‘Location-Based Advertising and Marketing’ is the second consecutive report from Berg Insight analysing the latest developments on the locationtargeted advertising market worldwide.
This strategic research report from Berg Insight provides you with 200 pages of unique business intelligence including 5-year industry forecasts and expert commentary on which to base your business decisions.
The mobile channel is gradually strengthening its position in the marketing media mix as smartphones are becoming ubiquitous and drive mobile media usage. One of the key developments in mobile advertising is the increasing integration of location-sensitivity, which releases the full potential of the mobile channel. A notable divide can be made between static and real-time location-based advertising (LBA). Targeting by static variables involves using information which is part of user profiles such as place of residence and work. Real-time location targeting instead uses location information which is gathered when an ad is delivered to a mobile user. Such LBA campaigns leverage the same type of technologies to determine user location as other location-based services (LBS). Common methods include GPS, Cell-ID and Wi-Fi positioning which are all based on real-time information.
Targeting by location in combination with other contextual and behavioural segmentation greatly enhances the relevance of mobile advertising. It has been demonstrated that locationtargeted ads generate considerably higher returns than conventional mobile advertising. The associated eCPM and CTR levels are several times higher. Berg Insight estimates that the total global value of the real-time mobile LBA market was € 526 million in 2012, representing 9.1 percent of the total mobile ad spend. Growing at a compound annual growth rate of 65.2 percent, the real-time LBA market is forecasted to be worth € 6.5 billion in 2017, corresponding to 32.8 percent of all mobile advertising and marketing. This means that location-based advertising and marketing will represent around 5 percent of digital advertising, or more than 1 percent of the total global ad spend for all media. Asia-Pacific is estimated to be the largest LBA market in 2017, followed by North America and Europe.
Key drivers for LBA include the growing adoption of both outdoor and indoor location technologies, as well as the increasing consumer acceptance of LBS in general. Local advertising is further a major market and LBA opens up the mobile channel for new advertisers such as local merchants. Big-box retailers can leverage LBA to combat both online and physical competitors. The fact that LBA has higher performance has moreover translated into premium rates. The main barriers to adoption are related to the inherently limited reach of LBA which acts as a mental hurdle for advertisers. Education of advertisers and new methods for campaign performance evaluation are thus called for. Privacy issues can further not be ignored, but can be beneficially handled by privacy control options beyond simple opt-in mechanisms. The demand for geo-targeting remains comparably limited, but is bound to increase given the proven results such campaigns generate.
LBA revenue forecast, € million (Worldwide 2011-2017)
The LBA value chain is still forming and there are a large number of players involved in the ecosystem. The industry remains fragmented and far from mature. Many different companies are involved, ranging from LBA specialists such as Verve, Placecast and xAd, to LBS players including Telmap, Telenav and Waze, and operators such as AT&T, SFR and the new UK joint venture Weve. There is furthermore an abundance of location-aware applications and media which serve geo-targeted ads, with examples such as Foursquare, Shopkick and SCVNGR. Other stakeholders include coupons and deals providers including Vouchercloud, Yowza!! And COUPIES, search solutions such as Hibu and Yelp, and proximity marketing providers like Proxama, NeoMedia and Scanbuy. A number of traditional mobile advertising players are also active in the LBA space, for example Millennial Media, Madvertise and Nexage, as well as major digital and telecom players such as Google, Apple and Facebook.
There are a number of key takeaways from the current trends in LBA. It has been established that geo-targeting improves the performance of mobile marketing and greater shares of ad budgets are devoted to LBA. High-precision real-time geo-targeting is still sparsely used, and rightly so as most campaigns do not require an accuracy of a few meters. Hyper-local LBA is nevertheless becoming more common. Location is furthermore only one of many valuable targeting variables and marketers must also strive to leverage other contextual and behavioural data. It is then crucial to ensure sound opt-in procedures and individual privacy measures for consumers. Marketing methods such as conquesting and combating of showrooming can further leverage location-based advertising. Current important high-volume LBA formats include mobile search and SMS campaigns. Berg Insight anticipates that geotargeting gradually will become ubiquitous and available across the entire mobile channel.