Analysis

Hyperlocal or Hyperbole?

Hyperlocal is one of this year’s favourite buzzwords. As technology makes it possible to place our customers at increasingly specific locations, marketers are cottoning onto what are described as hyper and micro location targeting opportunities. Brands have always used information about customer location.  Successful engagement requires some knowledge about a customer’s physical context regardless of the channel.   What has changed with smartphones is how much we now know about where our customers are; not just where they live, but where they are at a given point in time.  This knowledge presents significant opportunities, but is hyperlocal advertising the future, or just more hyperbole??

Although there’s no formally accepted definition, micro-location is generally when we know a potential customer is standing in store, in front of the perfume counter, while hyper-location tends to be about placing them within a few blocks, perhaps up to a kilometre away.  Previously in digital advertising, targeting has been limited to known address databases or the IP address of a desktop computer, which provides city level targeting at best. Now smartphones have made it possible to reach mobile customers down to a few metres by using the GPS chip inside a phone to pinpoint the phone’s specific longitude and latitude.  This level of hyperlocal information can be used to serve ads to a smartphone (say, in the Facebook app) when the owner is near a shopping strip or within a particular radius of a store or destination.  Micro-location technologies are more relevant for in-store or domestic situations where location needs to be accurate.  Technologies like Beacons and Bluetooth Low Energy (BLE) make it possible for tiny ‘beacon’ transmitters to built into almost anything; a door; vehicle; store display; handbag, which can then communicate with nearby smartphones.

You might have seen Facebook’s announcement of their new hyperlocal advertising, which allows targeting of ads to customers within a defined radius. The new targeting means s a business can simply enter their address (or use the one already on their Facebook Page), load up the ad, and Facebook will serve it to people in the immediate vicinity.   There’s even an option to include a directions button in the ad.

While this level of targeting has been technically possible for several years, the amount of inventory has been a limiting factor. Outside of special event marketing, individual publishers rarely have sufficient inventory down to the hyperlocal level, Facebook being perhaps the obvious exception.  But all that is changing; we are now at the intersection of several key trends that overcome the problem of limited inventory at the hyperlocal level.

Key Trends That Mean Hyperlocal Will Happen

  1. Mass market adoption of smartphones
  2. Increased adoption of location aware apps
  3. Reduced anxiety about the use of location in mobile services
  4. The use of programmatic ad platforms to buy ad impressions

According to the latest Telstra Nielsen Smartphone Index, 76% of Australians now own a smartphone. Thes devices are all enabled with GPS technology which means they are capable of location positioning down to a few metres. With hyperlocal positioning in everyone’s pocket, availability of the data comes down to a) which apps are on their devices and b) if they have location services enabled. When a customer downloads an app they can choose to allow that app to access their location.  Usually, if a customer accepts a location request, the app will only be aware of their GPS coordinates while the app is in use.  Some services however; such as mapping and navigation apps; will track location even when the app is not in use.  In the absence of the kind of rigorous regulation that limits SPAM marketing messages in Australia and globally, app publishers find themselves without restriction in terms how they can choose to use customer data for marketing purpose, as long as details are outlined in the T&Cs.

As customer acceptance grows for location aware service, there are more and more apps available on publisher networks and ad exchanges that are aware of their customers’ locations. Location privacy is a big issue for consumer advocates, but in general, people are becoming less anxious about the use of their location in targeted services.  According to the Pew Institute, 74% of adult smartphone owners say they use their phone to get directions or other information based on their current location. And 30% of adult social media users have set up at least one of their social accounts to share location in their posts.  Customers are also increasingly willing to share their location information in exchange for some sort of benefit.  According to a recent Punch Tab survey 88% of survey participants said they would share their locations for coupons and offers; 72%, for shorter checkout times; and 69%, targeted alerts about sales and products they like.

While acceptance of location sharing is high, many customers are actually unaware of exactly how their location is being used by the apps on their device.  This has been an area of much speculation and controversy in recent months. Although customers have control over privacy and location settings, it’s often an all or nothing scenario.   Services like Foursquare Swarm and Tinder are effectively unusable if you don’t enable location.   For ad-supported services like Facebook, location is increasingly being used to target advertising within the app. In Facebook’s case, and somewhat controversially, if you decline the use of location, Facebook will also disable any other location features such as checking in and finding nearby places.   Apple has addressed this to some extent in iOS8 by prompting customers regularly with alerts, reminding them that various apps have access to their location data. It remains to be seen whether Facebook will experience any backlash as a result, but certainly their decision to use location data broadly throughout the app will benefit advertisers, giving them access to almost the entire Facebook app installed base.

Location data is being collected by many publishers, but the missing link until recently has been the consolidation of ad networks and mobile publishers to provide aggregated impressions.  Hyperlocal targeting has always suffered from a lack of inventory, with no individual network or publisher having sufficient to justify that level of targeting.   By aggregating inventory, programmatic ad platforms now offer location aware impressions in a viable context for hyperlocal advertisers. According to Marketingland , around 44% percent of (U.S) mobile inventory in programmatic ad exchanges today is now location aware.  That percentage may differ from what we have on Australian and New Zealand exchanges, but we are certainly not far behind. In fact, according to some reports, Australia only lags about a year behind the U.S. in mobile programmatic ad buying. As a market we are apparently leading the world and the pace of growth is picking up. According to TubeMogul, mobile video auctions in Australia have increased by 248% since January . Magna Global predicts that more than half of Australian display, video and mobile ad spend will be booked programmatically by 2016.

With customers accepting location sharing in droves, and programmatic platforms making the data available, opportunities for hyperlocal marketing are enormous, and growing.  Aside from the usual issues of transparency and brand safety that come with programmatic buying, advertisers need to be aware that location can mean different things to different publishers.  When targeting at the hyperlocal level, it’s important to know precisely what data is being collected for the inventory you target.  While some publishers have location at the level of GPS coordinates, others accept WiFi location or an IP address, depending on how their customers access the internet.   WiFi can locate customers within a city block, which may still be acceptable, but IP address can be many kilometres from the user’s actual location.  At the hyperlocal level of targeting, this kind of oversight will significantly reduce campaign relevancy and performance.  Advertisers need inventory transparency so they can adjust campaigns and target accordingly.

We are moving closer to a world of ubiquitous smart screens and devices; a world in which there will be ten times more wearable devices than there are currently smart phones.  The contextual data made available as a result of this technology is simply beyond most of our imaginations. Hyper-location is only part of the story; micro-location, and other highly specific contextual insights will create unprecedented possibilities for marketers.  Today’s hyperlocal advertising stories are the current day interpretation of the old ‘walk past Starbucks and get a discount alert‘ scenario.  Aggregated inventory and location ubiquity have ultimately paved the way for that dated concept to finally make sense.  It’s now up to the advertising ecosystem to explore the depth and breadth of opportunity that hyperlocal targeting can offer.

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