Commentary

Nokia Maps A Future In Location-based Advertising

After wandering through a seemingly aimless adolescence as a telecommunications company, Nokia thinks it has found itself again. Its new direction: location-based advertising. It will be doing so by expanding its partnership with another somewhat large-but-dorky adolescent, Microsoft.

The company announced yesterday that it is combining its mobile-location and commerce-services business with its Navteq mapping unit to develop a "new class of integrated social location products and services for consumers, as well as platform services and local commerce services for device manufacturers, application developers, internet services providers, merchants, and advertisers."

Boil that down and it should all work the way you would expect: You're visiting Philadelphia and have a hankering for a hoagie. Type it into your Nokia smartphone running Window Phone 7 operating system and you'll get an offer from Sal's Hoagie Emporium down the street.

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"Focusing on location and commerce is a natural next step in Nokia's services journey," CEO Stephen Elop says in the statement announcing the initiative.

In Feburary, Nokia announced a partnership with Microsoft in which most future Nokia smartphones will be powered by the Windows Phone 7 OS. The Finnish company's origins date to the mid-19th century as a paper manufacturer; it got involved in telecommunications in the 1960s and launched a car-based mobile radio telephony system in 1971. Although it proudly proclaims itself as "the world leader in mobility," sales have been in a "freefall" as it continues to lose market share to Apple's iOS-based smartphones and models based on Google's Android OS, Todd Wasserman reports in Mashable

"The companies hope that combining Microsoft's Windows smartphones and other properties with Nokia's and Navteq's will create a large enough ad business to challenge Google and other leading industry players," Christopher Lawton reports in the Wall Street Journal.

The key to mobile advertising is to know what's around people, Christopher Rothey, vp of advertising for Navteq, tells Lawton. He says that Navteq has collected about 57 million points of interest -- restaurants, stores, gas stations -- around the world for which it can pony up a deal or directions.

A new study out of BIA/Kelsey projects that U.S. mobile ad spending will reach $4 billion in 2015, up from $790 million last year, and that 70% of those buys will consist of local advertising, David Kaplan reports in paidContent

"The ROI and brand awareness advantages that mobile has even in 2011 are apparent and serve to balance out the problems with mobile advertising that will probably remain even in 2015," Kaplan writes. "Those drawbacks include a small canvas for premium display ads and the often extreme aversion of consumers to ads interrupting them while using their phones, which makes the same displeasure online and offline appear mild."

Indeed, as Aaron Barr reports below (We Welcome Mobile Ads -- Just Not Too Many), consumers are leery about being inundated with ads on their smartphones, even from their carriers.

Michael Halbherr will be evp of the Location & Commerce business, as it's called, reporting to Elop, TechCrunch reports. Nokia acquired his company, gate5, in 2006. Halbherr has been leading the product unit in Nokia's Germany-based Services business.

Nick Smith of Bezinga points out that Nokia has been revamping its operations around the world since Elop came over from Microsoft last year. "It has shed thousands of jobs, reviewed its mobile phone strategy and invested in new products," he writes.

Now all the two companies have to do is settle down and build a bouncing, robust business.

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