For those unfamiliar with Location Based Advertising it is any form of advertising that targets users in a specific location and provides them with geographically-relevant ads. LBA has been around for quite some time now on the web, but typically targeting users only on the city or neighborhood level. However, with the rise of smart phones and smart phone applications, LBA becomes a lot more interesting. Almost all of the new smart phones possess GPS capabilities. This means that advertisers can now target people down to peoples exact location as they move around their respective cities.

We believe that LBA is going to be huge for the retail industry and we are already starting to see the returns as outlined in some of our previous posts. Although LBA has been around for some time, the companies really pushing this space forward are the Location Based Services (LBS), such as FourSquare and Gowalla. These services let you ‘check-in’ to specific locations and see who else is there and where your friends are. They are also useful for pushing location based deals and incentive programs. Gowalla, launched in 2007 and Foursquare launched in 2009 (according to Wikipedia). In the race to be the dominant service Foursquare is clearly winning –  Techcrunch recently reported that they are 5x larger and are growing 75% faster than Gowalla every day.

Location Based Services are exciting and have been gathering momentum over the past two years.   However we wanted to take this opportunity to point out the pros, cons and where we think they are moving in the next 6-12 months in regards to their potential for Location Based Advertising.

Pros

• These services are great at building brand loyalty. For example, if you are the person who ‘checks-in’ the most on FourSquare at a location, you become the mayor. Some stores offer free incentives to their current mayor. Also, there is a large opportunity to provide discounts to customers who ‘check-in’ a certain number of times. Think of this as an automated loyalty card program (i.e. Subway card).
• They pull nearby users in. For example, Foursquare is beginning to push deals via a banner on the application for specific stores or venues if you ‘check-in’ around their location.
• They let you know who is physically around you. I have been to many concerts and found out after the fact that friends were there. By using one of these LBS’s you can easily ‘check-in’ and find out who else is there (in real time).
• They are great for Word-of-Mouth marketing. Users can add tips to locations. If you login to a location close by to a location where a friend has left a ‘tip’, you receive the WOM advise via a push notification.

Cons

• People value privacy. I have been hearing from a growing number of people that they do not want everyone knowing where they are all the time. I think we are going to see this trend increase as time goes on. People are already worried about their privacy, but Location Based Services just up the ante on open information.
• People are beginning to experience serious ‘check-in fatigue’. Every time you go to a location, you have to manually check-in. If you are only using Foursquare, it still gets tiresome; However, if you are using multiple LBS applications, it becomes out-right annoying.
• There is very little utility for advertisers. Other than the location based deals that pop up every once in a while on Foursquare, there is very little value added to brands by these tools. People can provide you tips when you check in to a location, but there is no call to action, no directions to get to this location and definitely no ‘download a coupon’ option for this location tool.

If LBS apps are going to survive and become successful business ventures, they will need to address these cons. There is an interesting article in  today’s Mobile Marketing Watch about a new LBS app called GroupTabs. GroupTabs is set to launch in a few weeks and is a cross between FourSquare and Groupon. If you do not know about Groupon yet, they push local deals to subscribers daily. Grouptabs plans to push people deals from around their current location as they ‘check-in’. These deals will add a lot of value to the LBS chain and definitely provide utility for both the advertiser and the end user — which solves one of the major problems of the current tools.

The second article that inspired this post is based on ‘check-in fatigue’ and can be found here. In this article Saad Fazil of VenturBeat states that, “Auto checkins can become useful if, for example, I specify Starbucks as one of my favorite spots and am automatically checked in whenever I am there — thus making it easier for the company to offer discounts based on number of checkins.” I wasn’t too sure about auto check-in’s at first as people are already leaving these services because they do not want people to know where they are all the time. However, if you can specify what your favorite stores/locations are and have the tool automatically check you in when you enter the location, those problems cease to become a deterrent.

Now imagine if we mashed up the above two concepts and created an LBS application that allowed you to chose your favorite stores. Whenever you entered the store, you would be pushed a relevant coupon or promotional deal either for the store or for a relevant purchase. This would get rid of the ‘check-in’ fatigue, would in most cases solve users issues around privacy as these are not private location and would supply a great deal of value to the end user. This is the future of Location Based Services and where we would like to see this space going in the future in order to drive the Location Based Advertising Industry.

Only time will tell, but we think GroupTabs is on to a great idea and we whole heartedly support their efforts. If they can adopt the automated check-in system, we think they have  winner. At Spreed we are looking to push location based deals when people open up their newspaper app around one of the papers retail advertiser locations. The pop up would include directions to the location and a coupon for use on their next purchase. As end-users, newspaper publishers and advertisers, what do you think of this opportunity and Location Based Services in general? Let us know!