Why the Future of Local-Mobile Advertising Is Not What You May Think

Apple Maps I keep reading very aggressive projections about local-mobile advertising from BIA and others. Rather than grounded in reality today, these forecasts are built on a set of “optimistic” but simple assumptions about how the market will inevitably develop.

For example, the assumption is that national ad dollars from brands and retailers that sell locally will pour into mobile and that their mobile ads will necessarily be geotargeted or localized. And while all forecasts must make assumptions about the future, my belief is that many of the assumptions being made about mobile are crude at best or simply incorrect.

I’m a big proponent of location-based marketing and have written extensively about how geotargeted ads and ads with localized creative outperform conventional or “generic” national advertising. There’s no question about consumer demand for local information. The question is whether and how advertisers can match or exploit that demand.

Local Mobile Display in It Infancy  

There remains a great deal of friction and many challenges to overcome before these big local-mobile forecasts can come true. There are also several “unexpected” things that may change the direction of the marketplace. I go into a few of those things below.

In truth the majority of the localized mobile advertising today is happening in search. The platform is mature, the demand and the tools are there. The value is obvious to all involved. That’s why Google is making the most money in mobile advertising today. (Facebook is also going to make a lot of money in mobile, some of which will be localized.) By contrast, local-mobile display is in its infancy.

There are two mobile ad networks generating and syndicating a large percentage of the local display inventory that you’re likely to encounter: xAd and YP. CityGrid is out there and so are Verve, LSN, Telenav/ThinkNear and a couple of others. Marchex is there too with pay-per-call; however much of that is driving mobile callers to national call centers.

Among the major ad networks Millennial, JumpTap and AdMob (Google) all offer local targeting. Often that targeting doesn’t extend beyond state or DMA-level precision. The emerging exchanges and RTB platforms all offer location as part of a laundry list of targeting capabilities. Indeed, location is likely to simply become one of many targeting variables on most networks and exchanges.

There really isn’t all that much happening on the local display side that qualifies as more than experimentation outside of YP and xAd. YP (and CityGrid) mostly take SMB listings and convert them into template-based display ads, often without the active participation of the local business owner. By contrast, xAd is working with national marketers that sell locally.

Scale and Location, Location As Audience 

One major problem with mobile display in general, which extends to local-mobile display, is that the quality of the ad creative is dismal. Another problem on the SMB end is that local business owners have almost no capacity to think about local-mobile marketing beyond having a mobile website or app. That’s why the YP model will prevail for a long time to come: mobile simply becomes one more point of distribution and source of leads, clicks or calls.

Google AdWords Express similarly distributes ads across PC and mobile without differentiating. That can work but it can also waste clicks and budgets — especially if the copy isn’t right.

Most national businesses are interested in scale and audiences, not lat-long. In fact, most national marketers don’t really know what to do with location, especially lat-long. That’s almost useless to them because it seems the opposite of scale. In fact, the industry would do well to now banish the term “hyper local mobile marketing.” It’s not meaningful to SMBs and it won’t unlock major ad dollars from nationals.

One of the developments that’s likely to upend the simple assumptions driving the many forecasts is the effort to translate location into audience. Location has to be sold to brands and nationals as audience. Companies such as xAd, JiWire, Skyhook Wireless, Placed, Factual, Sense Networks and PlaceIQ all to varying degrees are using location as a proxy for demographics or audiences.

Location becomes the methodology to identify and target audiences. Location is not an end in itself but a means to an end. This is the language that brands understand. This is also a way to “reconcile” local targeting with national scale. But then do national ads that use location profiles and technology to find “soccer moms” count as “local ads”? From a marketing and efficacy standpoint it doesn’t matter; from a forecasting and “accounting” standpoint it does.

It may turn out that this “location as audience” (LAA) approach dominantes the way that nationals interact with localized ad targeting and the way the networks sell location to brands and nationals.

Marketing but Not Advertising 

In contrast to much of what I said about brands/nationals not understanding location, many do “get” geofencing around stores as a way to reach potential customers. Placecast has had success with this. Urban Airship is also doing lots of interesting things around location-based in-app notifications. This may be one of the major ways location is explicitly used by brands/nationals and thought about in reaching local customers and prospects.

One of the points to make about these sorts of geofencing programs, however, is that they typically don’t qualify as “advertising.” Very often the notification or geofenced alert goes out as an SMS or an in-app notification (REI or Macy’s tells me there’s a sale at my local store). There’s no media buy in most of these cases. Call it “marketing,” but don’t call it “advertising.” That has obvious forecasting ramifications as well.

My belief is that a meaningful chunk of the localized marketing by retailers and others will happen in the form of alerts or notifications. And this will operate largely outside of the the realm of “advertising.”

Location on the Landing Page

Another point that I’ve already made several times here and on Internet2go is that the way location may be utilized by national marketers is in the form of store or dealer locators on landing pages. Here’s a practical case-in-point: car company introduces a new model; the ad creative and copy are national (e.g., see the new Toyota Avalon); one or two clicks down is a dealer locator asking the user to input a location or find “current location.” The treatment of location in this case is almost perfunctory, and certainly an afterthought.

This will be the form of “location targeting” that lots of national mobile display advertising use in the immediate and perhaps medium-term future. I call this “lazy location.”

It’s simple for the agency and the marketer and they get some version of location without the challenges of local customization. There’s also an arguable benefit to being lazy in this case: even though they lose potential leads, making users work to find locations ensures that calls and clicks are more qualified.

But is a national car ad with “find a dealer” link two clicks down a “local” ad? Again, it doesn’t matter from a real-world point of view. The question for the agency and advertiser is whether the ad works (which raises other questions). But again it does matter from a forecasting perspective.

And in the End . . . 

This has been a long and rambling post so I’ll make the points above again more succinctly:

  • Aided by a range of mature tools, paid-search will be the channel where local-mobile ad targeting plays out most directly in the immediate term. This is where the revenues are now concentrated and will be for the near future
  • SMB advertisers will not be buying mobile ads (in any volume); mobile will simply be another point of distribution by sales channels catering to the SMB market, largely using automation
  • National advertisers will by audiences (LAA), use geofenced notifications or alerts and employ dealer/store finders on the mobile landing pages of national campaigns. These approaches to location are either simply unanticipated or not accounted for in most current forecasts

All of this also begs the question: how do we define a local ad? Does the ad simply need to be geotargeted in some way regardless of the copy? Does the ad need to explicitly recognize location in the copy. Does the requirement or likelihood of offline fulfillment make the ad local regardless of targeting and ad copy?

Consumers care about local information and see localized ads as more relevant. Marketers however are struggling to reach these consumers with the right messages at scale. But the idea that mobile advertising will simply resemble the desktop is wrong. There’s a lot more friction, complexity and nuance to the local-mobile discussion than is recognized by the forecasts that I’ve seen.

I didn’t even get into the impact of tablets, location privacy issues, on-site mobile marketing (e.g., QR codes) and different business models (CPC vs. CPA) on any of this either. These are other wrinkles worthy of further discussion.

OK, how much of what I’ve said do you agree with or disagree with?

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27 Responses to “Why the Future of Local-Mobile Advertising Is Not What You May Think”

  1. Lindsay Watt says at

    Agree with a lot of what you say, with a wildcard around “local creative.” If someone figures out how to let SMBs create compelling ads at scale and distribute them across multiple networks then we could see local ads meeting forecasts otherwise I agree with you that the local advertisers won’t come en masse.

  2. Gib Olander says at

    What a terrific, meaty post, Greg.  Thanks!  

    Great concept of splitting marketing & advertising, hadn’t heard the term LAA but it’s spot on, couldn’t agree more on alerts & notifications as it’s own class tto measure & monitor. 

    Posts like this remind me of the great potential there is for disruption, feels like “local” taking a big step forward. It’s exciting times

  3. Greg Sterling says at

    Hey Gib. Thanks. There’s a lot going on and a lot of potential here. You’re right. A number of people working to figure it out but the old categories won’t necessarily translate over. 

  4. Marketing Day: January 28, 2013 says at

    [...] Why the Future of Local-Mobile Advertising Is Not What You May Think, screenwerk.com [...]

  5. Dave Beltramini says at

    Great post.  I am interested in where you go with the ideas from the last 3 paragraphs.  The copy / creative is a huge hurdle  as you say.

    As someone who worked in the YP industry 20 years ago I would hate to concede the long term market to their existing business model.

  6. Greg Sterling says at

    Nationals can do a lot with creative. For SMBs it’s going to have to automated. 

  7. Christian O. Petersen says at

    Great post Greg! I agree with a lot of what you are writing, and it is important to look at both location based marketing and location based advertising. That said, from talking to all the leading media agencies, I know they want to be part of both.

    As you mention you didn’t get to the ad model CPM, CPC, CPA and I talking to marketing execs at most of the large retailers, I believe that while scale is hugely important the other missing link is clear ROI.

    When you book an online campaign to drive traffic to an online business you know if it increased your traffic and revenue, if you book a mobile campaign to drive traffic to your retail locations you don’t get that clear verification unless the marketing solution you are using offer a CPA model where you pay per visit and deliver clear stats to verify your ROI.

  8. Greg Sterling says at

    Yes ROI is a huge issue in mobile. I think that the ROI challenge will eventually be solved and that may have an impact on business models. 

  9. Street Fight Daily: eBay Loses Local Head, Opentable Acquires Foodspotting | Street Fight says at

    [...] the Future of Local-Mobile Advertising Is Not What You May Think (Screenwerk) Greg Sterling: I keep reading very aggressive projections about local-mobile advertising from BIA [...]

  10. Jeremy Geiger says at

    Good meaty post.  I validate the early interest in dealer/product/brand finders on landing pages.  Location, adds a DR component to mobile advertising.  In-store measurement will allow the adoption of eCommerce advertising concepts of ROI, affiliate fees, etc.

  11. Greg Sterling says at

    Jeremy:

    I think that one of the most interesting developments will be creative ROI metrics for mobile (in-store presence, lift, etc.). ROI is the big thing holding back mobile ad dollars right now. 

  12. Brooks says at

    Greg – Spot on and insightful as usual. Between vested interests drinking their Kool-Aid, and big numbers get more attention, it seems that forecasts such as this often get skewed to the wild side. Just human nature. I always appreciate your taking a broader perspective and sharing sound, fact based arguments to support your thoughts.

    Any metric that is based upon SMB adoption will have challenges. We created an almost fully automated product that takes less than a minute for an SMB to use that drives same day profits, filling empty seats on demand, generating tens of thousands of dollars a year in incremental revenue. Yet watch a significant percentage of owners struggle to make a decision.

    I would be curious to see the impact of age segmentation related to ad clicks. Personally I’ve never clicked a mobile ad “intentionally”, but that’s only one data point.

  13. Greg Sterling says at

    Brooks: Thanks. I think that the “fat finger problem” and the challenges facing mobile display will lead to different metrics and models. There are are already quite a few PPI or CPA models. There’s also pay per call. 

    The click is the wrong metric for mobile. It both fails to capture impact and, paradoxically, may overstate impact. Other metrics will emerge because of the ability to track people into stores. 

  14. Greg Sterling says at

    On the SMB point, lots of SMBs express interest in mobile or say they’re spending budget on mobile. I always wonder what that means as a practical matter because most of them don’t have any ability (save paid search) to execute mobile ad campaigns. Facebook will emerge as another place where SMBs may be able to do mobile advertising. 

  15. Christian O. Petersen says at

    Hi again Greg

    I completely agree on the fat finger problem and how especially retailers must look beyond the click for models like CPA where they only pay for the foot traffic generated for their store locations. Here is a blog post I wrote about it in December: http://zigi.com/blog/brands/google-acknowledges-the-fat-finger-problem/

  16. Greg Sterling says at

    Thanks, will take a look

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  18. Mike Boland says at

    Good post Greg. I just put out a 60 page paper that goes deep on all these challenges/realities. Good to see we’re in alignment — especially using location as a tool for audience profiling. That brings the conversation into the “language” that brand advertisers speak and will be a key adoption factor in the dollars moving where we think they will. The creative/copy issue is also an important one that I’ve been talking to lots of folks about lately. You hit the nail on the head. There are a million other variables we’re looking at closely. I spend way too much time thinking about this stuff, as i’m sure you do. Exciting times though. I’ll send you my paper if you’re interested in reading it, but you’ve covered many of the themes well here. 

  19. seth gardenswartz says at

    Very insightful. I think the copy/creative point is key and I would add technology. Few of the 14M local merchants with less than 20EEs are doing anything meaningful in mobile or with other new media. 40% say they have a FB page but less than 1/3 “update” once a month and most of that copy is not appropriate for the medium. I’m adding technology because even if they decide to do a “BOGO” and write decent copy, send it via email, FB and some type of mobile delivery (app or SMS), it will just say “mention this ad.”  I could not agree more with “[f]or SMBs it’s going to have to be automated.” The issue is how to scale that and make it authentic. 

  20. Greg Sterling says at

    @seth: scale and authenticity do seem to be at odds. The way you get to scale I think is by DIFM for certain things and then teach the SMB to take control of its own social media updates. That’s a process but the idea should be to help SMBs at the start and then increasingly turn over acct management directly to them.

  21. Greg Sterling says at

    @Mike: I’d be happy to look at your report. But if you’re in agreement with what I’ve said conceptually above I don’t understand how BIA turns out the forecasts that it does re mobile. Clearly a majority of the mobile ad spend is not going to be Local any time soon — unless you’re defining “local” extremely expansively.

  22. Christopher Folmar says at

    Excellent post.  You hit the nail on the head with the challenge of creating compelling local creative.  The “call to action” in a mobile ad has to be interesting, in far few characters than available on desktop.  When the ad is just a template based scraped version of their online heading it is going to lack the ability to be “Timely” “Relevant” and “Actionable”.  Also, mobile is a platform that is great for helping people make “immediate need” decisions, not in-depth research.  That sense of consumer urgency can be leveraged in a Pay Per Action (Call, Map, Nav, Download, etc…) RTB model.  

  23. Greg Sterling says at

    Chris: I think templates can work for SMB creative if really thoughtfully done. But it’s a major challenge. But there’s no excuse for all the lousy creative from the national advertisers that one sees: tiny print, fuzzy graphics, no call to action.

  24. Ken Aaron says at

    Finally, a realistic assessment of what I think has been a vastly overhyped marketing/advertising opportunity. And the term “hyper local mobile marketing” will not go away fast enough. What I like most is the realistic view about SMB’s capabilities relating to ad creative. We deal excusively is locally owned businesses and they simply don’t have the money or time to create good ads or keep them fresh. In addition, they are over innundated with online marketing opportunities, and again, don’t have the time to properly evaluate what is best for them. So rather than do anything they, for the most part, do very little or nothing. That is why the YP model works better for them, it’s easy. 

    One of the other great challenges for SMB’s is ROI. They will not spend money if they don’t see the return, which for them is people walking in the door, today. Budgets are very tight and any improvement in the economy has yet to reach them. So not only do they need to see the ROI, the price point needs to be affordable. That’s why I agree that location-based notification will, over time, be the method that works best for SMBs.

  25. Greg Sterling says at

    Agree with the point about ROI. This is a big deal for nationals too. There will need to be a lot more innovation around measuring/proving ROI. In store presence, calls and actual transactions will probably become ROI measures. Groupon’s “actual customers” was a great model/ROI in concept but the well documented challenges there made the model less desirable from an SMB standpoint.

  26. Mike Boland says at

    I’ll send the paper. It does come down to definition applied to local. Very interested in your feedback after reading the paper.

  27. Greg Sterling says at

    Sure . . .

  28. seth gardenswartz says at

    Re scale v authenticity: I agree that DIFM for some things and having merchants take over SM update makes sense in the long run–but the S of the SMBs need a solution now as the Ms are using these tools to accumulate earned impressions and market share. Small merchants are used to “buying” audience + message with one check.  I believe we can create authentic content with verticalization and take most of the hard work off their plates.  

  29. Service Central says at

    Well said Greg.

    Well done for being brave enough to start deeply questioning some of the presumptions that all of the businesses in the “local” space make.

    I too are starting to believe that there is a rapid race to the bottom (i.e. more and more things are now free), and that the revenue presumptions of many quickly disappear when faced with reality.

    This has to be the number 1 reason for the rapid rise and fall of startup after startup in the local space. The number of local businesses is so great that you can’t help but assume that you will create a Billion Dollar company, however the effort required to win over each of those businesses is overwhelming (especially when faced with “free” competitors).

     

  30. Greg Sterling says at

    Thanks. I think there’s plenty of money being spent but it’s being spent not on advertising in many instances but on presence management and services.

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