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Location-based services to bring in $4B revenue in 2012: study

Alcatel-Lucent, 1020 Placecast partner on location

Geotargeting strategies are getting more sophisticated

Pointing to an uptick in consumers using their devices’ GPS to receive relevant and local marketing, location-based services are expected to generate $4.4 billion in revenue by 2012, according to a new study from Visiongain.

Visiongain’s “Location Based Services 2012-2017: Monetising Opportunities and Challenges” report looked at how location-based services are being used specifically in the Middle East and Africa. Additionally, the report examined which services consumers are most apt to participate in.

"The challenge with location-based marketing is similar to the challenge we see with mobile marketing in general — precise targeting is possible, but it requires data to be available throughout the organization in a way that was never envisioned when current analytics and decision support systems were deployed," said Brennan Hayden, executive vice president and chief operating officer at WDA, East Lansing, MI.

"Most mass-advertising — with a few exceptions such as direct-response television sales like the Home Shopping Network — is built with support systems that have relatively imprecise targeting, substantial feedback delays, and imprecise proof points," he said.

"Almost all deployed infrastructure measures this data statistically and indirectly, in the aggregate, and well after the fact. For location-based services to be cost-effective and scalable, the targeting and the feedback need to be pinpointed and accurate in real-time at the planning, trafficking, creative and management levels and within both the agency and advertiser organizations."

Mr. Hayden is not is affiliated with Visiongain. He commented based on his expertise on the subject.

Visiongain did not respond to press inquiries.

Location location location

Per the report, location-based services have been particularly slow to take off in the Middle East and Africa. Revenue from location-based services in the Middle East and Africa will total $10 million in 2012.

However, there is also expected to be a 100 percent annual growth rate, meaning that the region will generate $20 million by 2013.

By 2014, revenues in the region will reach $60 million. A 83 percent year-over-year growth will be equivalent to $111 million.

The Middle East and Africa will bring in $360 million by 2017. This means that the compound annual growth from 2012 to 2017 equals 105 percent.

Interestingly, the report found a connection between location-based advertising and traditional advertising. In 2012, traditional advertising in the Middle East and Africa is expected to total approximately $150 million.

By 2015, revenue from traditional advertising will peak to just more than $300 million.

From there, revenue from traditional advertising in the region will slip to $20 million by 2017.

"While we think brands have made great strides with location-based service efforts, there are certainly areas for growth and improvement," said Brian Wool, vice president of Localeze, Sterling, VA.

"For example, many brands have a corporate Facebook fan page but do not have corresponding local Facebook fan pages," he said. "So by not localizing Facebook fan pages they are missing the opportunity to increase the possibility for likes and check-ins at specific locations. Leveraging the ability to engage with customers at a hyperlocal level is key for brands and their multi-channel marketing efforts."

"Location-based service campaigns will become more integrated with mobile and social platforms.  Also, brands will need to have a laser focus on ensuring their online business identities are correct across local search platforms. This ensures businesses can be found by consumers and that those consumers can tie descriptive content back to their online business listings."

Check-in for rewards
The report also looks at which types of location-based services are most used with foursquare leading the pack.

Foursquare lets users check-in to their favorite stores and locations through an app, a mobile site or via SMS, showing how the company has a grip on a wide group of mobile users.

According to Visiongain’s research, foursqaure’s users are split equally between males and females. Additionally, 50 percent of users live outside of North America.

Foursquare currently has 20 million registered users. Visiongain expects the company to reach 28 million registered users by the end of 2012. An expected compound annual growth rate of 35 percent means that foursquare will reach 67 million users by 2017.

Despite the growth in location-based services, monetization remains to be a challenge.

"I think monetization is the wrong focus right now," WDA's Mr. Hayden said. "In other words, today the numbers would be so small that it’s not worth focusing on any more than as an exercise."

"Ultimately, monetization will come from moving a consumer forward in the purchase funnel in a precisely-targeted manner, both in terms of location and time," he said.

"What is needed is an investment in the infrastructure and processes necessary to perform location-based services in a scalable manner. That means real-time advertising such as is available in RTB/DSP/DMP infrastructures. It also means accelerating and even perhaps interrupting the build-out of predictive analytics in favor of more real-time, organizationally distributed technology."

Final Take
Lauren Johnson is associate reporter on Mobile Marketer, New York

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Lauren Johnson is associate reporter on Mobile Marketer. Reach her at lauren@mobilemarketer.com.

 
Related content: Research, mobile, mobile commerce, mobile marketing, Visiongain, Brennan Hayden, WDA

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