Imagine you’re walking down the street beside a pet store. Your phone vibrates. On the screen, there’s no text message, no email, no social notification, but a promotion for the pet store you’re walking past offering you a lucrative discount on pet food.
We’ve seen keyword-based ads, interest-based ads, and device-based ads. What we are just beginning to see is location-based advertising. With over 700 million GPS-enabled phones in use, location-based advertising is truly the way of the future.
The irony, however, is that the advertising of the future has been in use, albeit on a much less precise scale, for over a decade. Geographic targeting has been a mainstay of the display and search advertising world since the early days of Google Adwords.
Thanks to geo-IP databases, almost every online advertising platform offers some form of location-based advertising. The results, which are overwhelmingly positive for businesses that implement it properly, say good things about the future.
Studies show that consumers respond more favorably to advertising that’s for local businesses. Clickthrough rates, conversion rates, and other metrics that indicate ad success all increase when an advertisement is local to the audience it’s targeting.
At the same time, there’s a downturn in interest when consumers get too close to the source of their advertising. BI Intelligence recently found that ad CTR is lower when a business is within a mile of its target than it is when a business is further away.
Part of this can no doubt be attributed to intent – after all, when prospects are very close to your business, they may not need advertising to buy something. But another part could be precision, or a distinct, industry-wide lack of it.
One of the biggest problems location-based advertisers currently face is a lack of precise location data. Despite over 75 percent of smartphones using GPS, just 10 percent of mobile ad network impressions can be delivered based on GPS data.
Because of this, many location-based advertisers currently use IP and zip code data to calculate the location of their audience – data that, on most platforms, has been a targeting option since the early 2000s.
Despite this, the precision of location-based advertising is constantly increasing as GPS latitude and longitude data becomes more available. As such, location-based advertisers are no longer being held back by the traditional ‘rules’ of advertising.
With clickthrough rates of three to four percent very possible – figures that are as much as four times the industry average for display advertising – location-based advertising looks very promising indeed.
Given the fact that the smartphone industry is rapidly expanding, with more users than ever before purchasing GPS-enabled smartphones, location-based advertisers are poised for a dual opportunity: better targeting and a bigger audience.
If that’s not an appealing prospect, it’s hard to think of what could be. With location targeting growing more precise, mobile audiences growing larger than ever before, and mobile CPMs remaining steady, the advantages of a location-based advertising campaign are becoming increasingly difficult to ignore.