October 13, 2010, 1:37 PM

Why social and mobile could represent a potent advertising combo

There’s plenty of opportunity, and the risks are small, an analyst says.

Katie Evans

Managing Editor, International Research

Lead Photo

Advertising via mobile social networks is cheap and offers lots of potential, Josh Martin, senior analyst at market research firm Strategy Analytics Inc., said today at Internet Retailer’s first Mobile Commerce Forum in Chicago.

“Risks are small, partners are plentiful, and opportunity abounds,” Martin told attendees during his presentation.

Martin discussed the potential in advertising via location-based social apps such as foursquare, shopkick or Gowalla, for example by offering a promotion or incentive to encourage nearby shoppers to enter a store or restaurant.

 

 

While relatively new, mobile social networks are growing and extremely inexpensive, he said. For example, he examined an advertising campaign McDonalds recently launched with foursquare to get app users to visit a nearby establishment. The campaign cost McDonalds $1,000 to reach 3 million people—an average of 33 cents per person to reach 1,000 consumers. By comparison, running a commercial during an episode of the hit Fox TV show Glee would have cost the restaurant around $127,000 to reach around 11.9 million viewers—a cost of $10.67 per thousand consumers.

Another big step for mobile social advertising: Facebook’s recent entry into the location-based arena with its Places network. But despite the activity and considerable publicity, Martin noted that relatively few consumers use such apps today–between 5 and 10 million globally, with the number of active users difficult to decipher. Foursquare, the king of the mobile social networks reports about 3 million users, while newer players such as shopkick aren’t reporting such adopter statistics yet, he said.

However, Facebook’s Places social network could be a game-changer, Martin said. With over 500 million total Facebook users, Places could soon offer a broad reach the other networks can’t, he said.

Mobile social networks also offer something else of great value to advertisers: the opportunity to gather information about consumers.

“You can understand where customers go and when, where they are at and who they are with,” Martin said. For example, a mobile social network user might establish a pattern, such as virtually checking in to the same movie theatre each Friday night, Martin said. A nearby competing theatre may then want to offer that moviegoer an incentive to try its cinema a couple of miles away.

How the location-based networks share such information, and what advertisers can do with it, is still unclear and likely varies by network, Martin said. But two things are clear: Mobile social networks have the information and they want advertisers. Advertising is the lone source of revenue for most of these networks as membership is typically free.

Low prices and potential access to a wealth of consumer information make mobile social advertising worth a try, Martin said—especially now that Facebook has entered the game.

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