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Location-based advertising grows up

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Analysis Mobile advertising is huge, and only getting bigger; but can advertisers gather information without appearing creepy ... and should they bother when customers are so willing to share?

Last month O2 started delivering adverts to opted-in customers based on their location - supplementing information volunteered by customers with that harvested by the network infrastructure. But O2 is far from alone in deciding that asking nicely won't get them all the data they need, even if some of the competition just think O2 isn't asking nicely enough.

These days a plethora of location services are tracking, recording and compiling people's location information – along with their sex, age and address – all in the interest of providing targeted advertising. The companies behind the services are adamant that this is what end users desperately want, while quaking at the danger of being labelled the next Phorm.

Back in 2004, Morgan Kaufmann published Location Based Services, a book which remarkably (by today’s standards) makes no reference to advertising at all. But back in 2004 it was thought that users would pay for services rather than expecting everything for free... Turns out that the company was wrong: users would much prefer to be battered with a continuous stream of advertising than pay for stuff.

However, on the phone screen every pixel counts, so placement companies are vying to provide the most accurately-targeted advertising platform.

Most high profile of the companies involved has been Blyk, who at one point tried to fund an entire Mobile Virtual Network through targeted advertising; customers got free calls, data and texts in exchange for viewing advertisements delivered over MMS and SMS. Blyk didn't make it as an MNVO, in the UK at least, but the company now provides the engine behind Orange Bright Stuff: the opt-in consumer offering that is sold to advertisers as Orange Shots.

Blyk reckons it can make a dollar a month out of those who opt in, and with 300,000 Orange customers opted in before the Bright Stuff brand has really been promoted, that adds up to a lot of money. But unlike the Blyk's MVNO, it is not free calls or cheap offers that bribe users to sign up, but (according to Blyk) exclusive content provided by advertisers who appreciate the 25 per cent response rate that Blyk is able to promise.

That rate, which includes those who click on a link or call a number, is so high thanks to the targeting information Blyk gathers from users as part of the sign-up process. According to Blyk, the user's home address is by far the most valuable thing collected, much more valuable than the next best thing, sex, which ranks just above age, with the rest far below.

Not that the rest is worthless. Bright Stuff includes an interface allowing users to tag things in which they're interested. In return they get even-better targeted advertisements. That might sound strange - customers taking the time to share their interests with advertisers, but this is a generation used to sharing their innermost thoughts with the world, and to whom advertising is a fact of life, so if you're going to be "advertised at" anyway, you might as well take the time to make sure those adverts are pertinent.

This is good news for Blyk as it has no other source of customer data, unlike its competitors. O2 More, for example, recently started adding the users’ current location to the mix. O2 More is O2's equivalent to Orange Bright Stuff, but can now use automatically-gathered information (the customers' location) to help target ads.

Operators already know where every customer is, but have until now refrained from using that data for advertising: even Blyk told us its users thought the idea was creepy. But those who opt in to O2 More can expect to have adverts delivered to their phone based on where there are, as well as who they are.

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