Here Comes Location-Based Advertising

Google’s (GOOG) preeminence in Silicon Valley is largely due to its ability to offer advertisers a way to hawk their messages against contextually relevant keywords. The plain-text advertising messages, which aim to peddle everything from broadband connections to litigation services, have worked well enough to make Larry and Sergey mega-billionaires (the current nosebleed-inducing decline not withstanding) of the rarest kind.

If in the first eight years of the 21st century contextual text advertising has proven to be the magic potion, then it is safe to say that the next decade or so is going to be about location-relevant advertising and marketing messages. LBA (location-based advertising) has been talked about in hushed tones for so long that it’s hard not to roll one’s eyes. I have been skeptical for a while, but more recently my opinion has started to change.

Why? Because the mobile phones of today are getting increasingly sophisticated, and are coming to market fitted with geopositioning systems. Every single chip maker catering to the mobile market is rushing to add location-based functionality into their chipsets; it’s something I’ve written about on many occasions.

Sales of mobile devices with integrated GPS are forecast to grow to 720 million units in 2011 from 180 million units in 2007, according to research firm In-Stat. Even if those numbers are just 50 percent accurate, it’s clear that location-based advertising is becoming quite real.

While quite a few companies have started to dabble in this arena, it’s still not clear who is going to be the champion here. Google, for example, is pushing its mobile agenda via Android and deals with phone companies; Yahoo (YHOO) appears to have a coherent strategy (if not execution) as well (for once). And then there are the startups.

One of them, Loopt, has made its plans obvious by partnering with CBS Mobile. The two have embarked on what seems to be an interesting experiment in location-based advertising, according to the New York Times. The reason I call it an experiment is because Loopt is available on Sprint (S) (and its affiliate carriers) and there is a limited number of handsets out in the market that are Loopt-capable. Consumers are likely to see a handful of location-relevant ads pop up on their screens, the Times explains.

However, the bigger story however went unnoticed yesterday. NAVTEQ, the Chicago-based digital map provider that’s in the process of being acquired by Nokia (NOK), has made an equity investment in Greenbelt, Md.-based startup Acuity Mobile, which specializes in mobile location-based advertising delivery. NAVTEQ, which licenses Acuity’s technologies, is pretty high on LBA.

Using Acuity’s EMAP technology, NAVTEQ will enable clients to target consumers with real-time and geographic precision. In turn, consumers will have advertising move with them, as their mobile mapping applications unobtrusively present ads, offers, coupons, or other promotions, based on their opted-in preferences. The ads might feature audio, rich graphics, or calls to action such as routing to the closest advertiser storefront.

With NAVTEQ likely to become part of Nokia, LBA could become part of millions of Nokia phones that ship every year. In other words, Nokia could become a big player in the LBA business going forward.

After all, no marketing message is more effective than subliminal location-based relevance. It’s like going to the movies and realizing that you need to eat candy and popcorn, even though normally you never touch the stuff. In my case, given my weakness for shirts, a coupon offering a 10 percent discount on Thomas Pink shirts while walking around Union Square in San Francisco is pretty likely to result in a sale.

Comments

[Tom B]

Great idea, but I hesitate to pick winners and losers. I expect ALL smartphones will be doing this, and NAVTEQ's advantage is probably quite temporary.