Bii location data report 1 22-13

How Location Data Is
Transforming The Entire
Mobile Industry
Marcelo Ballvé | January 22, 2013

How Location Data Is Transforming
The Entire Mobile Industry
Marcelo Ballvé | January 22 2013

The possibilities for location-based services on mobile go beyond
consumer-facing apps like FourSquare and Shopkick.

Location data has begun to permeate the entire mobile space, powering
advertisements, and many other services — from weather to travel apps.

There are 1.2 billion smartphone devices in use worldwide, and 770
million of these are equipped with GPS, according to TomiAhonen
Consulting. All that geolocation data adds up to a trove of valuable
information both for app publishers and mobile marketers.

n this report, we'll point to the opportunities emerging from this new
local-mobile paradigm, and demystify some of the underlying
technologies and privacy issues.

 Location-enabled mobile ads have generated excitement for
their effectiveness and the impressive prices they command. Many
mobile ad trading platforms are reporting triple-digit increases in
location-enabled impressions. However, it turns out some of this data is
unreliable.
 Location-based features have turned out to be great for boosting
engagement on apps.
 Local data can connect hundreds of thousands of small and medium-
sized businesses to the mobile economy, via mobile search and other
strategies.

Click here to download the charts and data for this report in Excel→

2 Copyright © 2012, Business Insider, Inc. All rights reserved.

It’s All About The Data: GPS And Its Friends

A pure GPS approach and the "lat-long" tags it generates is considered
the standard for location data. But there are at least four other methods,
sometimes used in combination, for pinpointing location. These other
techniques will follow different steps to achieve an estimate of your
location.

 Cell tower data: When GPS signals can't reach the device's GPS chip,
which often happens indoors, the device will often report its location by
communicating with the cell tower it's connected to and estimating its
distance. It's less accurate than pure GPS data.

 Wi-Fi connection: It's an accurate method but requires an active Wi-Fi
hotspot. Wi-Fi locations are matched with GPS coordinates. It can
pinpoint a user to a specific storefront, which is why many retailers are


rolling out free public Wi-Fi to enable in-store mobile ads.

 IP address: Location can be gauged by the IP address associated with
the data connection. The accuracy of this approach varies between
carriers, and is far less reliable than the above methods.

 User-reported: When users sign up for emails or register for mobile
apps and services, they often enter their addresses and zip codes. This
data can be translated into GPS coordinates to build a geolocation profile
of a single user or user base.

The ability to collect user location data and track it has raised some
concerns over privacy. However, Android and iOS give users the ability
to opt out of location tracking altogether via their settings.


(Please see section below, "Don't Follow Me: Why The Privacy Issue Is
Solvable," for more on the privacy issue.)

The Lat-Long Mirage

Advertisers pay a premium for location-enabled ad impressions.

Data from several mobile ad networks and ad exchanges tell the same
story: location-enabled ads see a lift in CPMs, or cost per thousand
impressions. (See chart, above.)

Also, the simple fact of a user being physically close to a business, within
two miles or so, gives a significant lift to click-through rates on mobile
banner ads, according to a 2012 study of clicks on AT&T's YP local
mobile advertising network.


(See chart below.)

But unbeknownst to many ad buyers, many location ads aren't always
what they seem.

It's an oft-discussed fact in the mobile advertising space that only five to
10 percent of all mobile ad inventory has true GPS-generated latitude-
longitude data. Many ad impressions in fact are powered with less
precise geographic information: zip codes, metro area, carrier IPs, etc.

Also, even ad inventory with latitude-longitude information isn't always
what it seems. That's because some ad platforms will take the rougher
location data like a zip code and translate it into a latitude-longitude
format.

"People are making up lat-long because it's one of the few things that can
give a lift to impressions on exchanges," says Tom MacIsaac, CEO
at Verve, a location-based mobile advertising specialist.


MacIsaac says Verve is able to offer 30 percent of its inventory with "true
lat-longs" because its ad platform rides atop an exclusive network of
3,500 local publishers.

For ad platforms that don't have lat-long data, there are ways to create it
from less precise location coordinates.

For example, ad suppliers can generate a "centroid" — the GPS
centerpoint of a zip code, metro area, or user cluster — and use that
coordinate to geo-tag their available inventory, or they can randomize to
distribute users across the same area.

In other words, the resulting location tags don't accurately represent the
real-time or past locations of the targeted users.

There's money at stake in being able to distinguish true lat-long data.

Nexage, an advertising exchange, reported in December 2012 that an
impression with any location data commands a premium of twice the
average CPMs for mobile ads, while lat-long impressions will fetch five
times the average CPM.

Do ad buyers generally understand differences in the quality and
accuracy of location data?

"I think the answer is no," says Greg Sterling, senior analyst for Opus
Research.

However, they may not necessarily care. Major advertisers are so
concerned about scale, Sterling says, that they often simply want to reach
as many mobile devices as possible, and ignore nuances in accuracy.


Jumping The Geofence

JiWire, another specialist in location-based media, already has
a database of over 3 billion location tags, which is growing at the rate of
16 million per day, thanks to JiWire's partnerships with operators of
public Wi-Fi networks, as well as app publishers.

JiWire's data shows that even in public Wi-Fi hotspots like cafes and
airports, mobile devices are already trumping laptops in usage.

By the end of last year, smartphones and tablets together accounted for
58 percent of usage on JiWire Wi-Fi traffic. (See chart, below).

In addition to hyper-local campaigns, location-based ads can be used for
"geofencing," which refers to the practice of isolating zip codes, metro
areas, or city blocks near retail outlets or malls. Then, advertisers will
bombard those ring-fenced areas with mobile ads.

The downside is that geofencing inevitably captures a great deal of
audience who might have no interest in a service, event, or product.

So, JiWire and other location-based advertising platforms are
reformulating their pitch to brands, big retailers, and national
advertisers.

They'll use location data not just to geofence, but to build much broader
audience categories.

For example, a user who visits airports and hotels with a certain
frequency may be classified as a business traveler. That business traveler
— along with potentially hundreds of thousands of users with the same
profile — will be targeted with relevant ads, no matter where they are.


"I think using location, not just present location, but present and
historical location, is a smart way to define audience," says Phuc Truong,
a managing director at mobile media planning agency, Mobext.

JiWire refers to this style of location-based marketing as the "location
graph," but other companies, including Verve, Everyscreen
Media, Factual and XAd are all pitching services that are a variation on
this theme.

Sterling, of Opus Research, sees this move beyond the geofence as key to
mobile advertising for two reasons. One, it translates user location, one
of the unique selling points of mobile as a go-everywhere medium, into a
language that advertisers can understand: the language of audience
profiles.

Two, it attacks the scale issue.


Let's say a luggage brand wants to reach business travelers. If this brand
were to simply pound airports with mobile ads, the audience would be
restricted to whomever happens to travel during the timeframe of the
campaign. Also, the campaign will reach many individuals for whom the
ads will be irrelevant: airport workers, travelers' relatives, taxi drivers.

But let's say the brand identifies devices owned by travelers who visit at
least a half-dozen airports in the course of a three month period. The ads
target these users regardless of where they are once the mobile campaign
begins. The audience expands considerably in size, and it gains accuracy
too.

"I think location as audience is kind of a near-term key for getting brands
involved" in mobile, says Sterling.


Apps: Pushing Location

Something similar may happen with location data in the context of
mobile apps and websites.

Location-based services will become ubiquitous, but not with a wave of
killer apps or social networks that will move them into the consumer
mainstream.

Instead, location data is being used to power location-sensitive features
in the background of more and more apps.

Facebook, Google, Yelp, Instagram, Groupon, Twitter and dozens of
other popular apps offer location-enabled features.

These mobile properties, and many others, have moved beyond the
"check-in" concept, which in any case never really caught on with users.
They may still offer the ability to "check-in," but are also trying to be
more imaginative with location-based notifications and location-aware
services.

Some apps, like FourSquare, Path, and Google Latitude, offer ambient
tracking of a smartphone so that users can share their location with
friends in real-time and receive push notifications that guide them to
nearby events, deals, or gatherings.

Another popular app, Life 360, allows families to track one another. In
December, Life 360 introduced a feature called "Places," which allows
families to receive automatic geo-tagged notifications. For example, a
teenager's mother may receive a note, "Alice Has Arrived At School,"
every time her daughter makes it back safely at her boarding school.

One big problem with ambient tracking and location-enabled push
notifications: the battery drain of always-on GPS. One company, Geoloqi,
has created a development platform that aims to allow coders to easily
build powerful location-sensitive features that are battery friendly.


In October of last year, Geoloqi was acquired by mapping technology
company, Esri.

Amber Case, co-founder of Geoloqi, says most of the uses for location
data in apps won't be glamorous, but instead will work unobtrusively in
the background to make life easier for individuals and organizations. For
example, she says, an energy-saver app will remind a user to turn off
their lights every time they leave their vacation home.

Or, a travel app will push notifications for automatic check-in as a user
arrives at an airport.

"You're using location to inform multiple services," she says. "It's really
just this nerdy, mundane but incredibly useful stuff."

Privacy: Don’t Follow Me


There is one stumbling block to a location-aware mobile ecosystem:
privacy. But we believe privacy fears as they pertain to location are
overblown.

Firstly, the industry is acutely conscious of consumer and media
attention on the privacy issue and is already self-policing.

For example, with Apple's App Store, if you can't make a good case for
why people should share their location with your app, Apple won't let
you ask for it.

Several of the largest ad networks and exchanges — including location
specialists JiWire and XAd — have contracted privacy
manager TRUSTe to manage privacy across their mobile ad operations.

Besides allowing users to easily opt out of ads, TRUSTe also "discourages
permanent device identifiers."

Instead, it generates temporary device IDs for location tracking and
audience targeting that are not traceable to specific users or their
personal information.

"What that does is separate that location data from any other data that
would push the boundaries of privacy," says David Staas, president of
JiWire.

If consumers feel they benefit from a location-aware mobile ecosystem,
including more relevant advertisements, they will continue to give up
their locations, says Jamie Singer, director of client services at
Everyscreen Media, which has also signed on to TRUSTe's service.

There's some evidence to back up Singer's belief. An IAB survey from
May 2012 found that 28 percent of consumers said they would accept
location information being used to improve ad relevance. That's a
relatively high proportion. By contrast, fewer than 20 percent said they
would accept ads targeted to their Facebook or Twitter activity, their TV
viewing, or their recent purchases.


(Note: the survey asked respondents to assume that mobile ads had to
exist.)

Mobile Search: Location In The Long-Tail

Since searches with local intent are such a big part of mobile search
traffic, location data has played a role in Google's rise to mobile search
dominance.

Currently, 96 percent of all mobile searches are undertaken on Google's
search engine, and an estimated 33 percent of these have local intent.

Google highlights the "local mobile consumer," in its ad sales material,
and touts statistics that show a third of mobile searches have local intent,
and that 94 percent of smartphone users have searched for local
information.


Smartphone users tend to use their handsets at the beginning of the
consumer process, while tablets are used throughout the purchase cycle,
according to a Localeze and 15 Miles study of local mobile search.

That echoes results of a Google survey of 1,000 smartphone users, which
showed that they use search to get basic, first step-type information
about a business: address, phone number, etc.

In Google's survey, 76 percent of the respondents said they would like
businesses' location or operating hours, and 61 percent said they would
like to be able to "Click to call" the business.

Because small and medium-sized businesses tend to have a local
footprint and source sales from a limited geographic area, mobile search
is an issue they will eventually have to grapple with.

Right now, SMBs are lukewarm to mobile, unsure about how it will
benefit them. A Borrell Survey released in September 2012 found that
only 49 percent of the over 1,300 small and medium-sized businesses
polled said it was likely that they would incorporate mobile into their
advertising and marketing efforts in 2013.

The survey also picked up an underlying discontent with existing mobile
efforts. Half the businesses that were in mobile said they would increase
that spending if they saw a better return on their investments in the
medium.


THE BOTTOM LINE
 Many geo-tagged mobile ad impressions aren't what they purport
to be. The GPS coordinates are often the result of various
workarounds. Ad buyers should try to understand exactly what
they're getting.

 The geofence is no longer the dominant paradigm in location-
based mobile marketing. Location data has become a powerful
tool for understanding mobile audiences and their needs.

 Location data will work its way into every major part of the
mobile ecosystem. Every mobile marketer, developer, and
publisher needs to consider whether location-enabled elements
are relevant to their audience.

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BI Intelligence has an experienced team of analysts led by Henry Blodget, CEO &
Editor-in-Chief of Business Insider. BI Intelligence’s team of dedicated analysts have
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Copyright © 2012 Business Insider, Inc. All Rights Reserved.
Proprietary and Confidential Property of Business Insider, Inc.
Licensed for Use By BI Intelligence Subscribers Only.
Access to and use of this proprietary and confidential information is limited by the
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Bii location data report 1 22-13

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