Converging Location Based Service with Performance Marketing
Posted by Jeff Lu on March 23, 2010
I was talking to a VC associate in NYC around this time last year. He asked me about a few businesses or trends that I liked. The Kindle just recently released a month before and I had gotten my hands on it 2 months before that because a buddy of mine at Amazon was working on the project. I told him that I thought the Kindle really changed my perception of what mobile computing could be and would be an indicator for where mobile computing was headed (probably not as eloquently). He said he didn’t see it because he has so many device to carry around, the last thing he wants to do is carrying around another.
In 2009, Amazon sold somewhere around 550K Kindles and analysts predict that they will sell another 2 million units in 2010. The iPad sold 120K units the FIRST DAY of presale and is expected to sell a few million units this year. I’m excited to see what type of new applications will grow on these new mobile computing platforms and how the they will disrupt the current antiquated book publishing business model. I think that iPad like devices will be a huge opportunity for the gaming and advertising industries.
After Todd shot down the first trend I was passionate about, I mentioned Location Based Services (LBS). He said it was interesting and something that Firstmark looked into but thought it was still too nascent and didn’t see an investment opportunity there. A year later, I see foursquare making headlines with 500,000 users who collectively check in 300,000 times a day. I see companies like yelp and facebook entering this arena as well. I think mobile location based services will be HUGE in the future as mobile hardware catches up with what we would love to do with the software. I mean… I did blog about it a year ago.
It’s easy to say “I told you so” a year later so I’ll expand on my LBS thesis to go into what it will become next year. A year from now, we will see location based services move beyond twitter like updates and data collection to actual monetizing the user using performance marketing techniques we already use on the Internet.
One idea I have for converging LBS and performance marketing is to push location-based special offers from local vendors to consumers. Here’s the use case:
As a consumer, I download the app on my iphone and sign up to receive offers from food and beverage vendors (one could conceivably receive offers from retail vendors, auto services, beauty service, etc.). I can choose to receive pushed offers from within a distance… so for this example, within 5 blocks from my GPS location. Now on weekends, when I walk along Lincoln Road on South Beach, I can see which restaurants are offering the most attractive deals.
From the advertiser’s point of view, they can create an advertising account online and in real time push offers to highly targeted audiences to drive offline traffic and sales. A compelling example might be that from 3-5pm, I have to staff my restaurant as if it’s 11am-1pm but business is not as busy as during the lunch time rush. These employees represent a fixed cost that I could offset by placing an offer for the next 2 hours that will generate incremental sales for my restaurant. Advertisers could pay on a cost per “click” or cost per transaction basis. The proper allocation of advertising dollars to the platform might be tricky but it’s something that can be worked out with enough thought.
Google is already doing location-based PPC ads on their maps. I saw this when searching for the location of a retailer and saw the location for American Apparel along with my search results. I’m not saying that example will be exactly where mobile performance marketing will go but I use it as an example of what I think can be possible in the coming year as this category explodes.
*EDIT
I started this entry Sunday night. I swear I didn’t see this news till just now
Placecast, a platform for location-based marketing, just announced that it has added $3 million to its recent series B funding, bringing the round to a total of $8 million.The funds come from existing investors Quatrex Capital, ONSET Ventures, and Voyager Capital, and will be used to expand the company’s network.
Placecast’s service pushes offers from participating brands to users who venture close enough to a relevant retail outlet. The company’s clients include The North Face, SONIC Drive-in, and American Eagle.
