing at a BMW dealership that a Lexus test drive awaits them, said Rahul Sonnad, CEO and founder of Geodelic Systems, which makes local discovery applications. Roumeliotis spoke of the prospect of a casino in Las Vegas contacting a high roller who walks into the Bellagio with a special offer of $50,000 in credits. He termed it “the physical click-through.”

But Sanjay Vakil, the founder of LuckyCal, which recommends future activities based on your location, voiced dissent. “I don’t think interrupting people on a device that’s even more personal and sits in your pocket is going to work.” He advocated more traditional click-through methods, like Google’s search ads, whose targeting makes them more relevant than banner ads. Instead of “push,” Vakil said, “I think pull works.” But then Vakil was playing devil’s advocate throughout the whole panel, and said he thought the real value of location-aware apps was in enterprise, not advertising at all.

So now that location awareness is surging onto phones, what are the key obstacles to monetizing it? The panelists laid out three:

  • Need for location-based ad networks and standards: Location-aware advertising is haphazard and mostly sold by each app maker independently. Sonnad said a centralized and/or standardized method of advertising across different company’s applications and platforms is urgent.
  • Privacy concerns: Roumeliotis said phone and app makers need to take special care to alert users when their location is being transmitted. If someone were to install Google Latitude on someone else’s BlackBerry and hide the app, and then track the phone owner’s whereabouts, “the negative PR could impact the entire industry.”
  • Augmented reality nausea: While panelists such as Morgan were highly excited about overlaying data on a location-aware view of the world, Vakil said the delay rate of the handset picture versus reality may not sit well with users. “Watch out for people barfing,” he said.