As large, national and international brands begin to show interest in advertising on location-based services, the check-in games are finding they’re on the winning end of the deal. This is a point that came up in one of the MobileBeat 2010 breakout sessions on location and advertising today.

Dinesh Moorjani (pictured), senior vice president at internet conglomerate IAC Mobile referred to a scavenger-hunt-style promotion shoe designer Jimmy Choo organized with the popular check-in service Foursquare, giving up a free pair of shoes for the winner of the hunt. “The question is, who benefited more? Jimmy Choo or Foursquare?” Moorjani asked. “It’s kind of ironic when you think about it. Who should be paying who?”

Brands like Jimmy Choo or Starbucks, or Pepsi, or VH1 are experimenting with location-based services, trying out different promotions and seeing what will stick. In the Jimmy Choo example, it can be argued that this promotion was just a testbed for them and a way to see if or how customers can be engaged. They probably didn’t need to reach out to Foursquare users to gain visibility in that demographic, much like a company with high brand awareness, like Starbucks, doesn’t need to win a new audience with Foursquare or Brightkite. But Foursquare and Brightkite need new audiences, Foursquare haging over two million registered users, but still only a fraction of smartphone users, let alone cell phone users globally.

Dustin Jacobsen, ad agency Barkley’s vice president of social media, agreed. “Large brands can also saturate an app, buy it out in a sense, which means that all you could end up seeing is a million coffee ads. The question for big brands is how to build up the level of engagement and tie the location in with other existing customer relationships like loyalty programs, because that will bring a lot more context to [mobile advertising].”

Another point in mobile advertising, or specifically location-based advertising (which is a very small subcategory of mobile advertising) is how to engage the roughly 15-20 million small businesses in the U.S., many of which are not even advertising online, let alone on phones. “It’s all about closing the loop,” said Moorjani. “It’s about hearing the cash register ring and comparing that to the dollar spent in advertising, and so far, the cash register isn’t ringing enough for many small and medium-sized businesses.”

As Jacobsen sees it, one challenge is the fragmentation of location-based services right now. With dozens of companies working in the sector, brands are still in an experimental phase. “Ultimately, there will be only a few select winners of that space. Brands want to work with companies that have a sales force, and some of the companies are better at it, like Yelp, which has a dedicated sales force. When a startup grows enough to afford to have a sales force, that’s when their chances increase,” Jacobsen said.

But in the end, it may be that just knowing somebody’s exact location isn’t enough to make smart marketing decisions. Jeff Montgomery, location-based ad company Placecast’s chief revenue officer said the company has learned three things on location-based advertising, and they are 1) time affects a location, meaning that a hotel is very different on a Monday morning than a Saturday evening, and this impacts the user’s experience and needs concerning that location 2) consumer behavior can be changed, but the message – the ad – has to give consumers time to react, not reach them as they walk into a store, and 3) give consumers control on the messages and ads they receive.

Which is something that Erick Tseng, Facebook‘s head of mobile products, brought up on stage in a fireside chat with VentureBeat’s Matt Marshall, speaking about the classic coupon promotion with location-based services.

“How many people have ever used a type of coupon where an offer is pushed to you based on your proximity to a store?” Tseng asked a full room. Zero hands went up. “To me, those types of coupons feel like spam.” However, Tseng continued, if there is social intelligence on top of the location-based ad that makes it more relevant to the person, that’s a different story. “If you see that 30 of your friends are raving about the new pumpkin-flavored frappuccino, and maybe two of your friends are inside, that could be more relevant to you,” Tseng mused.

[Photo: Miikka Skaffari]

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