Challenges for Hyperlocal Mobile Advertising

Facebook last week acquired the hyperlocal ad startup Rel8tion, joining such heavyweights as Groupon and Google in the race to deliver hyperlocal mobile ads. To be sure, there is noteworthy buzz surrounding the concept of marketing pitches that target users within small, well-defined areas. But the space needs to address several challenges to gain a hold on the mainstream.

Perhaps the biggest hurdle is users’ hesitancy to embrace location-based services in general. Microsoft reported last week that only 27 percent of U.S. respondents in an online survey said they’d be willing to pay for any kind of location-based service. The vast majority of mobile consumers are unwilling to share their whereabouts with other users. Meanwhile, only 27 percent of U.S. respondents said they’d be willing to actually 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 users 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. But when it comes to all advertising strategies, everyone in the ecosystem — from search providers like Google and Yelp to mobile ad networks to the retailers themselves — needs to take several challenging steps. Here are a few:

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. 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.

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 to the right audience.

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.

For an in-depth look at more of these and other challenges, see my weekly column at GigaOM Pro (subscription required).

Image source: Flickr user kevindooley.

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