The world of mobile advertising has long been over-hyped, and much of the increasing buzz lately centers on hyperlocal ads — that is, marketing pitches that target users within small, well-defined areas. In just the last week, Facebook acquired the hyperlocal ad startup Rel8tion, and Groupon and partner JiWire prepared to launch a hyperlocal campaign. These moves follow the lead of Google and others who have launched similar initiatives in recent months.
The space, however, isn’t without challenges. Enticing users to share their location won’t be easy: Microsoft reported last week that 51 percent of respondents in an online survey said they had used location-based services. But that survey also found that users are uncomfortable divulging their whereabouts to others: Fewer than 20 percent of respondents said they had used a service that shared their location with others, and more than half expressed concerns about sharing their location in general. Meanwhile, only 27 percent of U.S. respondents said they’d be willing to pay for any kind of location-based service.
Consumers, then, want free location-based content on their phones, which means the space is likely to be driven in large part by advertising. But they don’t want to tell other users where they are, so social networks, whose location-based mobile advertising components are based on check-ins, will be at a competitive advantage as the space evolves.
As I’ve argued before, the way to deliver the most highly targeted (and therefore lucrative) mobile ads is to present them to users who are looking for something similar, and preferably nearby. If I’m looking for cheap lunch, for instance, my search results should be accompanied by a clearly marked ad for an inexpensive restaurant within blocks of my location. For those search ads to be successful, though, everyone in the ecosystem — from search providers like Google and Yelp to mobile ad networks to the retailers themselves — must take into account a few key factors:
1) Place the right kinds of hyperlocal ads from the right kind of advertisers. Marketing efforts that are based on block-by-block location should present an offer I can act on (like a two-for-one deal) rather than deliver branded campaigns designed to simply raise awareness. (That’s why Greystripe has wisely chosen to deliver branding campaigns on a regional basis, not hyperlocally.) As Hipcricket’s Jeff Hasen wrote earlier this month, hyperlocal is a good strategy for nearby businesses looking to boost sales of products with limited shelf life (especially when supply is too high), or to advertise a promotional event or sale.
2) Make sure those ads are valuable to those who receive them. Hyperlocal mobile advertising will only succeed when users are presented with offers they’re actually interested in. There’s no point, for instance, in pushing your new microbrew to a teenager, even if he is standing right in front of your brewpub. Make sure your ads offer value — whether it’s a big discount or a compelling piece of downloadable content — and make sure the right kind of consumer sees them.
3) Make hyperlocal advertising easy and cheap for small businesses. Mom-and-pop stores have a huge opportunity to leverage hyperlocal ads to differentiate themselves from chain restaurants and big-box retailers. That’s why Google is wise to use flat fees for its effort rather than keyword auctions, which can be confusing to proprietors who aren’t very familiar with interactive advertising.
4) Build a massive base of local advertisers. Because local mobile ads will only be effective if they present offers based on what users are looking for in a specific area, it’s imperative that ad networks have a vast base of advertisers in a wide variety of industries. That will take a very long time to develop, but once it does hyperlocal mobile ads could take off in a big way.
Related Research: How the Little Guys Can Compete in Local Mobile Advertising