Location-based advertising still searching for its place
By Rimma Kats
June 6, 2012
Location, location, location
Location-based advertising has grown significantly in recent years. However, with privacy issues still very much afloat and many consumers not willing to give up their information so easily, marketers are having a difficult time finding their place in the medium.
As mobile technology continues to grow and becomes more sophisticated, so do mobile campaigns. Content needs to be more personalized and relevant to attract customers, and more marketers need to harness location-based advertising to achieve that – even though privacy and other issues still ensue.
“Location-based marketing has long been plagued by overpromising,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.
“Pundits looking for a headline have jumped to the ultimate iteration, usually in the form of customized orders automatically delivered to mobile consumers who are physically approaching a business,” he said.
“The ‘Starbucks order waiting for you when you arrive’ example has been beaten to death.
“The reality is that this scares consumers, rather than excites them. Mobile marketers need to realize that what gets them and their peers fired up does not necessarily move consumers in the same way.”
Location, location location
According to industry experts, location is both the great promise and the potential fear factor of mobile marketing.
Location-based advertising offers marketers a lot of opportunities.
The new application delivers location based services
Not only are companies able to connect with consumers on a one-on-one basis, but they can also supply them with relevant and personalized information.
“As long as real value is being delivered in exchange for the sharing of location information, the privacy issues shrink into the background,” Mr. Kerr said. “Google has mastered this.
“If, on the other hand, messaging is pushed based on location that is not seen as valuable or wanted, then one rotten apple can spoil the barrel,” he said.
The devices that consumers use every day already know where they are, per the executive.
And, consumers are sharing location information whether they like it or not.
“The location cat is out of the bag,” Mr. Kerr said. “The question is what is done with this data.
“What value can be delivered?” he said. “Location enablement is not scary when it is used to deliver relevant and meaningful offers to an audience that is uniquely prequalified to be interested in the message by where they are at that exact moment.”
Mr. Kerr believes that brand advertising will fade, as location-specific offers and deals fuel the acceptance of location-based advertising.
“When real value is delivered, few users mind that the device or platform that they are on is using their real-time location,” Mr. Kerr said.
“If, on the other hand, marketers continue to try and push blanket brand advertising to nonspecific audiences, consumers will sniff out the fact that their location is being used and the creepy factor will kick in,” he said.
Location is another valuable demographic that is added to the mix when targeting advertising.
“With 38 percent of smartphone users making mobile purchases and 90 percent of mobile searches resulting in an action, such as a purchase or in-store visit, location is increasingly becoming a more valuable piece of data that can help marketers move users through the purchase process,” said Rip Gerber, CEO of Locaid Technologies, San Francisco.
“It is still early in the industry understanding of how location impacts consumers’ awareness, considerations and purchase decisions,” he said.
“However, more and more industry research offers new insights on how location can affect user behavior dramatically.”
According to Mr. Gerber, marketers create their own privacy obstacles when they forget relationship, relevance and preferences in favor of short-sighted metrics.
All indications show that consumers are willing to engage with new forms of mobile advertising with 37 percent growth forecasted, location-based advertising being one of them, per the executive.
“Now, the mobile device feels very private, and location services or push messaging can seem intrusive,” Mr. Gerber said. “It isn’t just the medium; it’s the medium combined with the message and moment – if you screw up any of these elements in relation to the other, it can become not just an effectiveness issue for the marketer but a privacy issue for the consumer.
“Location gives context to every conversation we have, the first question people always ask on the phone is ‘Where are you?’” he said. “People have always shared their location, but now it’s enabled marketing and advertising conversations at a much more precise time and geographic degree – that precision can appear intrusive when the conversation goes wrong.”
“The hype cycle for location-based advertising is at that inflection point where it will become a ubiquitous part of every mobile campaign. Put simply, if you don’t know where your customer is, how can you have the right conversation with them?”
Currently, there are many privacy issues centering around location-based advertising and geofencing.
Many privacy advocates have decried both Apple and Android for possible data breaches that could reveal precise consumer locations.
Last year, mobile applications faced growing scrutiny from the Federal Trade Commission as the agency built up its public education around mobile and continued to speak out about the need for a universal do-not-track mechanism.
Privacy is one of the key legal issues in the mobile space, and it is something that a number of regulators are focused on.
“In the past few months the FTC issued a report encouraging all members of the kids mobile app ecosystem to play a role in making privacy disclosures, the California Attorney General announced an agreement in which the leading app stores promised to make it easier for developers to make privacy disclosures, and the White House announced a data privacy framework that establishes a ‘Consumer Privacy Bill of Rights’ with baseline privacy protections,” said Gonzalo Mon, attorney with Kelley Drye & Warren LLP, Washington.
“Given the quickly changing legal landscape – and the growing number of government agencies that want to play a role in that landscape – it can be difficult for companies in the mobile app space to understand what’s required,” he said.
“It’s possible that we’ll see more definitive guidelines or regulations this year.”
According to Mr. Mon, it is important that marketers do not collect more than they need.
Although there may be a temptation to collect as much data as possible, companies should generally collect only the information they need for an app to work.
Additionally, marketers should disclose their privacy practices by giving consumers information about their privacy practices before they download an app.
If marketers collect personal information from children under 13, they need to comply with the Children’s Online Privacy Protection Act.
Mr. Mon also suggests that companies consider when to get consent.
Although various bills pending in Congress would require companies to get consent before collecting certain types of information, the bills have not been enacted.
Nevertheless, there are several types of information – such as location-based data – for which getting consent may be a good idea.
Lastly, it is important that marketers protect the information they collect.
“Unfortunately, it’s not uncommon to read stories about major companies who experience data breaches,” Mr. Mon said. “If you collect sensitive information from consumers, you need to ensure you have physical, electronic and procedural safeguards to protect that information.
“Legal requirements and best practices are likely to evolve over the coming year, but if companies put these tips into practice, they’ll likely be ahead of the curve,” he said.
According to Linda Goldstein, chair and partner at Manatt, Phelps and Phillips LLP, New York, location-based marketing is likely to continue to be a high regulatory profile for the next several years.
"At the FTC's recent workshop on the application of the Dot.Com Dislcosures to new media platforms including global, the FTC specifically posed several scenarious involving location based marketing offers and raised issues concerning the level of disclosures that are required," Ms. Goldstein said.
"Marketers noted the huge challenges involved with making disclosures on mobile platforms with limited real estate and urged that the FTC take a contextual view of the issue and assess what levels of disclosures are necessar based on the context of the offer," she said.
"For example, if an offer for a free cup of coffee is made to a targeted group of loyalty customers the level of dislcosure required may be much less than would be necessary with a wider based blast."
Rimma Kats is associate editor on Mobile Marketer, New York
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Comments on "Location-based advertising still searching for its place"
Frank Viljoen says:
June 6, 2012 at 5:50am