How Effective Is Location-Targeted Mobile Advertising?

Advances in mobile communication and geo-positioning technologies in recent years have presented marketers with a new media channel: location-targeted mobile advertising. Location-targeted mobile advertising involves the provision of ad messages to cellular subscribers based on their geographic locations; this allows marketers to deliver ads and coupons that are customized to an individual’s tastes and geographic location and the time of day.

Although location-targeted mobile advertising seemingly offers businesses tremendous potential given the ubiquity of mobile devices, there has been little empirical evidence about the immediate and cumulative effectiveness of such advertising. Our research was designed to address this gap.

In our study, we obtained data from one of the world’s largest mobile service companies. This Asian mobile service company (which wishes to stay anonymous) has partnerships with cinemas and sells movie tickets via mobile phones. The mobile company provided us with data about more than 3.2 million consumers who had been exposed to the company’s mobile-ad app for movies over the course of a year. In response to the location-targeted mobile ads, consumers could inquire about movie information, book tickets and select seats from the app. If consumers were physically within a given geographic proximity of participating cinemas, they received location-targeted mobile ads via text messages that informed them about what movies were playing in the nearby cinema and how to purchase tickets by phone. If, after reading the location-targeted mobile-ad messages, mobile subscribers knew they were interested in a movie, they could respond by immediately booking seats and paying for the movie tickets via their phones. Customers also had an option to call a company hotline to get more information about a given film.

Besides location-targeted advertising, the mobile company also promoted movie ticket sales via mobile ads that were targeted by behavior but not consumer location; the company randomly selected and sent mobile-ad messages to those consumers who had responded to previous mobile ads and who had purchased movie tickets in the past three months. The company also promoted movies via instant message ads that appeared when a mobile user logged onto the company’s website. Once a mobile user logged onto the site after confirming his or her mobile account, the service provider could deliver a targeted instant message ad via a pop-up window on the company’s website.

Our research indicated that of the three types of movie ads the company used, the mobile advertising with behavior targeting had the highest impact on sales. Nonetheless, the location-targeted advertising was substantially more effective than the instant message ads. However, location-targeted advertising was not equally effective with all consumers; in our study, consumer product interest played a major explanatory role in the sales impact of the location-targeted mobile advertising.

Using records provided by the mobile company, we divided the company’s customers into two segments. A small minority of the customers — about 20,000 — had previously joined the company’s “Movie Fans” club, and we considered this group to be consumers who had a high interest in movies. These “high-interest” customers, it turned out, were able to decide whether to purchase movie tickets via the app more easily and confidently, and the location-targeted advertising was much more effective with this group. The immediate impact of the location-targeted advertising on sales was 37 times higher among the high-interest consumers than among those consumers who hadn’t joined the club for movie fans, and the cumulative effect over time was also about 15 times larger with the high-interest segment than with the low-interest consumer segment.

The low-interest segment of consumers, meanwhile, generally spent more time — often more than one week after receiving the location-targeted mobile ads — before making a purchase. It is possible that low-interest users needed more time and effort to evaluate or test the trustworthiness of the mobile app. Our research thus suggests that marketers should be aware of the potential for delayed responses to location-targeted mobile ads. In our study, location-targeted advertising not only influenced product sales immediately but also induced delayed sales.

It’s also of course important for marketing executives to note that the most optimal location-targeted advertising should be practiced with consumer consent to avoid privacy concerns. Under appropriate circumstances, the new ubiquitous mobile technologies can empower companies to deliver value to consumers with relevant and targeted offers almost anywhere and anytime — presenting promising new marketing opportunities that were previously difficult to seize.