LBS-based mobile advertising set to explode

Growing penetration of smartphones worldwide, including South Africa, is enabling powerful new ways for advertisers to talk to their audiences. This is helping to drive runaway growth in the mobile marketing and advertising sector.

Market researcher Gartner forecasts that global mobile advertising revenues will grow to $11.4 billion in 2013 from $9.6 billion in 2012. Revenue will balloon to $24.5 billion in 2016, predicts Gartner. LBS-based services will form an important part of this growth story.

A shift in consumer behaviour

We are seeing a massive shift in consumer behaviour that is making it easier than ever to segment and target mobile customers. Consumers are spending more and more time with mobile devices such as smartphones and tablets and count on them to navigate the world. The result is that we can reach them with relevant and actionable information on devices that they carry with them wherever they go.

Joubert says that mobile advertising is highly targetable according to a user's context and behaviour when it makes use of location data to infer where the consumer is and what he or she is doing at a particular time. If location data could be combined with demographic information, marketers will be able to deliver ads that are tailored to the user's interests, gender, and age. They could target potential customers with an unprecedented level of precision.

The potential applications are limitless. For example, a fast food chain could send a discount voucher by SMS to a mobile subscriber close to one of its restaurants at lunch time or a shoe store could send information about a promotion to people nearby through an app. There is also a wealth of third-party services that organisations can leverage to market to consumers based on their location - for example, FourSquare.

One major benefit is that the advertiser doesn't need to waste money advertising to people outside its geographical catchment area or to people that will not be interested in its products and services. They can instead focus on people whose behaviour, context and demographic data make them the perfect target market.

LBS-based mobile advertising isn't without its challenges

The first of these is that the mobile market is still fragmented between a wide range of devices and platforms. But the range of LBS solutions in the market can cater for everything from standard GSM phones to sophisticated smartphones with integrated GPS.

Companies should look at their user bases to determine whether their audience is best addressed through a GSM LBS service paired with text-messaging or through an iOS or Android app that is integrated with GPS and augmented reality features.

Companies must also face the issue of data privacy in a transparent and consumer-friendly manner. LBS ads should always be based on an opt-in model so that users don't feel that their privacy is being infringed upon.

Opt-in users will not only be happy to receive ads, they may also provide a range of information that will allow for more accurate targeting. To secure opt-in from consumers, companies should offer them incentives such as discounts, loyalty cards, coupons, specials and gift certificates.

In a market where advertisers are under pressure to drive real returns from their spending, LBS-based mobile advertising simply makes sense. Permission based LBS marketing is measurable, easy to segment, drives customer loyalty and allows for personalisation of content - it is a great way to drive a high rate of customer conversion with minimal wastage.