Where's the Beef? No, Really...
By Justin Hall, Thu Jan 31 00:00:00 GMT 2002

Early location-based marketing programs are yielding valuable insight into how this new channel works.

To get a sense of what exactly "location-based" means and how people might actually make a business of it, we took at a look at the early location-based trials taking place in Japan. Then we passed along some of that data to some Finnish folks working on mobile marketing for their comments.

Operating since July of 2001, DoCoMo's I-Area allows consumers to browse wireless Internet information specific to their general location in that city. Japan's third place mobile service provider KDDI recently released a phone with a GPS (global positioning system) in it; these phones talk to a satellite for more precise geographic data to use with location-based applications.

Both the GPS service and DoCoMo's I-Area are based around what KDDI refers to as a "Navi," an online menu of businesses and services in the area. So you request from your phone: "Here I am; what's the nearest sushi shop?" Users can select from a number of different Navi. According to Mitsuyo Someno at KDDI, the primary criteria for selecting a Navi would be pricing, and then interface - not attitude.

Location-based, but not yet personalized

There's virtually no branding, or editorial slant, targeting specific users of the location-based data yet. A middle-aged salaryman and a teenaged girl are likely to use the same location-based bar and restaurant recommendation service, while these two people wouldn't be caught in a convenience store reading the same magazine.

With a friend in Tokyo, I used DoCoMo's I-Area to find a nearby video store. The top recommendation was conveniently located, easy to find, and open late in the evening when we were searching. The only thing we weren't told online - this was an exclusively pornographic video store. Another night we were stuck in Tokyo without a dinner plan, we found a restaurant in nearby Ueno through I-Area. The food was tasty, though the empty restaurant did not speak bode well for the current popularity of I-Area in Japan.

Early Navi results from Japan left us feeling unsatisfied. We took our questions and concerns to some experts considering these problems from Finland.

We started with Timo Suokko of Contra, an advertising agency based in Helsinki.

TheFeature: "Location-based" has been a buzzword in technology marketing for some time now; is it a reality yet for you and your clients?

Timo Suokko: in short: No, it is not. However, at the same time it is - as you said - the buzzword.

The problem is that location-based, or wireless marketing in general lacks common and compatible terminology and understanding with the rest of the possibilities in the media mix. it is merely a bunch of formats and solutions, with no overall understood line-up for the value/food chain. Mobile instruments and devices are, well... devices. No one so far has been able to treat them as a medium - in other words, something capable of delivering a relevant, value-adding message to the receiver/consumer.

We have pull and push, we have sponsored messages, we have this and that... but just as TV didn't become a master media because someone was able to shoot a 30 sec or 7 sec commercial, or print never became big because a full page and half page format existed, mobile devices will not become media until a common terminology and tools for the people designing campaigns has been invented and proven in practice.

Vesa-Matti Paananen, "Vesku" as he calls himself, is the CTO & Cofounder of add2phone, a mobile services company based in Finland. He sees location-based services happening even without fancy new technology, or the development of mobile media:

Vesku: There are many location-based mobile marketing cases where you don't have to know users' coordinates. You just utilize his relative location (e.g. in something, outside something or next to something). That helps us to understand the current context and presence of end-user.

For example: i want to set-up a mobile campaign where people can vote for the best player of a hockey match with a sponsored voting service. They send the number of a player in an SMS message to the service and get a return message saying: "Vote registered. Sale! You get 20% off from all team shirts in iFK Shop in 2nd floor."

This is definitely location-based advertising, because the advertiser is only interested about people who are in the stadium. Do we need network or handset positioning? No. We just market the service only in stadium (banners, flyers, video screen etc.) so we know that people who are sending votes are in a stadium and they are in a hockey match.

With this example i just want to say, that there are lots of cases where network positioning is not needed to do effective location-based mobile advertising.

TheFeature: So what does specific information about a user's location add to this existing model for location-based marketing?

Vesku: These legendary examples, like when you pass Starbucks you will get a special offer, are science fiction and bad examples.

The first question is: Who owns my location? Do you have permission to send me messages?

You need to get permission to send me marketing messages (opt-in). And i think you also need permission to ask my location. We don't have enough capacity in the networks to track millions of users. And think about the situation where hundreds of services are waiting for triggers from networks when somebody arrives or leaves a defined hot spot. There isn't enough CPU power or messaging capacity.

The first marketing services are based on request positioning (pull-type services). i request SMS/WAP information and then network tries to locate me and delivers that information to a service. Then the service uses this information in personalization or just in a simple content selection.

How accurate should the positioning be? in most of cases you don't need high accuracy. i have been impressed that you can easily get accuracy of under one kilometer in metropolitan areas. i don't see this as a big problem in mobile advertising and marketing. in many of the cases this "relevant" position is more important than your actual coordinates.

My biggest concern is that the whole location-based hype is the business model. When somebody starts to get exited about LbS then i ask, "Show me the money!" There is a cost associated with locating a handset in a network. So you have to cover this cost in your business model and service.

i can see that in very targeted cases or when marketing is tied to premium priced service it will work. Of course if you don't have to rely on network positioning then you don't have to cover those costs. Today in most of the LbS cases a user tells actively or inactively his position by himself and that is used in content selection. Simple!

in two or three years we will be able to use network positioning at a reasonable price in some of the cases. That will help us to target the message. but we have to create rules to ensure privacy. i believe generally that location is very important factor in a mobile marketing but it is also easily over-hyped.

TheFeature: Do you see Japanese "Navi" type systems, pull-type location-based content, happening much with your clients or in your part of the world?

Vesku: All directory providers (white, yellow, pink pages) are more or less prepared to provide these types of services. This is the essential location-based service for them.

Those who have interesting data will geocode it in the near future, but key question is "What kind of LbS is really needed?" i have seen in past three years that companies try to solve problems with mobile services - problems that don't even exist.

The problem of your generation: Too much information. For example, imagine you are in London and ask for a restaurant; too many restaurants. Somebody has to select them for you. LbS will help but it is not the ultimate solution. My friend, who works for a mobile operator, said to me "Our problem is that people are not lost everyday." How much will people really use these kinds of systems and how will they generate revenues for companies?

Outdated databases will be a similar problem for LbS as they currently are for directory services. That's another reason why i don't believe in detailed user profiles: Outdated all the time.

LbS will happen in Europe and Scandinavia but slowly. i think it will take at least two years and in 2003 we will begin to see more services. The first services will be very targeted. The problem is simple: business model. it will take time until there are enough users to make profits in mass services. You can find early success in niche verticals (i.e. professional services).

TheFeature: Do you have any examples here?

Vesku: Red Cross, fire department, hospitals, prisons etc. utilize location in many ways. There is not much mobile advertising there. but i have, for example, heard that some parties are building a portal for truck drivers and there will be location-based offers for them.

These kinds of "professional" vertical services can be easily imagined. There the business model is a mix of premium services and free/sponsored services.

TheFeature: Do you have any sense of how the directory providers (white, yellow, pink pages) might work with mobile providers to give pull-type location-based marketing value to the consumer?

Vesku: Money. Advertising will be one driver, of course. brands will sponsor services. And tribes/communities: places for snowboarders, bikers, etcetera.

Like i mentioned, location is good for marketing. it is very hard to predict the market before we are more familiar with pricing and features. i think that location-based marketing is good when it is tied together with pull-type LbS, because then marketing can provide the second revenue stream to cover the positioning costs.

People consume very much in a relatively small area. How long you would like to drive or walk to do your shopping? That's why LbS will be used together with mobile marketing.

Ultimately if these services prove useful to a wide range of consumers then we will see location-based marketing making our mobile lives more convenient, offering us access to personally tailored, geocoded information.

in the meantime we should expect to see a wide range of location-based marketing experiments.

Justin Hall wrote his first article exploring technology culture in 1990; since then he's written over 2,000 web pages at Links.net. Today he writes and speaks on electronic entertainment and he's bootstrapping his own TV talk show.