July 28, 2010, 3:15 PM

Geolocation apps aren’t a gold mine for advertisers—yet, study says

Few consumers are using mobile geolocation apps, Forrester Research says.

Katie Evans

Managing Editor, International Research

Lead Photo

Location, location, hesitation?

A new report from research and advisory firm Forrester Research Inc. says the number of consumers using geolocation apps such as foursquare and Brightkite is still small—only a few million monthly. And it recommends marketers wait to advertise on such apps until more consumers use them.

Geolocation app foursquare and its competitors Gowalla Inc. and Brightkite Inc. are check-in apps that tell friends and other app users they have arrived at a place, such as a restaurant or store. In many cases, app users compete against each other for the most virtual check-ins at the most places for street cred and discounts. In May, foursquare said it had an average of 600,000 virtual check-ins per day.

But according to Forrester, only 4% of U.S. online adults have ever used location-based social networks on their mobile phones, with only 1% using them more than once a week.

“The biggest vendors in the space may boast fast growth numbers, but registered users are still a drop in the bucket compared with the number of consumers reached with tactics like SMS, mobile search, or display media on WAP sites,” the study says.

However, the users of such apps are influential. And that, Forrester says, is something marketers may want to consider. Geolocation mobile app users are 38% more likely than the average U.S. online adult to say that friends and family ask their opinions before making a purchase decision, Forrester reports.

The report also uncovered other characteristics about such app users:

• Nearly 70% of users are between 19 and 35

•  Nearly 80% are male

•  70% have a four-year college degree or post-graduate degree

•  App users are 14% to 20% more likely than the average U.S. online adult to check their cell phones before making big purchase decisions 

App users are also far more likely to search for information about businesses via their mobile phones—33% for app users vs. 10% for non app users—and to use their phones to search for product information, 30% vs. 6%, and read ratings or reviews, 27% vs. 4%. If adoption of the apps continues to increase, these types of mobile behaviors will be extremely valuable for marketers hoping to use geolocation apps to offer coupons and special offers to consumers for nearby stores and other locations, Forrester says

Marketers should also be aware that there are different types of location-based mobile services, Forrester says.

For example, most popular apps such as Brightkite, foursquare, Gowalla, Loopt and Whrrl all focus on connecting consumers to the physical world by notifying users that  friends, stores, or interesting places are nearby. Each of these apps has deals with major brands like Starbucks Corp. and Gap Inc., Forrester says. For example, Starbucks connected its existing loyalty program to a startup location-based app and not only received widespread press, but also was able to test an emerging technology, Forrester says. “Adventurous marketers like Starbucks see a consumer market of early adopters that will hopefully grow into a new and active audience,” the report notes.

Another app, called Stickybits, works with objects instead of places. It uses a bar code and a phone camera to allow brands and consumers to attach information and media — like a picture or video — to an object in the virtual world. Each time someone scans the bar code, an aggregated picture of that object or product appears. PepsiCo has used the app to deliver branded messages. Whenever a consumer scanned a Pepsi bar code, she first saw a message from Pepsi, similar to a paid search ad, Forrester says

A third type of geolocation app is targeted toward specific groups of consumers, such as travelers. Dopplr, for example, connects frequent travelers with tips, and notifications of when friends’ travel plans overlap, and a travel advice forum.

For advertisers waiting until geolocation mobile apps reach a broader audience, Forrester recommends watching Twitter and Facebook, noting such social networks already have large numbers of users, which could make their apps, if and when they develop them, more widespread.

 Forrester also suggests keeping an eye on large technology companies such as Google and Apple. For instance, it says a recent patent application and changes in privacy settings indicate that iPhone’s iAd may support ads with greater location-based and social ad targeting. And it notes Google is already entering the geolocation space with its Google Latitude—a location –based app that enables users to allow friends to track their locations. Google’s Android, Forrester says, easily could incorporate this technology into its mobile display ad network, AdMob.

Marketers most likely to benefit from location-based apps include event marketers, bricks-and-mortar retailers and online tools that facilitate offline interaction, such as Zipcars, a membership-based car sharing company that has strong ties to the web, but whose business model relies on people connecting with the physical—and often local—world.

An example of event marketing through the apps includes Gowalla’s deals with companies like National Geographic Society and The Washington Post Co. to create branded trips that lead consumers through historic districts or to hot restaurants.

A retailer that has tested the concept is apparel and accessories merchant Diesel, which send a one-day promotion to foursquare users who were within a three-block radius of the retailer’s Union Square store.

However, Forrester adds, the results of the Diesel campaign were modest. Forty-four people who received the promotion checked in, Forrester says. This, Forrester says, shows there’s still a ways to go before such mobile geolocation marketing and advertising campaigns can be considered a solid investment.

 

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