The Truth About Location-Based Mobile Advertising

A shopper with a smartphone in hand isn’t necessarily a viable prospect, regardless of how close they are to a store. Yet many mobile marketers look at smartphones as if they were a magical sales tool. After all, they go everywhere the consumer goes.

It’s true that if advertisers target the right smartphone users -- at the right time -- they can move them to the cash register sooner. But targeting by location alone does not negate the need for audience targeting. In fact, advertisers who are too focused on location may overlook the most basic objective of good advertising: reaching the right people with the right message. 

Geo-fencing can be useful, but advertisers need to know a lot more than their target’s location if they want a good return on their ad spend (ROAS).

Unless an advertiser’s brand has a penetration level of 50% or higher, location targeting alone could mean serving a lot of ads to people who are not in their target audience. In other words, wasted impressions.

As an example, if a brand has a penetration level of 10% and a mobile ad is served to the entire audience in a given location, 90% of those impressions are potentially wasted.

Even so, location-based audiences have become popular, with customers packaged into nondescript segments that advertisers can target. These segments are based on assumptions, not data, and you can’t count on getting an acceptable ROAS when you build a campaign around assumptions.

Targeting a mobile ad by location alone also prevents advertisers from optimizing their messages. Without knowing the target’s interests and purchase history, advertisers are limited to messages such as “there’s a store near you now.” If, on the other hand, an advertiser uses location targeting to serve ads to existing customers with a fondness for shoes (think CRM data), they can deliver a mobile ad offering a BOGO on sandals -- served when those loyal shoe shoppers are within a few blocks of their store.

Mobile advertisers get better results when they use past purchase data and location

Savvy advertisers target their ads based on known data about the people receiving those ads. This ensures the right people get the ad, and it ensures the results can be measured. Precise targeting is the only way advertisers can expect to see a return on their investment. Examples:

*Serving a dog food ad to a customer standing outside a pet store won’t do much if that customer is a cat owner. But serve a dog food ad to a dog owner near the pet store, and you may prompt a purchase. The key is to target by audience -- who they are, not just where they are.

*If smartphone users are in the vicinity of a casino, is it smart to assume they’re gamblers? What about shoppers who are standing between a fitness center and an ice cream store? Can you get a positive ROAS if you serve ads for athletic shoes to consumers shopping for a double-scoop of fudge ripple?  

Too many mobile ad platforms are pitching where a consumer goes as the most important information for targeting, which is fraught with problems.

That’s not to say location doesn’t matter in mobile marketing, because geography provides much-needed context. When a customer is couch shopping at home, that’s a good time for product education (perhaps a video.) When they’re out shopping, it’s time for a promotional or directional banner ad. Again, it’s important to hit the right target at the right time with the right message.

And it all starts with data.

Good mobile ads benefit from precise targeting, the same as any other advertising medium. Once advertisers know precisely who’s receiving their ads, they have a mobile ad campaign that can coax customers to the register sooner and deliver measurable sales lift.
2 comments about "The Truth About Location-Based Mobile Advertising".
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  1. Mike Greco from Indy App Systems, March 30, 2015 at 3:52 p.m.

    I'm going to respectfully disagree. I think proximity is critically important to making ads effective, but it's just one component. What we need to do is broaden this discussion to one of mobile ad optimization, not just "location" or "big data." These are just pieces to a much bigger puzzle.

  2. Neha Mallik from Mobstac, May 20, 2015 at 10:30 a.m.

    Great post Tim.! Totally agree with the you. Location alone cannot decide what you advertise and to whom.  I feel iBeacon technology, with it's proximity feature can be really helpful here. This is beacuse beacons can add a great deal of context to the whole thing, that can be applied to enhance a user's experience. Here's a nice post on 5 best practices for using beacons for location-based advertising:

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