Are you a hip location-based service looking to make money by selling ads for retailers on your übersnazzy iPhone app, which all the cool kids are using? Take another look at your business model. Chances are the good old SMS text message is still beating your app in reaching the pundits with ads.
According to a recent study commissioned by digital advertising company Placecast (carried out by research firm Harris Interactive) users still consider texting more important than any other activity, aside from talking. Which is not surprising if you consider the fact that smartphones account for little over than 20% of all mobile phones in the U.S. So, while location-based services like Foursquare (having just scored $20 million in funding and putting pressure on the other companies in the space), Gowalla, Brightkite and others are hoping to cash in on advertising integrated into their products, it is worth noting that these services still have very few users in terms of the percentage of people using smartphones. The survey points out that 40 percent of users said texting is “extremely” or “very” important to them. When it comes to the so-called check-in services like Foursquare and Gowalla, only 7 percent of men and 3 percent of women have same level of interest.
The survey, says Placecast CEO Alistair Goodman (pictured), represents the American population at large (2,046 adults in the United States, age 18 and over), not just centers for the digerati like San Francisco or New York City.
“We see in this data that texting is super-easy to use for both advertisers and consumers. For instance, middle-aged women are very brand-loyal and want to receive alerts on offers, but don’t want to use an application for it: for them, alerts are a utility and not a game they would like to play,” Goodman explains.
For retailers, e-mail has been a great way of communicating with customers, says Goodman, and texting is the logical extension of it. As always with advertising on a highly personal device like a computer, let alone on a mobile phone, it is a question of providing extremely relevant information to the consumer so as not to be intrusive. One of the ways of making advertising relevant to a consumer is to use place and time, ie. location data – which is comforting news to a hip location-based service. In fact, only less than 10% of the people taking the survey said that using their location in advertising was intrusive or wasn’t obvious to them. One third of the respondents of the Harris survey considered ads based on their location very useful, and other studies have shown the same tendency.
Mobile advertising is on the rise – Gartner expects the entire mobile ad segment to become a $7.4 billion market by 2014 – and seem to have an effect, since one in three consumers claimed to have gone into a store after receiving an ad, and one in four have made purchases, according to the Harris study. Microsoft is channeling (text-based) ads on the screens of phones using its upcoming Windows Phone 7 operating system, and Apple’s CEO Steve Jobs recently introduced the company’s iAd platform, providing guaranteed reach across a wide Apple device audience. And another study shows that the smartphone adoption rate will rise to 194 million users by 2015. Whether or not those nearly 200 million users will take app-based advertising over SMS alerts remains to be seen.