How the Little Guys Can Compete in Local Mobile Advertising

If you follow the mobile industry – and you probably wouldn’t be reading this if you don’t — your head may be swimming from the recent headlines about local mobile advertising. In the last two weeks alone:

Each of those players is looking for a piece of a market set to explode in the next few years. BIA/Kelsey last week predicted that local mobile advertising in the U.S. will grow from a mere $213 million in 2009 to a staggering $2.02 billion by 2014.

That holds tremendous promise for companies like Google, Facebook and Yelp, which bring to mobile both large user bases and numerous relationships with local businesses. And it opens the door for more mobile-centric players like Foursquare and Gowalla. But these players aren’t without vulnerabilities. Google has yet to gain much traction with Buzz, Facebook isn’t the place most of us choose when it comes to local search, especially on the go and Yelp continues to be tainted by allegations of extortion from businesses that have opted not to advertise. Foursquare and Gowalla, while popular, have yet to expand into the mainstream.

Which means that smaller mobile players — guys like WHERE, Geodelic Systems, Whrrl and Verve Wireless — still have a chance to compete with the big boys when it comes to local mobile advertising. To do so, though, they must address four critical issues:

1) Protecting users’ information is paramount. To be effectively targeted, local mobile ads must take into account sensitive information — users’ interests, mobile behavior and, of course, location. App developers such as WHERE must tell users exactly what kind of information is being shared and with whom, and allow users to opt out of any particular component. Failing to keep that kind of data secure can result in headlines that might only be a stumbling block for Google, but could spell death for any small player.

2) Pull, don’t push. The tired scenario of delivering a Starbucks coupon to any coffee-drinker walking by the shop is doomed (if not already dead), because it fails to take time into account. Consumers want deals at the right place, but also at the right time; barraging them with information based solely on proximity will sometimes annoy them. Help consumers find what they’re looking for when they’re looking for it, then sweeten the deal with ads that feel like information — not come-on. Instead, let consumers tell you what they’re looking through your app, then deliver targeted ads with the results.

3) Demonstrate positive return on investment. Mobile provides an unprecedented opportunity to give advertisers insights into how well their ads are performing. This lets them tweak campaigns for optimal effectiveness, which in turn leads to more lucrative ads. But that kind of data is sensitive and can lead to ads that seem too well-targeted, so — to restate the first rule — developers must be careful what they’re sharing and with whom they’re sharing it.

4) Build a better app. Smaller mobile players aren’t going to replace a Google or a Facebook, so they should focus on doing specific things better than their bigger counterparts. WHERE, for instance, has gained substantial traction with a simple value proposition: an app that serves as a local portal connecting users with local information such as news, weather, restaurant reviews, store locators and on-the-go coupons. Consumers value the stripped-down approach that presents ads alongside valuable information without having to join yet-another social network.

Question of the week

Can smaller players compete with the Googles and Facebooks of the world as location comes to mobile advertising?