How Location-Based Advertising Will Impact Brands

Location-based advertising, location-based targeting

Location-based advertising in digital marketing has introduced another avenue for marketers to reach consumers with the most highly relevant messages possible. Using aggregated location and consumer data, marketers can share localized, personal and aligned advertisements to the right consumer at the right time.

Apps like Facebook, Instagram, Snapchat or Uber use always-on location data to collate content and elevate the user experience, which means that consumers, places and media are all interconnected. Location-based targeting has proven to be 20 times more effective in converting consumers than traditional banner ads, and 60% of consumers indicated that targeted offers are valuable to their mobile online experience.

In a recent consumer survey by Microsoft, research deduced the following conclusions that drive consumers to share their location-based data: 89.3% would share data for location-based discounts, 99.6% would share data for cash rewards and 65.2% would share their data for loyalty points. Interpreting this data, marketers can conclude that monetary location-based advertisements have the highest propensity for conversions.  

What is location-based targeting capable of?

Imagine receiving an ad for Nordstrom while shopping at the mall, but there isn’t a Nordstrom within vicinity for you to act on the ad’s offering, resulting in the ad being ignored. Contrastingly, your local mall is home to Bloomingdales, and instead of receiving a Nordstrom ad, you receive a location-based ad for a sale at Bloomingdales. The ad for the retailer that is accessible to you is obviously going to perform better than an ad for a store that is out of reach.

Starbucks experimented with location-based ads in late 2014, tapping into signed-in Starbucks app users’ device IDs and locations to serve ads that provided the closest Starbucks location and a discount on their most ordered/favorite drink (the app assumes the most ordered drink is your favorite). According to Starbucks, the likelihood of a consumer entering a store increased by 100% upon being served a location-based discount ad.

How is location-based ad spend being allocated?

Paid search will continue to eclipse and outperform all ad formats, accounting for the largest share of location-based targeting ad spend through 2020. According to the U.S. Local Advertising Forecast spring 2016 update, location-targeted mobile ad spend will increase from $9.8 billion in 2015 to $29.5 billion by 2020.

While paid search is the current dominating player, native social (such as Facebook’s news feed or Snapchat Stories) has begun to steal share because native social ad environments are better optimized for mobile devices, they’re immune to ad blockers and offer higher conversions with in-feed calls-to-action. Social networks have become the epicenter of mobile consumers’ attention and time, presenting an advantageous opportunity for marketers to penetrate active social media users.

The future of location-based targeting?

The intersection of programmatic ad technology and location-based data has nurtured finite, acute precision targeting that can influence everything from awareness to in-store purchase intent. By capturing location data and implementing customized geo-fences, marketers can execute digital ad campaigns with incomparable scalability and accuracy.