BII REPORT: How Location-Based Data Is Making Mobile Advertising Explode

With 770 million of the 1.2 billion smartphone devices worldwide equipped with GPS, location data has begun to permeate the entire mobile space.

Location-enabled mobile ads have generated excitement for their effectiveness and the impressive prices they command. And many mobile ad trading platforms have recently reported triple-digit increases in location-enabled impressions.

In a recent report from BI Intelligence on location-based data, we analyze the opportunities emerging from this new local-mobile paradigm, examine how location-enabled mobile ads have generated excitement, look at how location-based feature have boosted engagement for apps, explain how local data can connect hundreds of thousands of small and medium-sized businesses to the mobile economy, and demystify some of the underlying technologies and privacy issues.

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Here is a brief overview of how location data is helping to grow mobile advertising:

• Making ads more valuable and effective: Advertisers pay a premium for location-enabled ad impressions. Data from several mobile ad networks and ad exchanges tell the same story: location-enabled ads see a lift in CPMs, or cost per thousand impressions. Also, the simple fact of a user being physically close to a business, within two miles or so, gives a significant lift to click-through rates on mobile banner ads, according to a 2012 study of clicks on AT&T's YPlocal mobile advertising network.
• Addressing the "lat-long" mirage: It's an oft-discussed fact in the mobile advertising space that only five to 10% of all mobile ad inventory has true GPS-generated latitude-longitude data. Many ad impressions in fact are powered with less precise geographic information: zip codes, metro area, carrier IPs, etc. For ad platforms that don't have lat-long data, there are now ways to create it from less precise location coordinates.
• Moving beyond the geofence: Some location-based advertising platforms are reformulating their strategy to move beyond geofencing, the practice of isolating zip codes, metro areas, or city blocks near retail outlets or malls. They'll use location data not just to geofence, but to build much broader audience categories (i.e. a user who visits airports and hotels with a certain frequency may be classified as a business traveler who will be targeted with relevant ads, no matter where that user is). This move beyond the geofence is key to mobile advertising for two reasons: it translates user location into a language that advertisers can understand, the language of audience profile, it attacks the scale issue.
• Enhancing mobile search: Local intent can connect hundreds of thousands of small and medium-sized businesses to the mobile economy, via mobile search and other strategies. Google highlights the "local mobile consumer," in its ad sales material, and touts statistics that show a third of mobile searches have local intent, and that 94% of smartphone users have searched for local information.