What is Location-Based Advertising?

Location-Based Advertising is a form of direct marketing specifically for mobile devices based on a user’s real-time location. Location-based advertising directs customers to the closest business in the vicinity that provides the products, goods and services that users want. The most accurate form of location-based advertising is GPS. Although location-based advertising can be effective, there is still a risk for inaccuracies. When a user asks for the location “near me,” the query results are much higher.

How Location-Based Advertising Works

  1. It's based on signals

    Location-based advertising is reaping billions of dollars for advertisers annually. It is a strategy that personalizes how ads are targeted within an app. Past browsing history, previous sales and user profiles are part and parcel of location-based advertising. It's a way of getting the right message in front of an interested customer. Because this strategy is based on a user's location in real time; advertisers use several methods to pinpoint the user. If a prospective customer is using a cell phone to find the closest location for a product or service; cell towers can drive traffic to the right location. When a mobile device is in the vicinity of a cell tower, a signal goes out from the tower. That signal provides the approximate location of the customer and, depending on the query results, directs the customer to the nearest brick and mortar location for the brand. WiFi signals also indicate location for users with even more precise signals than those for cell towers. The difference in this kind of location-based advertising strategy is that the customer has to opt-in and agree to share their information with advertisers and other external sources. GPS is the most effective and most accurate form of location-based advertising. In fact, GPS is so reliable that it is used for navigating ships, planes and cars. When a user is in an app, the GPS emits a signal so that the user's location is revealed. If the user queries to find the product near me, the search results can be even more accurate.

  2. It's not always accurate

    Even if GPS sets the gold standard for location-based advertising, this strategy is not 100% accurate. In fact, some estimates give it a success rate at slightly higher than half. Rural and suburban areas can provide obstacles near cell towers. Those signals are what advertisers use to find a customer's location in real time. Sometimes a customer can search for a location to have it come up in another state or on the other side of town. The more precise a customer can be with their query, the more accurate results will turn up.

  3. It brings up privacy issues

    When marketers find customers based on their location, customers may feel as though their privacy is breached. Within most apps and with GPS, customers have to agree to share their data. But this can open up a Pandora's Box of complications for advertisers. Customers may want to know how advertisers are tracking them. They may also be concerned about where their information goes and if the data is being sold to third party vendors. It is important that advertisers reassure customers with clear, concise language on how their data is being used.

Why Location-Based Advertising Matters

  1. Customers want precision

    When location-based advertising delivers inaccurate results, an advertiser misses an opportunity to make a sale. For example, In-app users who click on ads only to be directed to websites with incomplete information or wrong addresses can lose credibility with the customer. This hurts the brand.

  2. Customers want transparency

    Customers want to know that companies are forthcoming about how they are using customer data. Customers expect to feel good about engaging with ad content in an app. Customers should also understand that the data they provide will benefit the customer as well as the advertiser. For example, companies who use customer information to build reward programs show that data collection is not all one-sided.

  3. Customers want opt-out choices

    Giving permission for companies to use their data for location-based advertising is important to customers. With all the third-party interference and illegal tracking, customers want to feel that they can opt-out of data collection. Smart advertisers give customers the opportunity to voluntarily provide feedback and information. This gives customers a stronger sense of security as well as having confidence that the advertiser is credible.