Location-based adspend to rise

11 May 2012

GOTHENBURG: Expenditure on real-time location-based advertising delivered via mobile phone is due to increase more than twenty-fold in the next five years, a forecast has predicted.

Berg Insight, the consultancy, has reported that adspend through this channel stood at just €192m in 2011, equating to 5% of total mobile ad revenues for the year.

Looking ahead, the company was optimistic regarding the medium's prospects, arguing returns should log a compound annual growth rate of 90.9% between now and 2016, to a value of €4.9bn.

Such a figure would be equivalent to 28.3% of mobile marketing budgets, some 4% of digital outlay, and 1% of all adspend worldwide.

According to the report, Asia Pacific – home to the major, and rapidly-growing, mobile markets of China and India – will be the most valuable region for the sector, in front of Europe and North America.

The study suggested the "key drivers" for this industry include the increasingly widespread usage of handsets containing the necessary technology, and rising consumer acceptance of these ads.

"Local advertising is a major market, and LBA opens up the mobile channel for new advertisers such as local merchants," it added.

This strength is, in another sense, an obstacle, as the restricted reach of campaigns may prove to be a "mental hurdle" for some brand owners.

An education drive to inform marketers about the benefits of location-based services, and the need to institute the correct privacy controls, will also be essential.

Berg Insight was confident greater uptake could be achieved given the favourable payback and relatively affordable electronic cost per thousand (eCPM) that are typically on offer.

"It has been demonstrated that location-targeted ads generate considerably higher return than conventional mobile advertising, and the associated eCPM levels are several times higher," it said.

"The demand for hyper-local targeting of ads is so far limited among advertisers, but is bound to increase given the considerable impact such campaigns generate."

Data sourced from Berg Insight; additional content by Warc staff