Bachelor Thesis

BACHELOR THESIS

Mobile advertising and marketing A study of how location-based services is developing the mobile advertising

eco-system and its business models

Sixten Sidfeldt

Bachelor of Science Industrial and Management Engineering

Luleå University of Technology Department of Business Administration, Technology and Social Sciences ABSTRACT

Purpose The goal of this research study was to examine the current state of mobile marketing and advertising. With focus on how location-based services currently transforms the mobile advertising ecosystem and its associated business models.

Method The research study was conducted in association with different market leading industry actors, residing from diverse ends of the mobile advertising value-chain. This provided a broader spectrum for the study and the research questions sought answers to. The gathered empirical data was compared with existing theories providing possibility for further analysis and ultimately to draw conclusions for the research questions.

Conclusion The research study concluded that location-based services will play a pivotal role in the coming years for mobile marketing and advertisement, both from the application perspective but also from mobile search integration. The market of location-based advertising is currently in an early stage, but shows high growth potential. The research study also concluded that location-based advertising follows the theories of regular mobile advertising, with the main exception that everything revolves around location. This provided difficulties for the parties involved, since location adds geodata that can that enable identification of specific end-users, as in the location gate scandal. To overcome this dilemma actors clearly- and openly reveal their strategy, on geodata harvesting. The geodata is collected either with the possibility to identify end-users, in an anonymous way or no harvesting at all. The applied business models are adapted from those of online advertising, the empirical data though showed that the industry is switching towards a more transaction-based business model aside from the exposure business model that is currently serving the majority of the mobile medium.

Table of Contents

1 INTRODUCTION ...... 1

1.1 INTRODUCTION TO LOCATION-BASED SERVICES ...... 1 1.2 INTRODUCTION TO MOBILE MARKETING ...... 2 1.3 INTRODUCTION TO LOCATION-BASED ADVERTISING ...... 3 1.4 BACKGROUND ...... 4 1.5 PURPOSE ...... 5 1.6 DEFINED RESEARCH QUESTIONS ...... 5 1.7 DELIMITATIONS ...... 5

2 LITERATURE REVIEW ...... 6

2.1 RESEARCH QUESTION 1 ...... 6 2.1.1 MOBILE MARKETING ...... 6 2.1.2 KRUM MODEL FOR ADVERTISING CAMPAIGNS ...... 10 2.2 RESEARCH QUESTION 2 ...... 11 2.2.1 DRUMMOND AND ENSOR MARKET EVALUATION MODEL ...... 11 2.3 RESEARCH QUESTION 3 ...... 13 2.3.1 MOBILE TRACKING POSSIBILITIES ...... 13 2.3.2 MOBILE ADVERTISING MEASUREMENT ...... 15 2.3.3 BUSINESS MODELS ...... 15 2.3.4 INDUSTRY APPLICATION OF BUSINESS MODELS ...... 16 2.4 RESEARCH QUESTION 4 ...... 17 2.4.1 PERMISSION, PRIVACY AND SPAM AFFILIATION ...... 17 2.4.2 MMA MODEL TO ENSURE USER PRIVACY AND ADVERTISING RELEVANCE ...... 18

3 METHODS OF INVESTIGATION ...... 20

3.1 INTRODUCTION ...... 20 3.2 RESEARCH PURPOSE ...... 20 3.3 RESEARCH APPROACH ...... 21 3.4 RESEARCH STRATEGY ...... 21 3.5 RESEARCH LITERATURE REVIEW ...... 21 3.6 RESEARCH DATA COLLECTION ...... 22 3.6.1 QUANTITATIVE OR QUALITATIVE DATA COLLECTION ...... 22 3.7 RESEARCH SAMPLE SELECTION ...... 23 3.7.1 THESIS PARTICIPANTS ...... 23 3.7.2 INTERVIEW AT SONY ERICSSON ...... 24 3.7.3 INTERVIEW AT NAVTEQ ...... 24 3.7.4 INTERVIEW AT APPELLO SYSTEMS AB ...... 25 3.8 RESEARCH DATA ANALYSIS ...... 25 3.9 RESEARCH ACCURACY ...... 26

4 EMPIRICAL FINDINGS ...... 27

4.1 RESEARCH QUESTION 1 ...... 27 4.1.1 INTRODUCTION TO MOBILE ADVERTISING AND LBA ...... 27 4.1.2 TW ON THE NMS STRATEGY WITH LBA ...... 29 4.1.3 TW ON THE VALUE CHAIN FOR LBA ...... 31 4.1.4 NAVTEQ MEDIA SOLUTIONS LBA MODEL ...... 32 4.2 RESEARCH QUESTION 2 ...... 37

II 4.2.1 MARTIN SVENSSON ON THE MARKET FOR MOBILE ADVERTISING ...... 37 4.2.2 TW ON THE MARKET FOR LBA ...... 39 4.2.3 FRAN ON THE MARKET FOR MOBILE ADVERTISING AND LBA ...... 41 4.2.4 PETER TYREHOLT ON THE MARKET FOR MOBILE ADVERTISING AND LBA ...... 42 4.3 RESEARCH QUESTION 3 ...... 43 4.3.1 TW ON THE BUSINESS MODELS OF LBA ...... 43 4.3.2 JAMES ON THE BUSINESS MODELS OF LBA ...... 45 4.3.3 PETER ON THE BUSINESS MODELS OF LBA ...... 46 4.4 RESEARCH QUESTION 4 ...... 46 4.4.1 TW ON THE PRIVACY INTRUSION AND POSSIBLE SPAM AFFILIATION ...... 46 4.4.2 JAMES ON THE PRIVACY ISSUES ...... 47 4.4.3 MARTIN ON THE PRIVACY ISSUES ...... 47 4.4.4 FRAN ON THE POSSIBLE SPAM AFFILIATION ...... 47 4.4.5 PETER ON THE PRIVACY INTRUSION AND POSSIBLE SPAM AFFILIATION ...... 48

5 ANALYSIS AND CONCLUSIONS ...... 49

5.1 RESEARCH QUESTION 1 ...... 49 5.1.1 ANALYSIS USING THE KRUM MODEL AS SEEN ON PAGE 10 ...... 49 5.1.2 CONCLUSION RQ1 ...... 50 5.2 RESEARCH QUESTION 2 ...... 51 5.2.1 APPLICATION OF DRUMMOND AND ENSOR MARKET EVALUATION MODEL AS SEEN ON PAGE 11 ...... 51 5.2.2 CONCLUSION RQ2 ...... 54 5.3 RESEARCH QUESTION 3 ...... 54 5.3.1 ANALYSIS OVER THE APPLICATION OF BUSINESS MODELS ...... 54 5.3.2 CONCLUSION RQ3 ...... 55 5.4 RESEARCH QUESTION 4 ...... 56 5.4.1 ANALYSIS USING THE 6C MODEL AS SEEN ON PAGE 18 ...... 56 5.4.2 CONCLUSION RQ4 ...... 58

6 RECOMMENDATIONS FOR FURTHER STUDIES ...... 59

6.1 RECOMMENDATION 1 ...... 59 6.2 RECOMMENDATION 2 ...... 60

7 CREDENTIALS ...... 61

7.1 BIBLIOGRAPHY ...... 61 7.2 PRIMARY SOURCES ...... 61 7.2.1 INTERVIEWS ...... 62 7.3 SECONDARY SOURCES ...... 62

III FOREWORD I would like to point out a specific thank you to Ulf Ivarsson, at Stratio AB, for his guidance, contacts and the continuous help he has provided to me during the crafting of this thesis. Annika Ivarsson for providing me a place to live and work. From Luleå University of Technology I would like to thank Erik Lovén for helping me to get started on this bachelor thesis, Lars-Ole Forsberg for providing me the correct connections within the department at the university and finally my mentor Håkan Perzon for his guidance with the construction of the thesis.

Although the empirical core of this thesis derives from the interviews conducted in association with industry and hence I would like to thank Jeff Mize, executive vice president at NAVTEQ, whom enabled me to get in contact with key people within NAVTEQ Media Solutions. Therefore I am grateful for the opportunity to talk with James Winter, Fran Smith and especially Tae-Won Song whom cleared an entire day to enlighten me in person with his immense knowledge about mobile advertising and LBA in specific. This provided me with the empirical data needed to finish my bachelor thesis. From Appello Systems I am in gratitude to Peter Tyreholt who provided me with some important aspects from a content providers perspective and Martin Svensson from Sony Ericsson who received me for an interview with only one-day notice and in an early stage provided me useful industry facts and gave me a hardware manufacturers view on the mobile advertising medium.

During the beginning of this thesis I got valuable insights and connections from Daniel Nordberg, at HTC Corporation, and he helped me with an enthusiasm for LBA that I admire. Also I would like to thank my entire family, whom has supported me with both my on going studies and especially the construction of this thesis. Last but not least Jennifer for putting up with me during the research period with all the travelling and papers flying around.

To the people mentioned above I am always grateful.

Sixten Sidfeldt, GOTHENBURG 25th April 2012

1 INTRODUCTION In this first part the thesis will be introduced, that includes an initial description of the subject, a background note, the purpose of the work, the research questions as it sought answers to, limitations and a description of how the report will be distributed.

The thesis will analyze the possibilities given by the technology innovation constantly taking place in our surrounding. The technology that we are using on a daily basis is on the way of being more integrated into one device. The transfer from multiple devices to integrated devices is driving the innovation within mobile technology and especially mobile phones that are currently a mix of cellular phone, PDA and portable computer. The path is given, in the near future everything moves towards one universal mobile unit that covers all of our wireless needs and this device will become an advertisers dream.1 The device will be able to give accurate location information to an customer no matter where their current position is thanks to the expanding infrastructure of high-speed wireless internet for mobile units. During the construction of this thesis opportunity have been given to discuss mobile advertising and LBA with industry experts, representing market-leading companies in different parts of the mobile value chain. This provided valuable and certainly interesting facts and views on this constantly evolving market.

1.1 Introduction to Location-based services Location-based services (LBS) for mobile technology consist of mobile content and services (e.g. applications) that leverage GPS, Wi-Fi, Cell ID and A-GPS, which is a hybrid of GPS and high-speed wireless Internet uplink. The LBS use these technologies to pinpoint the mobile units position, which is then used to retrieve relevant geographic content and information that may be of interest for the consumer at the specific location.

Most of the consumers use LBS to search for information, find specific places or people in the closest proximity. Then the LBS service can provide turn-by-turn navigation or on foot navigation to the chosen target point. Most LBS application also enables you to share your location through social networks, which have grown in popularity following foursquare, latitude and Facebook places. When location data for mobile units is more available across different brands and carriers in the future it will be very valuable for the producers of different geographic positioning contents and applications. The possibility to combine mobile location with user preferences and other targeting parameters the industry could unlock the most attractive value chain within LBS experiences.

According to a whitepaper written by Peterson Mobility2, even though the change of business models within LBS from subscription based to ad-subsidized and even ad-based have enabled growth of free LBS, the category still holds the number one spot in the revenue-generating category of all downloadable applications. This is illustrated by the figure 1 below:

Share of revenue by wireless downloadable application type 1% 3% 2% 2% 1% 1% Location based services Personal organizer/toos 7% 9% Music Weather

74% Wallpaper/pictures Entertainment Maps/directions Chat/community Other

Figure 1: Revenue distribution concerning mobile applications Source: Peterson Mobility3

1.2 Introduction to mobile marketing Mobile marketing involves the use of mobile units to reach the desired set of customers with marketing offerings in the form of advertising, promotions and information. Currently mobile marketing mostly consists of push strategies using blast SMS, MMS campaigns, where coupons are sent to an individuals mobile unit with promotional offers.

Key benefits of mobile marketing according to Peterson et.al (2009) include: 4

Ø Scope: There were four billion mobile devices in operation in 2008 and it is forecasted that the figure will reach over five billion units in 2013. 5 Ø Personal factors: Using consumers given preference will enable the possibility to perform highly targeted personalized marketing. Ø Interactive: Communication with mobile devices based on two-way communication so that individuals can respond directly to marketing and advertising. This enables tracking customers to the point-of-purchase and instant feedback on campaign and with the ability to modify it to improve performance. Ø Accuracy: Marketing campaigns can be sent to the right person at the right place at the right time with relevant content. This is an extremely effective tool for individual-specific promotions. 6

Igor Novikov7 as chief business development officer at Bercut LTD describes the possibilities within mobile marketing in the article “Accuracy of mobile advertising campaigns as compared with traditional mass media as an advertising medium” when he puts it in perspective with mass media marketing. Igor brought two examples; first a commercial during a football game, where the error in calculating the target audience reached 30 % and the second example of mobile marketing, an advertising campaign where the customer has given consent on receiving advertising offers, where he proved that there is no actual error in the accuracy for the measurement of the advertising campaign. This should give the advertiser a possibility to work with highly accurate values in calculating the efficiency, although Igor finishes with explaining the fact that many advertisers will be suspicious of the cost and margins of mobile advertising.

This leads up to an interesting point where there is a strong need for well-defined metrics within mobile marketing. Laura Marriot aggresses this problem in her article “The need for mobile measurement”8 where Laura explains that the money spent on mobile marketing is still in its “test and learn” phase where she gives four points of which the industry needs a deep understanding:

I. The role the medium plays in the overall mix II. Consumer acceptance of brand messaging III. Consistent guidelines and best practices to ensure rapid deployment across brands and geographies “ IV. Evidence of effectiveness and value

Laura points out that measurement is key to analyze the mobile opportunity needed to drive brand involvement, since both advertisers and its clients need accurate metrics for the successful implementation of a specific business model. This constructs a problem because of the complex value chain, value-chains is a system of an organizations interdependent activities, which are connected by linkages, these connections exists when the way in which one activity is performed affects the cost or effectiveness of other activities (Porter et.al, 1985), where several actors sit on information that they aim to monetize respectively and this makes cross industry measurement hard to accomplish.

1.3 Introduction to location-based advertising When combining the pinpoint abilities of LBS with mobile marketing, marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others (Philip Kotler 2008), one will enable location-based advertising (LBA). LBA provides the possibilities to accurately reach the right consumer, at the right time and at the right place.

Figure 2: LBS and mobile marketing combined to LBA Source: Peterson Mobility Location-based advertising

This opportunity cannot be matched by any other marketing medium, since the mobile unit is carried around by a consumer at all times during everyday life and if advertisers are able to pinpoint LBA in accordance to the consumers given preferences one would have the most powerful tool to convince consumers to engage in specific products or brands. This has created a lot of fuzz about LBA but the allocated dollars needed to make it a strong competitor is still missing.

Patel Kunur writes in the article “Forget foursquare: Why location marketing is new point-of- purchase”9 about the capabilities of LBA. Patel explains that it is forecasted that LBA-spending will hit four billion USD by 2015; to put in a perspective the LBA spending totaled 34 million USD 2009. Patel also explains that it is projected that mobile will dominate the U.S. interactive marketing spending with a marked share of 70 %, or 56 billion USD. This is hard to imagine

today but in the same article Paul Feng, Google’s mobile-ads group manager, said that about one-third of mobile searches have local intent. Paul Feng was quoted saying “We think of location as a hugely important signal”. Companies have started to present applications for LBS, e.g. Placecast that geofence (a virtual border around a physical store) retailer’s proximity and once a consumer enter that proximity an offer will be sent to the consumers mobile devices, where consent has been given within the LBS, with an offering. This will have effect on the business models, a business model describes how an organization manages incomes and costs through the structural arrangement of its activities (Johnson et al, 2010), for brick-and-mortar stores. The marketing aspects of the business models for retailers sending out commercial through newspapers, mailshots amongst other will shift and the companies will be able to handle commercial by itself or by a geo-fencing company. In Patel’s article he explains the success of trial runs on American Eagle retailers, where Placecast’s product ShopAlerts was used, and the trail study concluded that 79 % of the customers included in the test said that geo-fencing programs increased their likelihood to visit stores using the application and 65 % of the consumer made a purchase during the trail runs. It should be taken into mind that these results could be objectively presented, although they still show the raw potential that LBA, via geo-fencing technology, offers to businesses of all sizes and markets.

The potential of conducting LBA, via geo-fencing, is further explained by Chris Cameron in an article10 where he is quoted saying “Other interesting ideas for geo-fences include connecting mobile devices to house lights or air conditioning units to automatically activate them when users approach their homes. Friends could even be notified when they are within a certain distance of one another. The possibilities for geo-fencing applications are enormous with this new library from Location Labs.”

Mobile advertising and LBA in particular is currently in an early market stage, but the value of position and interactive communication is the grounding factors for the strong growth expectations on this medium. Smaato, a market leading company that provides mobile market reviews and statistical reports, have concluded that mobile advertising will eventually account for a significant part of many European companies budget for marketing communication11. Within the mobile advertising medium LBA is forecasted to play a pivotal role because of its ability to drive foot traffic inside brick and mortar stores. This is backed by the fact that 96 % off all transactions takes places in physical stores, providing great opportunities for LBA.12

1.4 Background The background for this thesis derives from the development that takes place in the world. The marketing aspects within the business models of today will be on the path of being obsolete dinosaurs when technology development takes steps towards a more integrated unit that we call mobile phone. Interest for this thesis subject derived from a discussion with Ulf Ivarsson whom is well educated with the LBA industry through Appello Systems AB. Ulf explained the black and white potential that lies within the LBA industry. The large companies current use of mobile marketing is very constrained. To exemplify further in 2008 Procter & Gamble spent six billion dollars on advertising, which is the largest known marketing budget in the world, and within this budget the part for mobile marketing by Procter & Gamble was ten million dollars. This means that mobile marketing was only 0.17% of the total marketing budget. 13 Also when reviewing the value-chain for mobile computing companies compared to the one of personal computing companies you can see that the ecosystem, an ecosystem is defined as an economic community supported by a foundation of interacting organizations and individuals— the organisms of the business world (Moore14 1993), for mobile technology will not be a

defined monopoly or duopoly like the value chain for personal computers. The mobile ecosystem will consist of a more competitive environment allowing many actors to produce chips, operating systems, hardware, third party content and free distribution in contrary to Microsoft and Intel from the personal computer eco-system.15

1.5 Purpose The purpose of this thesis is to provide insights to the mobile advertising medium and LBA in specific. Investigating how companies can use LBS to leverage their advertising efforts. The thesis will also look into the enhanced targeting capabilities with LBA and how the targeting & tracking will affect the current business models and LBS users from a privacy perspective.

1.6 Defined research questions For this thesis the defined research questions will be linked to how LBS will develop the existing business models for mobile marketing. The criterion for the design of the research questions is that they are derived from the theoretical framework, LBS, LBA, and can be disproved by empirical evidence.

In defining the research problems an examination of the current state of LBS and LBA and the positive aspects was conducted. According Peterson et.al (2009) more brands, agencies and enterprises are currently experimenting with LBS, in other words looking into the possibility of LBA, and that the feedback from these experiments are positive16.

The negative aspects that the research study will focus on is: Ø The mobile advertising and LBA lacks the sufficient funding to make it a viable competitor to traditional advertising mediums. Ø There are no clear definitions on which business model is best suited for LBA. Ø The risk for privacy intrusion with the tracking of end-users. Ø The possible spam affiliation when showing advertising offers inside LBS’s.

When researching a relatively unexplored area the formulation of the defined research questions will be broader (Lantz 2007). The defined research questions will investigate the wider aspects of the mobile advertising industry and are “how-based” enabling the conducting of open-ended qualitative interviews with key actors active in the mobile advertising ecosystem.

Research questions (RQ) RQ1 – How does ad-networks conduct LBA campaigns? RQ2 – How does industry actors define the market for mobile advertising and LBA? RQ3 – How will the business models evolve with the tracking & measurement possibilities that LBA will provide? RQ4 – How can LBA actors minimize the potential privacy intrusion and spam affiliation?

1.7 Delimitations The thesis will focus on investigating LBA from a mobile LBS and application perspective. For RQ2 and RQ3 the theoretical framework will mainly provide the required background knowledge to understand the empirical data, then the data is analyzed based on the different interviews. The amount of data presented in the empirical findings have been limited to provide the data that is best suited to answer the defined research questions.

2 LITERATURE REVIEW In order to create a theoretical framework, a literature review has been conducted. It is based on various articles and industry descriptions regarding mobile advertising, LBS and LBA.

2.1 Research question 1 How does industry actors conduct LBA campaigns?

2.1.1 Mobile marketing

Prerequisit theory for the model described in 2.1.2

Mobile advertising Advertising is any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor (Kotler 2008). Mobile advertising is a form of advertising that is communicated to the consumer via a mobile phone. This type of advertising is most commonly seen as a Mobile Web Banner (top of page), Mobile Web Poster (bottom of page banner), and full screen interstitial, which appear while a requested mobile web page is loading. Other forms of this type of advertising are SMS and MMS ads, mobile gaming ads, and mobile video ads (pre, mid- and post-roll).17

Mobile Marketing strategies Marketing strategy is the marketing logic by which the business unit hopes to achieve its marketing objectives (Kotler 2008). According to Peterson et.al 2009 mobile marketing includes two possible generic strategies: Push or Pull marketing.

Push: The push strategy depends on the sales force and trade promotions to push the product or service through channels. The producer promotes the product or service to channel members to induce them to promote it to end-users (Kotler 2008). In mobile marketing the push strategy delivers content automatically to costumers based on some sort of trigger. The trigger can be based on a mobile webpage, where a banner appears when surfing the webpage or by proximity alert with LBA when a coupon is sent to end-users. This strategy can be tempting for advertisers but there is one problem; the intrusion the promotion messages bring, it can be referred to as mobile spam, which is defined as untargeted or unrequested digital marketing communication (Krum 2010).

Pull: The pull strategy calls for high spending on advertising and consumer promotion to induce end-users to use the product or service. If successful the end-users will demand the product or service from channel members who will in turn demand it from the producers (Kotler 2008). In mobile marketing the pull strategy is based on the consumer searching for information or the consumer has given consent for relevant advertising reaching his mobile unit. For example, a consumer has downloaded an application that is based on your geographical position and gives aid for restaurants, malls and gas stations. Afterwards the application sends out coupons with offers from businesses within the designated proximity.

Opt-in strategy This method is based on the process where a subscriber provides explicit consent, after receiving notice from the mobile advertiser to give them permission to market their products and services to the individual (Mobile Marketing Association (MMA), which is an international group of mobile carriers, content providers, marketers and other actors who help establish the best practices in the industry). Opt-out strategy This method is based on the process where the consumer gets marketing regarding products and services without giving an explicit consent (MMA).

Mobile affiliate marketing This is a unique form of marketing based upon business-to-business (B2B) relations where other companies agree to help a specific company in selling its product or drive traffic to its web site, this is done in return for a portion of the profits from each sale they send to the affiliate company web site (Krum 2010).

Affiliate marketing follows this cycle:

A customer visits an aﬃliate website

The aﬃliate website directs the customer to the seller, where the actual transacon takes place

The seller compensates the aﬃliate with a poron of the proﬁt

Figure 3: Mobile affiliates marketing Source: Krum 2010 For affiliate marketing to work properly, in promoting mobile content, it is important to set up proper tracking algorithms to ensure that every affiliate partner gets credit for all the sales and traffic that it produces for a seller.

Delivery of promotional messages According to the MMA the following methods of delivery is currently in use on the mobile advertising medium:

Delivery Description Applications method SMS Short message service: text messaging Promotional messages, coupons, to mobile phones sweepstakes MMS Multi-media messaging service: Advertisements, coupons, promotions multimedia messages and graphics delivered to mobile phones Mobile Mobile web protocols for designing Banner ads; coupons, sponsored links Websites mobile web sites and landing on mobile search apps Mobile Installed software that resides locally Customized, brand-specific Applications on a device. Multiple application applications, in-application sponsored environments exist (e.g. Apple iOS, advertising; loyalty marketing;

Android, Symbian and Windows 7) coupons Steaming Multimedia/video content streamed Pre-roll advertising clips can be media to a phone inserted into video content

IVR Interactive voice response: software- Pre-recorded advertising can be driven technology which can be programmed and delivered during call programmed to receive voice or hold times; voice or keypad strokes keypad input and deliver automated can initiate delivery of content to the services to the end user phone (e.g., SMS w/ coupon)

Bluetooth An open wireless protocol for Marketing and advertising messages exchanging data over short distances. can be blast to all phones within range Flash messages to phones with their with Bluetooth enabled Bluetooth on

Table 1: Promotion delivery methods Source: Mobile Marketing Association This thesis will be focused on LBS and those applications usually supports in application coupon delivery. Coupon enabled applications have the purpose to help customers save money on purchases. People that download applications who support coupons and sign up with their services can receive coupons directly from the mobile application with possibility to conduct interactive actions on the coupons (Krum 2010).

Location-Based Advertising Peterson et.al (2009) define LBA as the combination of mobile marketing and advertising with location-based services (LBS), increasing the value proposition for both industry segments.18 This form of advertising needs geotargeting; geotargeting is defined by the IAB as displaying content based on automated or assumed knowledge of an end user’s position in the real world19.

According to the study conducted by Peterson Mobility, LBA will be groundbreaking since it offers a media channel with abilities to penetrate all the way into the personal space of consumers. The traditional advertisement was brought to consumers at their doorsteps in the form of newspaper- or direct marketing. Then broadcast advertisement provided a new universal way into the marketing mix, later Internet became the new frontier with enhanced targeting and measurement capabilities. Peterson et.al (2009) further gives notice that this evolution provided advertising closer to the consumer’s, which has been proven to capture more of consumer’s attention. The final leap is the biggest; transforming the mass advertising on Internet into a targeted effort aimed a single mobile user, via their mobile phones. 20 Illustrated by figure 4.

“Targeted marketing can reach one user, on one medium, at the right time and place, and provide instant feedback on the performance of the ad or marketing message. No other medium can offer these advantages” - Peterson et al (2009)

The penetration into the personal circle will further enhance the outcome of the conducted campaigns. According to Peterson et.al (2009) leveraging location with mobile advertising, hence enabling LBA, will provide the following benefits: Ø Context Capable of providing enhanced information about individual mobile users, such as transaction time, user profile, user behavior and particularly location. Ø Content localization By having knowledge about the mobile users location, advertisers can tailor the content according to the current location at all times. Dynamically tweaking the content in the quest of achieving the highest relevance. Ø Knowledge Integrating the location of mobile users with the advertising campaigns, either via API or proximity technology, will enable the delivery of advertising content triggered by a geographic boundary or the distance to a particular POI. Ø New revenue Through the delivery of targeted, localized content, SMBs will more effectively reach local consumers and hence generate more traffic that will in turn increase their conversion rate, and freeing up money for additional mobile advertising. Ultimately this results in increased revenues being funneled into the LBA market. Ø Higher conversion rates Mobile local search utilizing LBS provides higher conversion rates. Search with local intent on the mobile is generally executed to fulfill and immediate need, the user want information to aid in an immediate decision.

“If mobile location is correctly exploited, mobile devices will be more compelling for marketing and advertising than any other media channel.” - Peterson et al (2009)

Printed

Broadcast

Internet

Mobile Phone

Consumer

Figure 4: Media penetration into the consumer space Source: Location-Based Advertising, Peterson Mobility 2010

2.1.2 Krum model for advertising campaigns Krum (2010) provides a model where there are four key elements for actors in the mobile advertising medium to consider. Ensuring the creation of an effective mobile advertising campaign:

I. The creative around the advertising The first thing the users will view from a mobile advertising is its content, or the creative. This part should be created to encourage them to visit the advertisers mobile site, download an application or sign up for mobile alerts. This can be composed of: Ø Text feature Ø Display feature Ø Video Ø Animation The ultimate goal with the creative part is to get users to click on your advertising placement. On the mobile medium there is a limited amount of space for advertisers to convey their promotional message. Therefore it is important not to compose overly complicated graphics or post-click actions since it might make the advertising effort less effective. If advertisers are building banners it is important for the banner to focus on what the advertising offers and how to redeem it. If the creative around the advertising is unclear it could lower the Click-through- rates (CTR).

II. The landing page The second part is the landing page of the advertising. When the creative message is clear the next thing is to construct an effective landing page. The landing page should further promote the constructed ad and provide clear instructions on how it can be redeemed.

III. The targeting The third part is to make sure that the constructed ad is served to the appropriate customers. According to Krum (2010) the most important aspect to ensure the success of your mobile advertising campaign is to target the ads appropriately. This will ensure that the ads are clear, actionable and possible. Krum suggest the following targeting criterions:

Targeting Description methods Demographic Different ad-networks allow advertisers to segment based on demographic segmentation factors like age, gender and income level. This segmentation works based on the information that the ad-network has about the website, application, or game where the advertisement will be shown. Day parting Segmenting your advertisement by time of day can be a powerful targeting (Time) tool because some ads will be more effective at driving clicks and segmentation conversions at a specific time of day. In the CPM model it is particularly important to show ads when they are most relevant to the viewer, because it is based solemnly on exposure and not results Handset groups Your mobile offering, advertisement or landing page will be built to work segmentation on specific mobile phones. This is particularly important if you are working directly on a carrier deck, promoting a mobile game or application that have been designed for specific mobile platforms. Carrier groups There is also the possibility to segment your advertisement based on segmentation carriers. This will occur automatically if your running ads in association

with a specific carrier. But using this to target customer outside your current carrier network is a powerful tool to reach new customers. Location Some ad-networks also allow you to segment your ads based on the segmentation location of the receiver. This is done by specific areas or based on search results but there are ad-networks whom are capable of pinpointing your exact location, via an LBS where users have Opt-in for ad serving. Table 2: Targeting method Source: Mobile Marketing (Cindy Krum, 2010) IV. The evaluation of success The fourth and last part is to provide results for the advertisers that their advertising campaigns are successful. Ø If the campaign is based on brand awareness, hence exposure, the number of impressions and the CTR determine the success. Ø If the campaign is set to encourage customers to take action and make purchases the success will be evaluated by a ROI-measurement described in section 2.3.2.

Mastering each of these tasks will ensure the creation of a valuable campaign, and that actors are able to learn from their success and failures, in order to tweak the campaign to achieve maximum yield on the mobile advertising medium (Krum, 2010).

2.2 Research question 2 How does industry actors define the market for mobile advertising and LBA?

2.2.1 Drummond and Ensor market evaluation model When evaluating a market segment, as the market for LBA, Drummond et.al 2001 defines the need to analyze two major issues: I. The market attractiveness of the competing segments II. The organization’s comparative ability to address the needs of that segment Since this research question will only address the market segment and not a specific organizations ability to serve the LBA market but rather the conditions for the market as a whole, II. , will be excluded. According to Drummond et.al 2001 the following market factors, criterions, are used with advantage when analyzing the features and attractiveness of any market segments, the criterions is categorized beneath three broad groups: I. Market factors II. The nature of competition III. The wider environmental factors. When conducting the analysis it is pivotal to recognize that the different criterions used to evaluate the market attractiveness for LBA should be qualitative rather than quantitative in nature (Drummond et al 2001).

Evaluation model market factors Ø Segment size With greater segment size comes increased revenue potential by definition, the size itself will make it more attractive for customers and the possibility of enjoying economies of scale, deriving from the volumes involved. The downside arises from the possibility of larger capital requirements necessary to operate in the segment and that with higher potential comes higher competition.

Ø Segment rate of growth Market segments that are enjoying steady growth will be more attractive in contrast to segments where the growth has matured or started declining trend. Growth provides potential in the long run and hence warrants the investments needed so serve the market segment. The downside is the fact that market potential attracts competition.

Ø Segment profitability The total profitability within any segment will be pivotal; this requires an analysis over the profitability of all competing actors activities and not a single actor. Since different market segments needs to be evaluated and analyzed with consistency to certify that the correct segment will be chosen by organizations.

Ø Customer price sensitivity The segment consisting of consumers with low price sensitivity will provide the ability for competing actors to gain higher profit margins. In these segments the overall quality and service will be of higher importance than solemnly the price. Segments with higher price sensitivity will be subject to a higher price competition, providing lower profit margins.

Ø Stage of industry life cycle Market segments in the early stage of an industry’s life cycle offers the potential for high future growth with fewer competitors. The downside is that in the early stage of an industry the need for investments will be greater with usually limited sales revenue.

“If, however, the organization has the ability to deliver that innovatory approach it may make the segment a prime target as the company has the skills to change the nature of competition to their advantage.” - (Drummond et.al 2001).

In regards to the stage of industry life cycle, the model “adoption of technology innovation”, constructed by Everett Rogers describes the willingness or unwillingness of organizations to engage in new technologies. Some organization is more willing than other to try out a new technology and based upon their readiness, the model categorizes organizations in five different groups (Jobber 2007).

Figure 5: Technology adaption life cycle Source: Geoffrey A. Moore 2004 I. Innovators Consists of larger more profitable companies if the technology innovations is costly, and have more progressive, better-educated management. They usually have a good track record of successfully adopting new technology innovations in the past.

II. Early adopters Consists of companies that are not so venturesome as the innovators and need someone else to take the early risk. However they pick up new technology innovations quick once the innovators notice it. III. Early majority The early majority of companies are usually careful in adopting new innovations and generally wants to see the innovation prove itself before they are willing to engage in the innovation IV. Late majority The late majority of companies are even more careful with adopting new technology innovation and tend to be skeptical to new innovations. They are willing to look in to the technology innovations first after the majority of the market have tried it. Social pressure can convince them to adapt the new ways. V. Laggards The laggards are often tradition-bound companies and the technology innovation must be viewed as traditional for them to adapt.

Ø Pattern of demand The appeal for different market segments will be affected if the demand is affected, to a large extent, by cyclical or seasonal factors. Some segments will be affected by weather, seasons, and religious celebrations amongst others, in these cases that demand is affected. Seasonal or cyclical competing actors need to have the ability to resist the irregular cash flows over the operating year.

Ø Potential for substitution The market segment will be affected by the possibility of new emerging technologies and solutions that will facilitate the consumer’s needs. Posing a threat to the success of a segment, the potential for substitution needs to be evaluated. With a high possibility of substitution, segments will become less attractive for actors.

2.3 Research question 3 How will the business models evolve with the tracking & measurement possibilities that LBA will provide?

2.3.1 Mobile tracking possibilities

Location-based Services The mobile marketing association defines LBS as a range of services that are provided to mobile subscribers based on the geographical location of their handsets within their cellular network. Handsets have to be equipped with a position-location technology such as GPS to enable the geographical-trigger of service(s) being provided.21

Location-based proximity marketing technology Ad-networks working with LBA generally leverage one or more of the technologies defined below to reach customers at their current geographical position (Krum 2010).

Ø Bluetooth Bluetooth technology uses radio bands to transmit signals to Bluetooth-enabled devices, including mobile phones, handheld computers, and laptops (Krum 2010). This technology is useful for marketing because a Bluetooth server can be placed anywhere and blast out

promotional messages. The range is estimated to reach mobile phones that have their Bluetooth function enabled in a mathematical circle with a radius of 100 meters22, but as all signals it can be decreased if obstacles is in its way (i.e. concrete walls).

Bluetooth devices all have a specific number linked, this enables detection. When a Bluetooth- enabled mobile phone enters the range of a “server”, the “server” captures this unique number, which gives information about the specific mobile phone. Then the server contacts a database that provides the server with the right details on how to construct the promotional message for that specific mobile phone and then sends the promotional message.2324

Ø WiFi WiFi technology basically broadcasts and receives a short-range radio signal to provide Internet-access for Web-and Wifi-enabled devices (Krum 2010). WiFi enables the possibility to send out promotional messages in a particular radius much like the Bluetooth technology, to mobile phones with their WiFi-function enabled. There is also given a possibility with this technology to use passive advertising, such as naming your WiFi network to a promotional message or an encouraging text that is aimed to drive customers and revenue to a brick and mortar store.25

WiFi technology can also be used to provide a free Internet access with a condition that users must watch advertising before they can access the web or commercials pop-up with certain time periods when people are surfing a provided WiFi-internet access. 26

Ø Near Field Communication Near field communication (NFC) relies on high-frequency messages to be sent and received from two enabled devices, each sending its own signal (Krum 2010). NFC-enabled mobile phones can be waved over a poster or another form of offline marketing material to access or provide information to the reader placed on the poster. The technology of NFC is already used on metro-cards and other “smart” cards that you blip on readers.2728

Mobile marketers have adopted this technology by embedding NFC-chips into billboards and displays, the idea is to sweep the phone and get access to a promotional message or information regarding a specific brand or product. The drawback of NFC is the short range, reaching only one and a half inch, so the NFC-enabled mobile phone must be sweep very close to offline advertisement chip (i.e. billboard poster). 29

Ø Global Positioning System The Global Positioning System (GPS) is based on the U.S. NavStar fleet of approximately 34 satellites used for precision pinpointing of geographic positions located anywhere on the earth´s surface. The GPS used today was created out an intentionally degraded version of the military GPS data service that was made available for commercial use. This degraded version of GPS data is enhanced in a technique called differential GPS to increase its accuracy down to ten meters (Rutenbeck et.al. 2006). This enabled the public GPS to be used for turn-by-turn navigation for mobile units and tracking of property like cars. Public GPS receivers can access signals from three satellites, the information received is use to calculate the user’s three- dimensional position and time. More advanced GPS receivers to a higher price can pick up signals from up to four or five satellites enabling even more accurate pinpointing capabilities.30

2.3.2 Mobile advertising measurement The following models of measurement are in affect within mobile marketing (Krum 2010). They form foundations for the business models described in 2.3.3.

Ø Impression Instances when a mobile advertisement is viewed online. The quantity of impressions can be used to measure the success of advertising campaigns. It is important to bear in mind that impressions are not a measure of advertising-engagement but a measure of exposure (Krum 2010).

Ø Click This measures the number of actual clicks on an advertisement. This measure ad-engagement and not ad-exposure as Impressions do (Interactive advertising bureau (IAB)).

Ø Reach This measures the percentage of people, in a defined target market, who can be exposed to an ad campaign during a specified time (Kotler 2007).

Ø CTR: Click-through-rate This measure unfolds as a percentage, based on how many advertisement viewers, e.g. viewers of an ad-banner, which clicks on or takes further action of sort. If 100 people view your advertisement and 1 takes further action the advertisement CTR is 1 % (Interactive advertising agency).

Ø ROI: Return on investment This is a measurement that incorporates all the costs associated with running the advertising campaign, including agency management fees, design fees, and the cost of the time the staff has spent managing the campaign. ROI is the success metric for mobile advertising because it allows advertisers to show that, for each Euro they spend on advertising, they are making more than a euro back in value or return (Krum 2010).

Therefore ROI is defined as a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.31

(!"#$ !"#$ !"#$%&'$"& − !"#$ !" !"#$%&'$"&) !"# = !"#$ !" !"#$%&'$"&

Ø ARPU: Average-revenue-per-user This measures the revenue per user. The ARPU aids companies when they are analyzing their revenue stream and locating which services are high or low revenue creators. (Krum 2010)

2.3.3 Business models A business model refers to the specific modes in which a business model enables revenue generation (Hitt et.al 2002). The business models in effect today are based on those of online advertising. 32 Therefore the following models are currently tweaked and adapted from the online advertising medium. The function of these models is to determine through calculation

the price for mobile advertising campaigns conducted (Krum 2010). The study have excluded some models that have lesser relevance for the research and chosen the following:

Ø CPM: Cost-per-thousand Within this model, the cost is represented by the amount that is charged for an ad-network to show your advertisement 1000 times (Krum 2010).

Ø CPC: Cost-per-click (equal to Pay-per-click PPC) Within this model, the cost derives from a customer/visitor clicking on your ad and hence the providing ad-network charges you for each clicking visitor. CPC-rates vary from 3 USD to 0,05 USD per click. The cost varies depending on your product and the competition on the designated market (Krum 2010).

Ø CPA: Cost-per-action Within this model, the cost comes from visitor/consumer action. The action could be for example a visitor clicks on your banner and is rerouted to your website and ends up filling up a enquiry or the consumer purchase a product (Krum 2010).

Applications of the business models Nokia intelligence provides the general characteristics for the different business models and which ad-network that are advocate for the respective business model:

2.3.4 Industry application of business models

Figure 6: Ad-networks and associated characteristics Source: Nokia intelligence

The Interactive advertisement bureau defines a mobile advertising-network (ad-network) as an aggregator or broker of advertising inventory for a multitude of web sites. Ad-networks are the sales representatives for the web sites within the network. 33 Advertisers seeking to get their advertising into a selective or exclusive channels use ad-networks for their competencies and contacts. Figure 4 illustrates the general characteristics of different ad-networks.

Ø Blind advertising networks These are generally the greatest in quantity of advertisers, publishers and impressions. Blind ad-networks perform high volumes of advertising to a large base of mobile publishers, mostly independent, and supplemented by premium publisher’s unfilled advertising space. Blind ad- networks offer different options for targeting; Geographical (country, city) and Content channels (sports, financials, news) but they usually deny advertisers the possibility to choose from specific sites.34

Within blind ad-networks, performance advertising is the model used; advertisers are usually charged by a CPC-model or CPA-model. These networks are suited for marketers who are seeking an active response in form of click to action. Some blind ad-networks offer brand advertising, on a CPM-model, which is ideal for marketers seeking exposure or brand awareness. 35

Ø Premium blind advertising networks These are generally medium sized and have higher quantity of premium publishers (consisting of big-traffic mobile sites of well-known brands such as newspapers, broadcasters or carrier portals) and they often have some of the premium publishers on exclusive relationships. Premium blind ad-networks attract higher shares of brand advertising, based on CPM-models. Advertising conducted on these ad-networks will still be blind or semi blind, meaning that advertisers are given a chance to target a specific channel, but advertisers can be given possibility to choose a specific spot a preferred site for a premium charge.

Performance advertising is also available through premium blind ad-networks. Advertisers will be given a mix of self-service, support, direct sales and plenty of targeting options. 36

Ø Premium advertising networks These are focused on limited exclusive publishers (consisting of mobile operators, big-name destinations) where the ad-network works as an extension of the publishers direct sales unit. The price model offered is CPM-based since the majority of campaigns on these networks are brand advertisement. Premium advertising networks appeals to advertisers from big brands that are willing to pay premium prices to secure prime locations on the most visited mobile destinations. Price deals for 1000 impressions on premium ad-networks are often negotiated on case-by-case basis. 37

2.4 Research question 4 How can LBA actors minimize the potential privacy intrusion and spam affiliation?

2.4.1 Permission, privacy and spam affiliation “Consumer protection, especially issues of privacy, have gained greater visibility in recent days, arising from the discovery that Apple and Google both collect and use location data from their users” (Caruso et. al 201138). To ensure the success of mobile advertising customers has to

acknowledge that the marketing efforts provides them with true utility, accompanied with the notion that their privacy is not being invaded by the advertisers.

“In order for the industry to grow and progress, consumer and industry protection must be a priority” (Caruso et. al 2011). From this the term permission marketing has arisen; it specifies consumer’s ability and right to ignore non opt-in marketing efforts and instead reaps attention from conducting marketing that treats consumers with respect (Caruso et. al 2011). The increasing attention for permission marketing provides value to the mobile marketer since: I. Ensures that marketing efforts are targeted at the right audience II. With the evolution of mobile internet, the cost of delivering promotional messages to the mobile audience is very cost-effective

Hence consumer attention is very valuable and should be developed with respect. Therefore when marketers combine opt-in permission marketing with consumer profiling (targeting) the creation of a comfortable and trusted mobile advertising eco-system will arise. In this ecosystem the consumers give consent to receive valuable information, offers and promotions that are tailored to their lifestyle which in the end leads to above average engagement rates (Caruso et. al 2011).

The MMA has developed three general guidelines in their code of conduct that is the background for the 6C model in section 2.3.6, which are:

Ø Permission According to the MMA the key to establishing a effective advertising partnership with consumers is to acquire the consent of every end-user. Studies conducted by the MMA have proven the effectiveness of having a set of highly engaged participants, in regards of response rates. “Standard online advertising, which does not include a permission component, has a far lower response rate, compared to permission-based marketing, which has an audience that is ready and engaged.” – (Caruso et. al 2011).

Ø Privacy The public awareness of privacy issues has risen in recent times with the evolution of the modern mobile units. Consumers will be reassured when marketers allow them to decide if and when to receive advertising efforts, with an opt-in on top of that consumers can be protected from privacy intrusions (Caruso et. al 2011).

Ø Measurement Since mobile marketers need an opt-in (or consent) from customers, this is usually bundled with an agreement about what information the marketers are allowed to gather. The measurement is key for targeting advertising campaigns, provides measurement capabilities to evaluate the success of campaigns and provides useful information about specific customers. This information can be synthesized into more relevant and accurate advertising offers targeted to specific customers (Caruso et. al 2011).

2.4.2 MMA model to ensure user privacy and advertising relevance To ensure that mobile marketing stays within the privacy limits and avoids spam affiliation the MMA in association with Out There Media have created the 6C’s of mobile marketing from their code of conduct. These six guidelines have been worked out to give way for permission

marketing in the mobile medium, which ultimately helps the customer’s mobile experience 39:

Ø Choice The consumer must "opt-in" to a mobile marketing program. Consumers have a right to privacy and marketers must therefore gain approval from consumers before content is sent, and include clear directions on how to unsubscribe from communication should it become unwanted. This ensures consumer pull rather than consumer push.

Ø Control Consumers should have control of when and how they receive marketing messaging on the mobile phone and must be allowed to easily terminate or "opt-out" of an unwanted program.

Ø Customization Any data supplied by the consumer must be used to personalize content (eg: restricting communications to those categories specifically requested by the consumer), making content as relevant and useful to the consumer as possible.

Ø Consideration The consumer must receive or be offered something of perceived value in return for receiving the communication (product and service enhancements, requested information, entry into competitions, discounts etc.)

Ø Constraint The marketer must effectively manage and limit mobile messaging programs to a reasonable number of programs.

Ø Confidentiality Marketers should commit to refrain from sharing consumer information with non-affiliated third parties.

Through the permission seeking mobile advertisers can protect consumers privacy, enable more precise and consistent measurement as well better targeting. According to Rohit Dadwal (2011) permission marketing is the defined way onwards for mobile marketing; working with the consent of customers enables the ability to reshape advertising material into valuable content.

“It offers the holy grail of marketing: a 360% reach across the vast number of mobile users, combined with one-to-one marketing to ready audience. In combination with traditional marketing channels (which can point users to the opt-in mechanism), permission marketing looks to be a powerful tool, and one that can provide the impetus for new levels of industry maturity.” -(Caruso et.al 2011).

3 METHODS OF INVESTIGATION The methodology chapter describes how the study has been carried out and what tools were used. Theoretical data were first collected by means of a literature review then empirical data followed in association with industry.

3.1 Introduction After the decision was made to write a bachelor thesis I initiated a process of productive thinking in association with various contacts in industry. This led to a couple of interesting topics to research. Early in the process my choice landed on the decision to research a topic within the area of industrial marketing. After a dialogue with Ulf Ivarsson from Appello Systems AB and my program coordinator at Luleå University of technology I choose mobile marketing and advertising as the backbone with my interest going into the advertising market within LBS. This was reasonable since data was accessible, although scarce in printed literature but there were a sufficient base of online articles regarding my chosen subject. The articles and literature enabled a theoretical platform. Appello Systems AB provided with an introduction to necessary industry contacts for my empirical research.

This research project has been time consuming, from the start until the end, the reading of articles, literature, models and searching for information has led me to several dead ends and studying lots of material that is not included in this report. The material that has been excluded from the report has provided me with a better understanding of the industry and hence dead ends provide possibilities. This has helped me to provide results for the study, which is the aim of a research study (Denscombe 2010).

The research was conducted during the last part of the spring semester, from 2011-03-27 to 2011-05-27, and then there was a break for an exchange semester at the Nanyang Business School in Singapore before finalizing the thesis spring 2012. The project is set to cover 15 HP, in the Swedish system, and this requires 40 hours of active study per week. I have exceeded this with a lot of time going into scanning the Internet for relevant information, setting up connections with key people in different companies and processing the raw material from my interviews. But the study has provided me with an understanding of the LBA industry in its whole so I consider all the time wisely spent.

3.2 Research purpose According to Diane Kelly (2009) there exist three ways of defining the purpose of a research study to clarify how it will be conducted. The study can be of the exploratory, descriptive or explanatory purpose: Ø Exploratory studies are generally conducted when there is little knowledge regarding a particular phenomenon. Exploratory studies often leverage a variety of research methods with the goal of learning more about a specific subject and is usually less structured than descriptive or explanatory studies. The results from exploratory often form the foundation for descriptive or exploratory studies and the research questions are normally broad and open-ended (Diane Kelly 2009). Ø Descriptive studies are generally focused on documenting and describing a specific phenomenon. The main purpose of descriptive studies is to provide benchmark description over the chosen subject (Kelly 2009). Descriptive studies can also be used to provide information for further studies on a specific subject.

Ø Explanatory studies investigate the connection between multiple variables with the final goal of providing an explanation over the correlations. An explanatory study is conducted in a more structured way, is more focused than the previous two methods and involves hypothesis analysis (Kelly 2009).

This thesis will be of the exploratory purpose to investigate the market for mobile advertising and LBA in general to provide insights to the defined research questions.

3.3 Research approach For this research study to be started I had to define the formal research approach. According to Saunders et.al (2009) there are two ways of conducting research studies in association with industry, deductively or inductively: Ø The deductive approach implies that the research study starts with the creation of a theoretical framework from already existing theories. Once this is done the research for empirical findings can start (Saunders et.al. 2009). Ø The inductive approach starts out with researching for empirical findings from the start and thereafter investigate which themes or issues to follow up. This approach is concentrate on identifying and defining correlations between the collected data and work out hypotheses or propositions. Therefore theory emerges from the empirical findings (Saunders et.al. 2009). I choose to conduct a deductive approach, so I started to build up a theoretical framework but during this I realized that some theory was missing or not practically defined. Therefore I constructed a theoretical framework from the start before conducting the empirical research, although during the research I added theories and revised the theoretical framework. With this in mind a conducted a combined approach, with most emphasis on the deductive approach.

3.4 Research strategy The strategy for my research is affected by the choice to write my thesis in association with industry instead to focus on one company. This enabled me to get in contact with several key players in the mobile advertising ecosystem and to perform qualitative interviews to extract their extensive knowledge of the practical aspects of the market. Therefore Denscombe (2010) suggest that qualitative interviews, with open-ended questions, should be conducted to acquire the best possible data for this research study.

3.5 Research literature review The search for literature started when the topic was defined and was ongoing throughout the thesis. The literature review was wide from the beginning and after contact with Ulf Ivarsson at Appello Systems AB I narrowed it down to specialize on LBS, LBA and the mobile advertising ecosystem.

My sources and the chosen literature will be reviewed with criticism to exclude aspects not directly related to the defined research questions.

My research database consisted of: LUCIA, e-books on LTU and LIBRIS, which forms the literature base for the university. I used Gothenburg University library for literature when I worked from Gothenburg. For articles I used Academic Search Elite, Business Source Elite, CINAHL, which are the university provided article search engines. I also used Google books and Google Scholar as external sources of literature.

Ø Key phrases: Location-Based Services, Location-based advertising, Mobile marketing, Mobile Advertising, Mobile Revenue Models, Mobile Business Models

3.6 Research data collection Research data for a social research project can be collected in four different ways; questionnaires, interviews, observation and documents according to Denscombe (2010). This thesis will be based on literature, articles, public research and gathered empirical data from the conducted interviews and e-mail correspondence. I have chosen to form the base of the empirical research on interviews because when the research project is set to explore more complex and subtle phenomena this is the recommended approach (Denscombe 2010).

The interviews will be one-to-one based. Denscombe (2010) suggests this with the following four advantages: I. It is easier to arrange since it only has to rely on two persons diaries. II. The opinions and views expressed throughout the interview stem from one source only and this simplifies the process to locate valuable data. III. The one-to-one interview is relatively easy to control. IV. Transcribing and dictating the interview tape is far easier when the audio only originates from one person at a time.

The interviews will aim to acquire privileged information, based on the value of contact with key players in the field who can provide information that others could not (Denscombe 2010). This will be done through semi-structured interviews; the answers are open-ended. This interview structure is flexible to allow the interviewee to elaborate around points of interest from their personal knowledge, which is supported by Denscombe (2010).

3.6.1 Quantitative or Qualitative data collection According to Denscombe (2010) there exist two common methods of collecting data for a social research study. There is the quantitative method and qualitative method: Ø The quantitative method takes the form of numbers and involves a large number of sources or people surveyed (Denscombe 2010). This method is usually associated with research strategies such as surveys and experiments. With research methods such as questionnaires and observation. Quantifiable data can be used effectively without the need of complex statistical analysis to present reliable results (Gorard 2006). Ø The qualitative method engages the researcher into the chosen field of investigation and it usually provides a narrower scope with a greater insight. According to Denscombe (2010) the qualitative method suits in depth studies because of its exploratory nature, enabling the opportunity to specialize in areas that have proved relevant to the study. Qualitative data takes the form of words (spoken or written) and visual images (observed or creatively produced). This method is usually associated with research strategies such as case studies, grounded theory, and phenomenology. With research methods such as interviews, documents and observations. Data acquired by open-ended questions as part of interviews can produce answers in text form that can be treated as qualitative data (Denscombe 2010).

With this in mind I have chosen to conduct a qualitative data collection for my research study since it suits my methods of researching. This method will provide a deeper insight and more

relevant about the mobile advertising medium. With the possibility to tweak interviews to acquire as much useful information about LBA as possible.

3.7 Research sample selection The research work on this thesis involved three physical interviews with key people in three companies active in the mobile advertising medium. Further on I also conducted a research correspondence via e-mail to get in contact with people where my budget and time space did not allow a physical interview. The physical interviews provided more data to be processed but the e-mail correspondence provided some valuable insights to complement the interview data. Two interviews were conducted in Sweden, one in Lund and one in Gothenburg. The third interview was conducted in Germany, in Frankfurt.

3.7.1 Thesis participants To provide a brief description of the various contacts in this thesis, the table below will provide short details on their involvement and which research questions they contributed to:

Contacts Description Ulf Ivarsson Acted as an initial mentor and soundboard during the research period. In his role as COB at Appello Systems AB, until 2011-06-30, he was the first contact within the LBA industry and through his network I established the other industry contacts Tae-Won Song Was involved in the physical interviews, TW provided empirical data for all the research questions Martin Svensson Was involved in the physical interviews, Martin provided empirical data on research question 2 and 4 Peter Tyreholt Was involved in the physical interviews, Peter provided empirical data on research question 2, 3 and 4 James Winter Was involved in the e-mail correspondence and provided empirical data on research question 2, 3 and 4 Fran Smith Was involved in the e-mail correspondence and provided empirical data on research question 2 and 4 Jeff Mize Provided the contacts within the NAVTEQ group Daniel Nordberg Provided information and contacts to HTC Corporation and Sony Ericsson AB Table 3: Research participants

3.7.2 Interview at Sony Ericsson Conducted 2011-04-13 at Sony Ericsson Glasgow Office, Nya Vattentornet 221 83 LUND

The company Sony Ericsson was formed by the joint venture of consumer electronics company Sony Corporation and the Swedish telecom company telefonaktiebolaget LM Ericsson in October 2001.40 Ericsson and Sony owns equal parts of the company41

Sony Ericsson’s mission statement is as quoted from their homepage: “Our vision is to become THE communication entertainment brand. We inspire people to do more than just communicate. We enable everyone to create and participate in entertainment experiences. Experiences that blur the lines between communication and entertainment.”42

The company sold 43,1 million mobile units in 2010 and the total sales landed on 6294 million Euros. Sony Ericsson’s operating income for the fiscal year was 159 million Euros.43 Sony Ericsson’s currently has got 7600 employees’ worldwide.44

Contact person The contact person is a senior associate at Sony Ericsson’s Media Services & Marketplace. He has years of experience with ad-sales within Sony Ericsson’s associated media services. Based in Lund he and his team are responsible to create revenue for the Sony Ericsson Corporation through ad-sales and to establish a business relationship with mobile advertising sales houses globally.

He has chosen to be referred to by a pseudonym of Martin Svensson in this report to remain anonymous since this bachelor thesis is set to appear on the Internet and might reflect his personal opinions in the future.

3.7.3 Interview at NAVTEQ Conducted 2011-05-12 at NAVTEQ’s office on Düsseldorfer Str. 40, Eschborn in Frankfurt, Germany.

The company The NAVTEQ group was founded in 1985 in Silicon Valley, California. NAVTEQ focused early on capturing the reality of the road network to enable dynamic turn-by-turn routing. The company began by collecting accurate data for large metropolitan city areas. NAVTEQ got initial funding from an investment by Philips Electronics and started a strategic expansion strategy, launching its first European office in 1991 and launched in Japan by 1996. The NAVTEQ group went public in 2004 and was acquired by Nokia in 2008 for the sum of 5700 million euros. The NAVTEQ group operates as a wholly-owned subsidiary of Nokia Corporation, NAVTEQ had total sales of 1002 million euros the fiscal year and operating profit of -225 million euros. 45 The NAVTEQ group is currently headquartered in Chicago, Illinois and has 5452 employees’ worldwide working in 212 offices in 48 countries.46 47

My research was conducted in association with the NAVTEQ Media Solutions (NMS). Their mission is to provide customers with

world-class traffic content and relevant, innovative advertising solutions. NMS key features are as follows: Ø NMS provides multi-platform Integrated Ad Solutions on television, radio, Internet, mobile, and on navigation devices to reach your customers several times throughout the day. Ø NMS are a world leader in Location Based Advertising technology, which allows you to send your message to selected customers, based on their location and time of day through either their mobile device or in-vehicle navigation unit. Ø NMS also deliver real-time, cutting-edge Traffic Content to radio stations, TV stations, Internet sites, and mobile sites via our affiliate relationships.48

Contact persons I. The contact for the physical interview in Frankfurt at NMS is Tae-Won Song (TW), Director of Ad Strategy and Business Development. II. The second contact with the e-mail correspondence is James Winter, Key account executive and head of advertising affiliation for EMEA (Europe, Middle East and Africa), NAVTEQ Helsinki Office. III. The third contact with whom e-mail correspondence was conducted is Fran Smith, Director Global Planning and Ad Operations, NAVTEQ Philadelphia Office

3.7.4 Interview at Appello systems AB Conducted 2011-05-16 at Appello Systems AB headquarters, Kungsgatan 19, 411 19 GOTHENBURG

The company Was founded in 2003 in Gothenburg, Sweden. Their primary product was launched in 2004, the Wisepilot navigation software for mobile phones. This application enables turn-by-turn navigation, maps, position based search and sharing location via social networks. Wisepilot got the award “2009 European Mobile Phone Based Navigation Market Leadership Award” from Frost & Sullivan. The advertising model inside Wisepilot is provided by NMS.

Contact person The contact person at Appello is Peter Tyreholt whom is in charge of product management for Appello Systems AB globally and he is headquartered in Gothenburg, Sweden.

3.8 Research data analysis The gathered data will be analyzed both from the empirical data and the theoretical framework. When the empirical data was gathered, the data was processed and compiled to form the results of the research. Afterwards the empirical data was analyzed against the theoretical framework for RQ1 and RQ4. The analysis for RQ2 and RQ3 is based upon the different views and thoughts of the interviewees.

3.9 Research accuracy For the conducted research study to provide accurate results it is imperative to reflect upon the credibility (validity) and reliability actively during the duration of the study. According to Denscombe (2010) credibility refers to the accuracy of the presented data, to certify that the collected data is appropriate and correct in accordance to the defined research questions. Therefore I have continuously spent time on reviewing the collected data and analyzing the raw data from the interviews to only include relevant data. To further assure the credibility I have had an ongoing dialogue with my mentors. Reliability of the collected data indicates that the research is conducted in a natural environment, not affected by external events, and for the data to be consistent. The main objective of assuring that the research study is reliable is if someone else would conduct the same study they would achieve the same results (Denscombe 2010). To accomplish the highest possible reliability I have been critically chosen the sources for my theoretical framework, this assures that they are from serious web sites, publishers or research companies.

To further enhance the reliability and validity of the research study, all the interviews were taped on a computer and later dictated down on a document to assure the accuracy of the collected data. The raw-data were then sent to each interviewee for approval before I started to process the material into the actual report.

4 EMPIRICAL FINDINGS The empirical chapter presents the data that emerged from the conducted research study.

4.1 Research question 1 How does ad-networks conduct LBA campaigns?

4.1.1 Introduction to mobile advertising and LBA According to TW the mobile advertising market derives from the online advertising market. When referring to mobile advertising it is conducted on mobile phones while online advertising is conducted on a PC. Although TW explains that this however has become somewhat confusing lately since mobile phones are capable of using the fixed lines and Wi-Fi networks. The introduction of the iPad tablets, which supports SIM-card and 3G, has further merged online and mobile advertising. Although the general public is confined with mobile advertising being the advertising efforts conducted on a mobile device with call services.

TW illustrates his view on the evolution and current state of mobile, described above, in figure 7 below:

A Text D

Online Advertising Mobile Advertising Display U N I Rich Media Research Search T S Search

Location is the key differentiator LBA

Retailers & Brands SMBs

Figure 7: Mobile advertising and LBA overview Source: Tae-Won Song, NAVTEQ

TW explains that mobile advertising started out with copying the online advertising but provided much smaller screens. What weights up the smaller screens is that the end-user is constantly on the move and using their mobile phones to interact with advertising. This is where the focus will be with LBA, end-users searching for information on the move, according to TW. On the PC users are doing research but on the mobile phone users achieve true search, because they are expecting instant response and results based on your searched keywords and position. The big separation between online advertising and mobile advertising is the targeting capabilities, on the PC advertisers know users position via IP-protocol but when their computer goes offline there is no possibility for further tracking. With the mobile phone advertisers are capable of leveraging position technologies like Cell-ID and GPS to track users

from promotional delivery to the redeeming at brick and mortar stores. This is why TW is certain that location will be the key differentiator between online and mobile search.

“When the mobile medium evolved, mobile advertisers offered targeting by operators, network, devices and some demographics. Therefore enhanced targeting over the PC became the criteria for advertisers to engage with mobile advertising instead of online advertising.”-TW

TW describes that the mobile advertising medium is smaller in reach (only capable phones with opt-in permission) but provides a lot more targeting capabilities. This was how mobile advertising started to grow; actors like AdMob grew on the targeting capabilities, with text and some display, but really with the value proposition of targeting audiences.

He explains that Google owns search on the online medium but they own it even more on the mobile search industry, their market share of mobile search is above 90 %. Google have previously expressed that they will not do anything different on mobile search from the online search business. They use the online search algorithm and adapted it into mobile search. TW explains that they have not monetized mobile search until now, first they created the reach and now they start to monetize on the same way as online via Ad-Serve (where advertisers can buy ads via bidding systems). Then Google added Google maps into their mobile search to engage with LBA. They embedded Google maps because with it Google has one of the largest Point-Of- Interest (POI)-databases. This will assure that you find something when you are conducting a local search. TW explains that the difference between NAVTEQ and Google is the quality of the maps and therefore the navigation within LBS, Google does not target the market of in-dash navigation and therefore their navigation does not have to be as accurate as NAVTEQs. The key differentiator is that NAVTEQ started out with B2B relationships with the car industry. In that industry mapping actors have to provide very accurate information.

“The worst user experience is if you trust your turn-by-turn navigation to reach a destination and you end up at the wrong place.” -TW

He describes that some actors have taken the standpoint that LBA is just another targeting parameter, when in contact with big players they say that they can provide a range of targeting parameters and location is one of those for advertisers to pick. This is an approach that many big players are currently taking. TW explains that NMS are taking a different approach; they want to break out of text, display and rich media ad units. They have taken this standpoint because there is immense competition with big players like yahoo, Google and Apple investing sums from 280-750 millions dollars. Investments of that size are needed to be successful in the text, display and rich media market.

TW on how NMS model works for their LBA campaigns TW explains that NMS splits the LBA-market in two different customer segments because they branch out in the way NMS approaches them and the products they offer to the respective segment. The major difference is the way they buy advertising.

Segments Description Retailers and Retailers are the likes of IKEA, Wal-Mart, BestBuy, Tesco and brands Sainsbury. These are the big actors in the industry and they conduct advertising the traditional way via media agencies which are multi channeled and they spend a lot on TV, Online, direct mating in a combination to try and drive traffic into your store but also a way to create brand awareness and get exposure. Retailers have an internal media agency that goes through large external media agencies where they position a large media budget based on cycles to avoid over exposure. The retailers have sophisticated targeting methods thanks to larger budgets. Small and medium These can be smaller lunch chains, coffee chains and family driven sized businesses stores that is focused around a particular city. The SMBs do not care (SMBs) about brand awareness or conducting exposure campaigns their primary focus is to drive foot traffic to their stores. The SMBs conducts advertising in newspapers, yellow pages. Rarely online advertising because of the difficulties in segmenting to a small geographic location. Their typical customers lives in the proximity unless the store can offer some sort of specialty that cannot be find anywhere else. The SMBs are under a lot of pressure today from large retailers who can offer the same products to a lower price and are usually located outside the city but still on a local basis and these enterprises are drawing customers outside the city centers. Table 4: LBA segmentation Source: Tae-Won Song, NAVTEQ According to TW the SMBs are suffering from the price pressure of the retailers and explain that this is the access point were LBA comes in to play. NMS visits SMBs and explains the lack of ROI-measurement from traditional advertising methods and they describe the targeting capabilities available with NMSs LBA.

“One interesting statistical fact is that large retailers spend about 50 % of all advertising on local media; you could think that they would advertise on national media, big newspapers for example. This causes trouble for the SMBs and we confront them and explain that we can offer advertising with excellent targeting capabilities and with the possibility to measure the results of the campaigns which they have shown great interest in.” –TW 4.1.2 TW on the NMS strategy with LBA He explains that NMS always try to take an approach where their goal is to solve specific problems that specific companies have with promoting their product and reaching their desired customers. Here NMS differs from media agencies since they only want to sell their advertising whereas NMS goal is to build up a strategy in association with the company that hires them. TW describes that NMS usually have lengthy sessions with advertising customers trying to understand their business model, distribution channels, promotional activities, what products they would like to sell more of and how their promotional activities are currently conducted. When NMS have a good idea about that information, they go back to them and from every point they provided NMS will try to find a solution on how LBA can help them. Therefore NMS approach is very consultancy.

TW describes that the general objectives that provide added value for LBA is: I. Reaching the customers when they are on the move II. Targeting the most profitable target audience, smart phone users III. Providing a very dynamic and flexible way of selling goods and services to an audience. Providing different post-click-actions

NMS can charge higher prices because they can prove to advertisers that specific campaigns works. Providing real time data and statistics on quantity of clicks and then measure the post- click action leading to the point-of-purchase. This is a lot more valuable to advertisers than just saying that they get premium audience according to TW. Therefore the LBA conducted by NMS yields a higher ROI for advertisers and they can prove this via statistics.

Strategy towards SMBs NMS cut out all the middlemen and there is no agency involved when they run advertising campaigns with SMBs. They conduct this through self-serve tools where the SMBs will provide their budget for the desired period. Then they provide their own texts, images and coupons and select target features, by a mathematical figure for example and then they define the time period to avoid overkill exposure. Then NMS ad-serving platform will take care of the rest and run the campaign. During the different advertising campaigns NMS will provide real-time statistics over the campaigns so that the SMBs can track the outcome from day to day.

Strategy towards Retailers and brands He explains that the larger retailers will not engage with self-serve advertising since they spend the amount of money to cover those aspects. They contact NMS via their internal- or external media agencies, these agencies then get the technology described to them and they are in general more strict and require the ability to check all their campaigns 24/7 via a self service that NMS provide. The advertising agencies representing the retailers & brands are more interested than the SMBs to provide hassle free results via a closed loop (tracking from redeeming until purchase). They require integration to their POS systems, where they provide NMS with their API (Application programming interface) to enable the required programming. The most used technology is BAR code scanning to date, where users scan their display that enables the scanner to get the electronic content of a coupon. But the NFC technology opens up for integrated redeeming and payment via a mobile payment execution. TW withholds that the closed loop is only required by the largest retail chains in practice the majority of merchants is satisfied with a check-in because that would prove that the advertising campaigns is driving foot-traffic into their stores.

TW illustrates the relationship between the retailers & brands and the SMBs in figure 8. The retailers & brands are the head; this is where the large marketing budgets exist and best revenue possibilities for NMS. The SMBs are the tail providing additional revenue, but the SMB segment shows increasing potential.

Retailers & brands = Head SMBs = Long tail

Head

Figure 8: Revenue distribution between retailers and SMBs Source: Tae-Won Song, NAVTEQ

4.1.3 TW on the value chain for LBA He defines the general value chain for LBA as the following (illustrated by figure 9): Ø First in the value chain are advertisers who position a media budget and contacts a media agency. o The budget is still at 100 % Ø Second are the media agencies that get a budget from the advertisers and spread it over various advertising mediums. o The media agencies usually take 15 % of the budget in commission from the advertisers. Ø Third are the ad-networks who get a part of the media agencies budget to conduct LBA. Within the ad-networks or in association with them are ad-serving publishers o The ad-serving publishers take up to 60-70 % of the budget o The ad-networks then get 15-25 % of the budget. Ø The fourth stage is the customer receiving the promotional messages.

TW explains that the value chain shows similarity to the value chain of mobile advertising with the exception that LBA is more focused on advertisers from companies running brick and mortar establishments.

Media Ad- Advertisers Agencies Networks Consumer 100 % 85 % 15-25 %

Ad-Serving Publishers 60-70 % Figure 9: LBA Value-chain Source: Tae-Won Song, NAVTEQ

Advertisers side The primary goal from advertisers with LBA is to drive foot traffic inside their stores to create revenue. He describes that the US commerce revenue is up to 4 trillion USD a year, but statistics have showed advertisers that only 5 % of that commerce revenue derives from online buying. Therefore 95 % is sold in physical stores and this proves that the market for LBA is interesting for both big retailers but also SMBs. NMS role here is to help advertisers from brick- and-mortar stores to drive foot traffic to their storefronts. According to TW the large retailers have the intelligence and financial power to drive people to their stores and NMS serves this segment because they have the largest advertising budgets. The large retailers wants NMS to make their existing promotional messages digitalized and enhance the targeting to increase their overall advertising efforts. With the large retailers it is an efficiency and effectiveness game, they have to provide live feed statistical reports over the campaigns. With the SMBs it is a whole different playground. NMS are basically providing them with an opportunity and incentive to endure the pressure from large retail chains.

Agencies The agencies have a hard time understanding LBA according to TW. They have started to understand what the mobile advertising medium is but this was a long process for them that took years. He explains that they understand online and the traditional channels and focused their efforts there. The mobile medium struggled at the start. Now the agencies have acquired sufficient knowledge of the mobile medium. When NMS provides them with LBA they are overwhelmed. The technicalities and all the aspects one have to consider, the agencies do not understand how to engage with this medium in the right way. He describes that because of their lack in knowledge, the majority of the LBA campaigns are booked directly with retailers and brands.

“This is how mobile advertising started as well until it reached sufficient volume for agencies to be interested. This is what will happen with LBA as well in time when agencies see the volume and realize the market potential.” – TW

Ad-Network For the ad-network to conduct with ad-units like Display or Rich Media they would have an application or an WAP-site, then they would go in an animate it and put some ad-tax (programmed advertising banner positions) on the site and the ad-networks can sell advertising on the space. With LBA the process is more difficult because the goal is driving people to a specific locations. The specific locations need to be part of the ad-networks POI- database for it to appear on the map inside the LBS. When an ad-network is hired by a small merchant it needs to clarify that the location is in its POI-database and if they are not the ad- network needs to visit the merchant and geocode (get exact Latitude/Longitude) the stores and integrate them. Once that is done ad-networks can put a Geofence around the specific location and start LBA campaigns.

NMS role in the value chain NMS are an Ad-Network, they do the ad serving via their LocationPoint platform, and they also have publishers that they acquire and have ad selling towards agencies as well as directly to retailers. The key feature is that everything revolves around location. So NMS is a premium location-based ad-network.

4.1.4 NAVTEQ Media Solutions LBA model

The creative around the advertising campaign In this step the creative around the advertising is worked out with NMS partners. This is either done by: Ø Self-serve methods where advertisers themselves design the creative aspects of the advertising and then that information are adjusted to function within the NMS ad- serving systems. Ø The other way is that NMS takes care of all the aspects of the creative part of the advertising in close association with the hiring advertisers.

TW explains that the LBA model by NMS is based on push advertising inside the LBS. The advertising offer consists of relevant pop-up promotional coupon advertisement. These ads is served to users of LBS via an in application banner. The banner is positioned in such a way so that it does not drain the usability of the service.

With this approach consumer does not have intent but it is relevant for them since: Ø It is in the proximity of their current position. Ø The promotion is targeted towards the user to suit his given preferences. Ø There is the possibility for consumers to save the coupon and redeem the coupon when time is available.

Therefore the NMS model is impulse driven and providing promotional incentive to consumers on the move. The strategy is to drive customer to retailers and merchants who initially had no incentive of going there and avoiding to target the people whom go there without promotional activities. Table 3 illustrates the full list of supported ad-formats by NMS.

NAVTEQ media solutions supported ad-formats Ø MMA Banners Ø Proximity Banners (Dynamically generated hyper local banners based on user location, with closes store info including distance) Ø Rich multi-page in-app ad units supporting: o Landing Page with click-to-map, click-to-route click-to-call and click-to-coupon o Coupon redemption tracking o Ad Wallet (Saved Ads) Ø Deal Finder (Shows closest advertisers based on user location) Table 5: NMS Ad-formats Source: Tae-Won Song, NAVTEQ and Nokia research The landing page for the advertising campaigns When the users have clicked on the served ad NMS knows that the advertising is relevant since further action was taken and if the end-user knows the store, the ad is even more relevant. The landing page of the ad will provide post-click as illustrated by figure 8 to provide users with a variety of options on the ad offered.

Ad Wallet Click-to-map (Saved Map Page Ads)

Directions Page LBA Banner Or Click-to-route Navigate Session LBA-Enabled LBA Landing Application with Ad Triggers Page

Promo Click-to-promo Page

Mobile Advertiser Click-to-call phone Web Page Click-to-Web dialer (external)

Figure 10: Standard LBA model in use by NMS Source: Location-point advertising whitepaper 2011, NAVTEQ

Ø Ad wallet provides you to save the offer in your mobile phone to redeem at a later occasion Ø Map page will provide users with a map to view the location of the offer

Ø Direction will provide users with turn-by-turn or on foot navigation to the store where the offer can be redeemed Ø Promo page redirects users to a promotional page where the offer is presented in further detail Ø Advertiser web page will redirect users from the mobile application to the advertisers external web page Ø Mobile phone dialer will provide users with a speed dial function to the advertising store

The targeting for advertising campaigns TW explains that the general targeting efforts for promotional messages can be based on different handset groups; mobile handsets that have similar attributes like screen size, operating system or browser. The targeting can be based on analyzing the behavior of different phone owners. Nokia have done research in this area and the general way is as follows:

Mobile Phones: Easy phones to call and text with that generally never go online. For example the Nokia Asha 202

Feature phones: Positioned between smart phones and mobile phones, it allows you to e-mail, surf the web to a lesser extent and usually support 3G roaming. These are the phones with the largest reach today. For example the business suited phone Nokia Asha 303

Smartphones: With these phones you spend a lot of time on the web and engaged with applications. The smartphone users embrace the social aspects of the social networking on smart phones; they usually have embedded application for Facebook and videoconference. For example the Nokia Lumia 800.

TW describes that when positioning these three phone category owners on a grid where you examine how much they have respectively spent on consumption; traveling, eating out or clothing. The conclusion is that the smartphone owners spend a lot on consumption, the feature phone owner to a lesser extent and very little on the simple mobile phone owners. He describes that this is almost globally applicable in developed countries. Hence LBA is effective towards smartphone owner because the profiles of smartphone owners are usually the ones with the highest disposable income, are early adopters and tech savvy consumers in general. Table 4 illustrates the full features for NMS targeting for LBA campaigns. NAVTEQ Media Solution targeting features Ø Import advertiser’s storefront locations Ø Target campaigns on geofencing around advertisers store locations o Radius around stores o Defined geofences for targeting (e.g. neighborhoods, college campuses) Ø Targeting campaigns also on: o Priority o Pacing (Automatically adjust relative priority to pace for even and compete delivery) o Commercial category (Commercial, 3rd party commercial, house and bonus)

o Keywords & Search terms, demographics (age, gender and interests) o Language-locale (Need to support all key language-locale settings) o Creative spreading (Spread impressions across multiple creative for one campaign) o Day part (Day of week, Time of day) o Frequency caps based on daily and total impressions Ø Operator, Device, Application and application spot Table 6: NMS ad formats and targeting features Source: Tae-Won Song, NAVTEQ and Nokia research He describes that the targeting features will arrive at a part where they have a segment of consumers that are quite targeted, he also points out that its pivotal to understand that the targeting needs to stop at one point because if one performs too much targeting the advertising will only reach a very narrow segment. Targeting the people whom already have the perfect match, people that always come to the store in question, stores would never reach new customers. Therefore advertisers should target the customers who have the potential to become regular customers and extend the reach one segment outside (illustrated by figure 11).

Most Valuable Customer (MVC)

Potential to become MVC Today

Preferred targeting reach

Figure 11: LBA ideal targeting Source: Tae-Won Song, NAVTEQ

The evaluation of success for advertising campaigns When end-users that have redeemed the offers arrive at the brick and mortar store they will show the received coupon to the person at the counter, then the person working in the counter will then recognize and redeem the coupon. To enable accurate results of how many customers that visit specific stores NMS use a geofencing technology.

NMS geofencing is based on their POI-database Physical maps based on Longitude and and on top of that they have a Rich Media- Latitude database that pulls up with reviews from Rich Media Database customers and photos of specific the specific location. This is integrated with their visual POI Database map that is based on longitude and latitude (illustrated in figure 12).

Figure 12: NAVTEQ Geofencing technology Source: Tae-Won Song, NAVTEQ 35

TW explains that the geofence can be set up around a particular POI, around an area for a wider view and in practice a geofence could be set up around a country. NMS is keen to keep the geofence as tight as possible to increase LB-relevance. The actual geofence technology is simple according to TW; the technology only needs a defined geographic area based on a specific POI or larger premises like universities. Then a virtual border is applied around this area and when a mobile phone, using LBS, enters this area the phone acknowledges entering the fence (via GPS for example) and sends an ad-request to NMS ad-servers.

The difficult part with our geofencing technology is collecting and building the POI-database. This is done be mapping actual streets with laser guided cameras, calling up big chains (e.g. gas chains) and offering them to appear in NAVTEQ maps (key account managing). To integrate the local merchants NMS work with yellow pages companies since they have the majority of all registered enterprises. The business model with the yellow pages companies is that they get NAVTEQ maps for free if NMS get to integrate their POI-database into their own. If the yellow pages companies provide NMS with their POI-database then NMS can sell LBA to the companies listed in it. Therefore NMS are using yellow pages companies to bring in SMBs to their POI- database and also utilizing them to sell LBA where they will get a commission in an affiliate marketing deal.” -TW

From a measurement perspective NMS measures how many customers have seen the coupon, how many actions on it, how many click-to-route and check-in services (via a smaller geofence of 10-50m around the store). NMS stop here (if the store lacks integration with the POS, for a closed-loop) with a check-in and they provide the local store with statistics about the people who have chosen to click-to-route and then actually went to the store provided by the checked in. TW explains the complication in regards of how many users that really redeemed the coupon once they entered the local store, although the local merchants are quite satisfied with the statistics provided.

NMS measures and reports on the following features: NAVTEQ media solutions measurements Ø Online reporting service for ad operations (internal) and for advertising and publishers (external) Ø Network, advertiser and publisher records Ø Track and report on all key ad performance metrics: o Ad Requests, Impressions, Clicks, User actions (Click to call, map, route, coupon and redemptions) o CTR, Post-click engagement rate, Fill rate, Commercial fill rate Ø Revenue based on CPM, CPC, CPA or hybrid campaign pricing Table 7: Metrics provided by NMS Source: Tae-Won Song, NAVTEQ and Nokia research

4.2 Research question 2 How does industry actors define the market for mobile advertising and LBA?

4.2.1 Martin Svensson on the market for mobile advertising Martin explains that the market for mobile advertising is very disarranged at this present time, the market lacks structure and industry actors have not defined relationships and clear value- chains. Although he is confident that it is a long-term market with great opportunities. He also pointed out that when reviewing the competitive aspects, mobile advertising is an medium that many are now choosing to trial. He pointed out that the market is still in the Early Adopters stage when reflecting the technology adoption life cycle with emphasis on the current global spending on mobile marketing in comparison to total marketing spending.

He believes that blind banner advertising plays its role within mobile advertising although it should not be in exclusive focus for then it would bring down the market. The new trigger, in his point of view, is targeted offers. Martin describes a possible shift in mobile advertising. It has always been focused on revenue, but he believes that focus will shift from being solemnly revenue oriented to take in all aspects that provide added value to end-users through mobile services, applications and games.

“For example if you are in a defined geographic area and have Opted-in for offers via a service you will be able to get concert ticket information, football games or cinema information in that area with time, place, price and a possibility to buy tickets via the service. These targeted offers could form a symbiosis with advertising where it is included in the service, because in the end everything is advertisement. The service has to apply relevance to ensure end-user value.” - Martin

Mobile Services Targeted oﬀers

Adversing

End-user value

Figure 13: How relevance provides end-user value Source: Martin Svensson, Sony Ericsson

Martin further explains that the fast evolution of mobile services has resulting in people spending an increasing amount of time on their mobile phones. He derives this fact partly from the revolution of applications for the smart phones and points out that applications have the ability to attract “unique users” which is a customer group that spends a lot of time on the application and gets close ties with the application makers. Martin describes that these “unique users” are very valuable for application makers because they have the ability to deliver

highly targeted advertising to their customers since the application usually knows some personal preferences about the user.

Martin points out that the future of mobile advertisement will not be based on hardware makers like Sony Ericsson, whom can survive without advertising revenue, but on third-party service and application providers. There are few companies that have managed to survive on ad-based business models, and he has a hard time seeing that solemnly ad-based services will survive. He believes that they will be ad-funded with an initial buying cost or a monthly subscription payment. Although he explains that ad-sales will be an important aspect for these companies to secure their survival in the long run.

Martin further says that the interesting aspects of what he believes will make the mobile marketing channel more attractive as well as providing higher revenue rates for advertisers are the possibilities with premium advertising. He defines premium advertising as a sales job and it is based on knowing brands and to have direct contacts.

“You have a company, A, that has one responsible for media contacts. This responsible person contacts a media sales agency saying that they have 100 000 Euros for advertising. Then the media agency gives a proposal that they choose to go out with 30% on TV, 30% on Radio, 20% online and 20 % on mobile advertising. The media agency then contacts an ad-network saying that they have 20 000 Euros for a McDonalds mobile advertisement campaign. The chosen ad- network then hires publishers whom work together and take in offers from the right mobile channels, in accordance with Company A’s given targeting preferences; demands a quote of “unique users”, so the campaign is focused on reaching people under 25 years of age for example, and then they sell these offers to the media agency for quite high prices. “ – Martin Svensson

That is premium advertising according to Martin and unlike blind banner advertising, which is automatically aggregated advertising such as AdMob is currently working with. He explains that the advertising revenue for blind banner advertisement is quite low. Martin emphasizes on the possibility given with premium advertising to deliver highly targeted and relevant advertising to end-users that will be of value for them.

Lack of funding for mobile advertising Martin explains that there is international funding for the mobile channel but in comparison to other channel it is very small, although he states that it is projected to outgrow TV by 2015. Martin expresses his belief that we are in the middle of a shift in the mobile ecosystem. Currently the majority of operative phones through out the globe are old java-based GSM phones and loading a WAP-webpage on these phones is a long process and is usually expensive. The revolution of smart phones and high-speed mobile Internet will be the trigger for mobile advertising.

According to Martin the value chain is evolving with the ecosystem of mobile phones. The more standardized OS and integrated application stores have enabled the possibility to customize mobile phones fast and easily through the new value chain of smart phones. Therefore third-party content is easily accessible and this has enabled the growth of applications and services, which is great for the mobile advertising medium. This increases the reach for advertising campaigns conducted on the mobile medium and will increase funding and pricing for campaigns.

“On the mobile market Apple iOS, Google’s Android and Windows 7 phones are growing and taking market shares. I believe that a lot is based on the maturity of the operating system. Every application demands network access and when you have two-three more standardized operating systems the channel for advertisers will flourish.” – Martin

He explains that in the past every hardware maker developed their own operating system, which was tailored for specific models. This posed a problem because marketers did not just want to reach a specific phone model, they were interested in the masses and therefore choose other channels to reach them. He is confident that Apple’s App Store, Google’s Android Market and Window’s Marketplace will revolutionize the reach of advertising. Because when an application is available through these channels there will be a possibility to monetize on advertising on that application which will reach practically the whole world. Martin explains that when your able to conduct premium advertising in this channel, not just conduct blind banner advertising, the relevance of the advertising will increase and adding position can be a crucial value-differentiator.

Market for LBA Martin when asked about the possibilities with LBA was very clear to point out that if you have an LBS-service with a large enough customer base you have all the possibilities to monetize on LBA. It is all about reaching your desired customers with your service. Martin exemplifies this with the applications: Angry Birds, Facebook, Twitter and Google maps. When you have a well- defined customer base as these applications do you are very interesting for companies to engage with advertising and you can demand a higher price.

4.2.2 TW on the market for LBA He describes that to get the LBA market jumpstarted there is need for significant media budgets to be shifted from online or traditional media into LBA. This shift is key because companies will not spend more money to cover the mobile medium. The classical trend according to TW is that traditional media is declining but not deteriorating at the speed analysts believed they would. TV is still a strong competitor and even traditional media are innovating (TV channels through interactive TV, everything is digitalized). He explains that funding for printed advertising is shifted into the interactive space but not at a high pace, this is especially true in emerging markets where Internet coverage is scarce. Making printed advertising the primary marketing channel for an extended period of time.

He explains that the key feature for LBA to work is the smartphone penetration. He estimates that it makes out around 20% in developed countries but in markets like India and China it is around 1 %. Therefore building business models primarily on GPS is only reasonable in developed markets, where smartphone penetration is increasing in a high level and will soon GPS-enabled phones will make out the whole market. LBA actors have to leverage other technology like Cell-ID, Wi-Fi, Bluetooth or position provided by carriers in markets China and India to conduct LBA successfully. Hence to make LBA work on a global basis, actors cannot rely on only one method to pin point users they have to leverage two or three technologies to enable the sufficient reach and volumes.

TW explains that NMS leverage GPS, Wi-Fi and Cell-ID as it is provided by carriers to conduct their pin pointing of mobile phones. There are difficulties for carriers to provide positioning since it can breach privacy laws, rules and regulations. Carriers usually need an Opt-in from

end-users, which they get when users sign the T&Cs when starting a service or application for the first time, the T&Cs will say that “I agree to get advertising in the application”.

In developed countries, TW goes back to what is described in section 4.1.4; there are opportunities just by the fact that the smartphone penetration is constantly increasing. Since smartphone owners spend a lot on consumption Hence LBA is effective towards smartphone owners because the profiles of smartphone owners are usually the ones with the highest disposable income, are early adopters and tech savvy consumers in general.

TW on the possibilities to leverage social networks within the LBA market He describes the two different ways of viewing the location-based social networking (LBSN):

Ø First there are Foursquare, GoWalla and Facebook Places who comes from the social networking industry. They have started starting to monetize on their customer base by providing offers when you check-in at different connected stores Ø Second are the likes of NMS who are not coming from the social networking industry but still views social networking as a powerful medium that is important

According to TW social networking is a cheap way of advertising because of the strong viral effect on social networks. The chance is high for someone in a community to have friends with the same preferences; if one person likes an offer the chance is high that other people within that community will find the offer interesting. TW goes on by explaining that this is a jackpot from an advertisers perspective, they only need to target someone who is likely to forward offers via social networking to friends in his community and these people usually believe that they are doing their friends a favor when forwarding relevant offers.

TW explains that social networking is particularly interesting from a local standpoint; in the social networks your friends are mostly from the same geographical location.

“If I can say that I like this offer and there is an opportunity to forward the offer via Facebook to others, by integrating the advertising service with Facebook, it is great because you can get viral marketing with a strong momentum.” –TW

Another key feature with social networking according to TW is that the way of passing on offers is free for the advertiser but also it provides a sort of social status to the person forwarding relevant offers to his friends. NMS general strategy is driving more people into specific stores, this can be done effectively through LBSN. If a person gets a promotion from a store, visits it, and is pleased with the offer, that person can forward this specific offer to other connections within his social network. This creates a powerful viral marketing channel.

“From an advertisers standpoint until you have that person who really likes the offer and visits the store, your relying on targeting to work, but when someone uses the coupon and forwards it via social networking you have proof that the targeting is actually working. “- TW

TW explains that continuous targeting of that first person that redeemed the offer will be even more targeted based on them forwarding the offer to people of the same preferences.

“This is not a little medium since social networking is so big; this is something that needs to be apart of location-based targeting. NMS is not a social network but we need to connect to social networks to get that viral effect. “ -TW

4.2.3 Fran on the market for mobile advertising and LBA The current market for mobile advertising is still in an early stage according to Fran, but he believes that it will in time surpass the online advertising marketplace. Because generally ads on mobile devices have much greater targeting ability and the mobile device are much more widely distributed than the PC.

The key focus areas for advertisers are: Ø Reach (How many people will see your ad) Ø Frequency (How often will they see the ad) Ø Relevance (How the ad reaches people at an optimal time) Ø ROI (Proof that advertising expense led to increases in revenue)

Mobile can clearly meet these objectives and in most instances and to most advertisers better than any other advertising medium according to Fran.

The possibilities with LBA is clear, currently the projected compound annual growth rate (CAGR) for LBA is at 100 % over the next five years and the business is fairly nascent with a global turnover excessing 500 million euros the fiscal year according to Fran, CAGR is a business and investing specific term for the smoothed annualized gain of an investment over a given time period49. He goes on explaining that with NAVTEQ´s LBA service, called LocationPoint Advertising (LPA), they are demonstrating the power of location targeting and LPA has generated CTR of 4-5 times the industry average of 0,5 %. Although he goes on explaining that the challenge for NMS and any other player is to build significant reach but he is optimistic about this because of Nokia’s distribution and NAVTEQ’s industry leadership in mapping and navigation.

Fran describes the benefits of conducting premium advertising via LPA; they have the ability to offer a differentiated product with demonstrated results.

“95% or so of transactions are generated in brick and mortar stores so the ability to route potential customers to a store front location is very powerful” – Fran

In addition to the premium performance of LBA, NMS have the ability to drive premium rates with an average CPM around 15€ range. Fran explains why they have chosen to position themselves outside the blind-banner space, even though NMS have some limited blind-banner space but it is generally bundled with the LPA and traditional mediums as radio or TV to achieve a complete package, is that it is highly competitive and with limited ability to differentiate which leaves price as the key point of negotiations. With their LPA product, NMS is trying to maintain pricing integrity.

When asked about the unwillingness to invest in the mobile medium, and LBA in particular Fran explains that this is not uncommon when a new medium emerges and generally the big corporations are slow to implement. Although NMS currently have and/or are running campaigns for big corporations, i.e. Best Buy in the US, and they have been very pleased with the results of their LBA. NMS will in some ways benefit from the progress made by Google and

Apple as they take a more mainstream approach and therefor NMS can compete effectively with their more specific location-based services.

“Ultimately we have a very powerful value proposition – the ability to reach customers and route them to a storefront while delivering a coupon or offer – that is already resonating and will continue to do so.” – Fran

4.2.4 Peter Tyreholt on the market for mobile advertising and LBA Peter describes that the mobile advertising medium is lacking the sufficient funding to establish itself as strong competitor to traditional advertising medias. Peter also points out that the mobile advertising medium and LBA is still in the Early Adopters stage when reflecting the technology adoption life cycle. This derives from the fact that only a small portion of companies total marketing budgets goes into the mobile marketing medium. The majority of that goes into blind banner advertising. Peter is beginning to experience a small core of LBA that has established itself as a vital advertising medium. He describes that LBA is attractive because it can offer advertising offers with a higher relevance towards end-users that will in return increase the yield for LBA. For this to work there is a need for attractive applications with LBS that will have the capability to show advertising offers based on an accurate position and also with connections to ad-networks that conducts LBA.

-“But LBA is increasing rapidly and I think this will be the future for mobile advertising.” – Peter

Peter is confident that the new mobile ecosystems will enable an entirely different reach because of the strong three platforms that is constantly gaining market shares in the smartphone segment. When companies have the ability to place their application on Apple’s AppStore, Google’s Android marketplace and WP7 marketplace it will enable an entirely different reach, practically the whole globe. Peter explains that Appello Systems have their Wisepilot application on AppStore and Android marketplace currently because as of today it does not support WP7. This is something that they will look in to in the future when the reach of WP7 mobile phones have increased, but currently the reach of WP7 smartphones is minor in comparison to Android and iOS.

He explains that the industry have seen growth rates in volumes for LBA increased with up to 50% over monthly periods but he points out the importance of bearing in mind that LBA is in an early stage, the growth rate will stagnate to a more normal level as volumes increase.

Peters is of the opinion that the interactive media space will transit into the mobile devices in the future since end-users will constantly have uplink ability and ad-networks will have the ability to pinpoint end-users position. He is of the conviction that all companies will have to relate to that first contact will be via ones mobile phone either via phone calls, video calls, e- emails or text messaging.

-“Just to give an example the major online papers should be able to dynamically tweak news and advertising based on your current position to increase their relevancy on both mobile devices and laptops” –Peter

To get LBA into a jump-start Peter believes that advertising agencies are going to need an incentive of sorts to shift funding for the mobile advertising medium. He believes that mobile advertising today is done by a specific request from the buyer of the advertising and not by the

advertising agencies. Because agencies know the traditional channels better and therefore think of those mediums as superior to mobile advertising whilst the reality might be the opposite.

Peter sees good conditions for high growth in LBA from an application perspective where one can provide better relevance in the advertising offers towards the end-user which will yield a better payout for advertisers and ad-networks. He believes that a lot of advertisers are interested in LBA, but the key drawback for the LBA-medium is that the medium is dependent on the advertising market, which is partly conservative, to shift funding from other traditional channels like TV, Online and Printed-advertising into the mobile medium in general. Because companies will not increase their marketing budgets to cover the mobile medium as well it is dependent on the relocation of existing funding. Peter explains that currently the mobile advertising medium is filled with too much junk-ads and those have to be phased out to pave way for more relevant ads and a stronger traction power for investing into the mobile advertising medium.

One problem according to Peter is that a sufficient market share of smartphones is not enough Appello are dependent on the quantity of end-users using applications and LBS that has capability to show advertising. That is key to reach a critical volume of expressions to attract funding from advertisers. In Peters estimations one need to have a market share of smartphones at around 40% to secure sufficient volumes. Today in the EU the smartphones have reached an approximately 20% market share that supports LBS but Peter is of the conviction that it has to double to attract sufficient funding. The key is to attract enough volumes of the preferred user type, the person who use LBS on a regular basis.

4.3 Research question 3 How will the business models evolve with the tracking & measurement possibilities that LBA will provide?

4.3.1 TW on the business models of LBA He explains that NMS is focusing on providing performance based advertising campaigns; their goal is for advertisers to pay based on the campaigns achieved results. He goes on explaining that results are actions taken after first interest was provided by a click. This can be click-to- route, click-to-call or click-to-save, and then the key feature for LBA is that the geofencing technology allows NMS to track the actual amount of customers that visits stores after showing first interest by a click. NMS use these measurable actions and charge advertisers mainly based on a CPA-model.

“NMS tend to go after the CPA-model because we are entirely performance based, our mission is to drive customers to brick-and-mortar stores and for them to redeem coupons in this store to create actual results. From a location-based standpoint everything is moving towards a more transaction based business model and that is what advertisers want from ad-networks.” –TW

The blind ad-networks like AdMob provides volume and for the volume they want to be compensated on a CPC-basis. What happens after you are rerouted by clicking on an advertisement to the site of the advertisement is not in their interest. Their primary focus is the click-action, with this in regard the CPC-model will be around for blind and premium blind ad-networks according to TW.

He describes that very premium publishers will use the CPM-model, they will charge you for the premium exposure provided on their sites. They are capable of doing this because they have a really premium audience, for example the Wall Street Journal. TW believes that the CPM-model will have to be integrated with a CPA- or CPC-model in future, because advertisers are quickly realizing that they have the ability to pay based on results which is a stronger incentive than premium audiences.

The key feature for advertising metrics in general is that advertisers do not care how much they are investing (can range up to 30-40 Euros based on a CPM) if it works according to TW. The important aspects of LBA campaigns are that the ROI is positive. The complication with LBA pricing is determining what pricing you use based on what vertical. He explains that when using a CPA-model where one take a share of the transaction, unified pricing is impossible since the products can vary from cars to take-away coffee.

TW provided figure 13 that illustrates the general business models that advertisers from Retail chains, SMBs and Brands are keen to pay for. From the model it is obvious that Retail chains are the driving force with the CPA business model since they want, as TW earlier explained, statistical proof that advertising offers lead to a transaction. The SMBs are not as transaction oriented as the retail chains and generally accept a CPC business model. The brands are in general only interested in exposure, since they are not as interested in driving traffic to a specific store or product, their goal is to acquire brand exposure. Therefore they are the driving force behind the CPM business model.

Figure 14: Business models with regards to segmentation Source: Tae-Won Song, NAVTEQ

According to TW the actors conducting LBA get into a new territory with the business models that is totally untapped because LBA actors cannot charge by a medium of 1000 expressions. They have to shift into a business model that is based on the transaction volumes or price. He explains that the drawback for LBA here is that everyone is asking for a CPA-model because

everyone likes paying for results, but there are no unified codes of conduct with campaign rates. The actors conducting LBA are used to the standard way of CPC- or CPM-models but those are based on fixed rates and no regard is taken to whom the advertiser is and what products the advertising offer is promoting. The CPA-model enables LBA actors to look at different verticals and advertisers. This is something that will revolutionize the entire advertising space according to TW because it is a totally new way of pricing campaigns. He identifies a possible problem with this way if LBA actors charge different prices based on different companies, in regards to the companies products. Therefore TW explains that the CPA-model will have to be based on verticals and the price will have to be negotiated probably via a bidding system where everyone bids on the same integration. Advertisers will be bidding on verticals and whoever is bidding the highest gets the advertising.

TW finishes the questions regarding the business models by explaining that NMS have been successful with using the CPA model. The geofencing technology that NMS provides enables the tracking of users from first interest by a click on an advertising offer to their performed post click actions and the actual number of users that check in (provided by a smaller geofence) at the merchant conducting advertising via NMS. This will enable NMS to charge by a CPA-model that is based on the statistics of how many actions/transactions have been made. When relating it to the whole LBA industry NMS are one actor and the lack of a unified CPA pricing model inflicts that the CPA model is not industry wide applicable yet, TW however is certain that the model will be the preferred one in the future.

4.3.2 James on the business models of LBA He believes that current actors and content providers will shift to CPA-models. This will enable “deal providers” to pay their distribution partners (e.g. Handset manufacturers, Carriers and major online and mobile publishers) mostly based on results, instead of compensating for exposure to audience which the CPM-models of today are offering for internet advertising. James explains that mobile advertising in general is shifting rapidly towards a CPC-model and industry actors like AdMob, Millennial Media and Google (their mobile search business, distinct from their mobile display business under AdMob) are as of today moving the bulk of ad- impressions through the mobile advertising medium. He further explains that advertisers enjoy the minimum risk nature that CPA- and CPC-models offer where you pay based upon results.

The CPC-business model is lower risk but not riskless since the occurrences of click fraud and vanilla “yield management”. There is need to define which percentage of the clicks that advertisers paid for, transformed into monetization actions apart from the traffic to the target landing page that did not lead to closure.

“My favorite example of this “Pay only for results, but pay well” model is Amazon’s affiliates program. Under this system, any online site can get a share of all (net of returns and refunds) sales they send to Amazon servers. This is the purest form of “riskless” online business model” – James

He describes that Amazon and Living Social has launched a location-enabled application for mobile and Groupon is in launching stage for its own application for mobile. The possibility to use an individuals current or searched for location, in these applications, and then using personal preferences to source relevant and varying advertising content is according to James where action and hence revenue will be in the near future.

4.3.3 Peter on the business models of LBA Peter believes that a consumer’s position will be used more in the process of serving customers with relevant advertising material, and the big challenge will be to avoid becoming like major newspapers where the end-user gets blind to advertisement banners because they are used to ignore them based on their low relevancy. If your able to show advertising offers that are relevant towards the end-user then you will increase CTR-rates and also be able to acquire higher percentage of post-click actions. Position will be the key differentiator, it will evolve the online advertising as well where the PC will be able serve ads based on users geographic location, which is acquired via IP, but the key feature of mobile is the possibility to track end- users from the ad-serving to the point-of-purchase which the PC does not support. Hence it is the major value proposition for LBA.

Peter holds the CPM-model as dominant but points out that it is an early market with low volumes and with those conditions the CPM-model is the one that is easiest, since it is based from the online advertising medium, and widely understood. He explains that Google has been very good with the CPC-model and bringing awareness to that way of pricing. Peter is certain that the CPM-model will live on for a while, although it will have to be supported with the actual results of the campaign from a CPC- or CPA-model. Although in the evolution of the business models for LBA Peter think advertisers will demand statistical proof that the advertising campaigns are working and these statistics will be based on CPC or CPA-models.

Peter describes that with their collaboration with Sony Ericsson, where Wisepilot is the preprogrammed navigation service. Their shared business model, where they have in application advertising on all Sony Ericsson devices, they have combined a mutual business model where a part of all Wisepilot revenue, either from up sales or advertising, will go to Sony Ericsson in exchange that they have our application on their preprogrammed set.

4.4 Research question 4 How can LBA actors minimize the potential privacy intrusion and spam affiliation?

4.4.1 TW on the privacy intrusion and possible spam affiliation Privacy intrusion TW describes that the issue with privacy intrusion have been internationally recognized since the Apple Location-Gate scandal. The problem derives from end-users interacting with LBA offers and actors like NMS provide the end-to-end reporting. The general publics are worried where this information is stored and if it is anonymous or if it is based on cookies that enable identification of specific end-users. NMS strategy is to first acquire a Opt-in from the consumer, usually when signing the LBS T&Cs, then not keep any form of individual records of users. The records of end-users are used to report on campaign statistics but once that reporting is done they delete the information that enables identification of specific end-users. NMS do keep information regarding the interaction, in a non-identifiable form, with the promotional message at a specific location because they need that information for further targeting.

He explains that LBS and LBA are now experiencing the same start-up skeptics that Streetview, Internet payment and many others have experienced. NMS have chosen to take a very conservative approach and deleting all end-user specific data. Facebook and Google is taking a completely different approach and storing this type of data for further refining. There are obvious pros with keeping the data because it is easier to build up a powerful database and to enhance the relevance around the delivered advertising.

“Everybody wants something relevant but they do not understand that to make the advertisement relevant they need to provide some individual data. At the end of the day I think that other people will lead the way in educating the public and the crowd.” - TW

Spam affiliation He explains that NMS view is that something is only spam if it is not relevant for the end-user, hence if there is proven value in the promotional messages it will not be classified as spam. Therefore NMS is constantly trying to make the promotional messages as relevant as possible to avoid spam affiliation.

Avoiding spam is also part of NMS targeting features. It is called frequency cap, but it is important to keep in mind that NMS do not own the audience. The publishers own the audience and they are responsible for the eyeball and reach. TW explains that the publishers can for example demand that they do not want ads from car companies shown more than five times a week and NMS will arrange that for them. Depending of it is an Opt-in approach you can ask the consumer how many relevant ads they would like to see, and the more they choose to view in the LBS the better for the ad-networks. 4.4.2 James on the privacy issues He describes that the privacy issues of LBA have become a hot topic since the Apple “location gate” scandal and currently EU-regulators and many other current or potential ecosystem participants are developing ways to protect the end-user.

“Our current approach is to not retain user location info beyond the actual targeting activity/moment, so there is no persistent user data (i.e. it’s geographic targeting, not geographic tracking).” –James

James declares that the use of pretty clear T&Cs of service is key, those T&Cs should note that a user agrees to share location information in return for receiving: Ø More targeted and hopefully more relevant advertising Ø Some other defined benefit such as free navigation, free traffic or speed camera alerts. Although he concludes that rarely the question about using a end-users location for targeting ads pop up large and central on the screen before they have agreed to the T&Cs.

4.4.3 Martin on the privacy issues When regarding the aspects of personal intrusion that mobile advertising will pose if delivered to people who have not Opt-in for the advertisements. Martin explains that currently there is a consensus in the industry about what applications and services that will have the ability to attract users attention by a kick-start from sleep mode or screensaver.

“There are only a few applications that are allowed to kick-start your phone; Incoming calls, SMS, E-mail to name a few and it is crucial that end-users Opt-in to a service that might kick-start your phone with offers.” -Martin 4.4.4 Fran on the possible spam affiliation Fran explains that NMS goal is to deliver relevant ads that do not drain the user experience from the LBS or application in use. He explains that NMS spend a lot of time with each of their partners to design ad-placements; the goal is for the ads to be non-obtrusive and provide the most value to the end user and the advertiser. If the ad-placement would be obtrusive for end-

users the performance will suffer and when performance suffers advertisers are less likely to buy the placement from NMS.

“We have done studies that show users do not mind and even expect to receive ads for free content, and if the ads are done correctly the user actually views them as an additional service.” – Fran

4.4.5 Peter on the privacy intrusion and possible spam affiliation Privacy intrusion He explains that they inform the end-user in our T&Cs before starting the application and also they see to it that Appello does not pass on individual information to their partners that could enable end-user identification. Appello are generally working to anonymize the individual end- users as quick as possible and they look over the access to individual specific geographic information provided to NMS and other partners so that they cannot identify specific users and hence Appello protects their customers.

Although Appello are collecting some geo-data, they collect it in an dis-identificated form making it impossible to relate with a specific user and it is saved on a third place, never together with the user-data. The geo-data that they collect are refined in association with partners as NMS to build up live-feed traffic information that is useful for their customers. The advertising data is deleted once it is served.

Spam affiliation Peter explains that users Opt-in for advertising when signing the T&Cs when starting the application for the first time and if they buy something inside the application, premium navigation for example, they can choose to turn the ad-serving off. The advertising inside Wisepilot is delivered by Push-marketing that the users have opted-in for, with the aim to serve relevant ads that will interest the end-user and drive him to perform action on the offers. To secure relevance and avoid spam affiliation Appello is working with max limits for how long an advertising offer will appear on end-users displays and then they have long intervals between the ad-servings. Therefore the key criteria to avoid spam affiliation are to provide relevance in the advertising offers. This is secured by delivering hyper local advertising based on the geofence technology supplied by NMS. Appello measures the effects of different advertising offers so that offers that provide low interest and therefore low relevance are phased out, this way they can tweak the campaign to acquire the maximum yield and relevance.

5 ANALYSIS AND CONCLUSIONS In this chapter the empirical data from the previous chapter is discussed and analyzed. The defined research questions are tested against the theoretical platform in chapter 2. After the analysis the conclusions of the thesis will be presented. The conclusions will be the concluded answers to the research questions presented in chapter one.

5.1 Research question 1 How does ad-networks conduct LBA campaigns?

5.1.1 Analysis using the Krum model as seen on page 10

Krum 2010 NAVTEQ Media Solutions The creative around Uses two different ways depending on the client: the advertising I. The client designs the creative around the ad and then NMS program and adjust the creative to fit the NMS ad-serving system II. NMS takes care of all the creative around the ad with close association with the advertiser According to Krum (2010) the ultimate goal is to get users (in this case LBS users) to click on the specific ad. In either of the two cases NMS provides an extensive set of features for the ad, including the four specified by Krum (2010) that TW defined as MMA banners. Although NMS adds on proximity banners relevance since the served ads are tweak to fit the stores in the proximity with detailed information about distance and the specific retailer (pictures and reviews). NMS also provide the in application service, Deal Finder, that serves deals based on users location. Krum (2010) specified the importance that ads are served without draining the usability of the application or service and its essential that ads are easy to redeem. According to TW it is key for NMS that the banner does not drain the usability of the LBS, the creative also provides clear instructions on how to redeem offers and they take it one step further with their ad-wallet where users can save offers to redeem at a later occasion. The landing page Krum (2010) stressed the importance of a landing page that promotes further activities to increase the CTR-rates and post-click-actions. The NMS model provides an extensive landing page, illustrated in figure 10 (page 32), with six different options offering post-click-actions in the form of: I. Ad Wallet (Save ad) II. Click-to-map III. Click-to-route IV. Click-to-promo V. Click-to-web VI. Click-to-call All these options will, according to Krum (2010) provide clear instructions on how to proceed with offers and enables accurate measurement capabilities for NMS. The targeting Krum (2010) defined that appropriate targeting for the campaigns is the most important aspect. NMS supports all the five targeting criterions

that Krum (2010) recommends and surpass it with many highly automated criterions, all specified in Table 5 (page 32), that will ensure very narrow targeting capabilities. Although TW specifies that basic targeting is easily done only by defining different phone types (and hence users) on a grid: I. Mobile Phones II. Feature Phones III. Smart Phones Using that approach NMS campaigns will be targeted automatically towards the tech-savvy smartphone users, which can ease up the demands for other more specified targeting efforts towards SMBs that does not have high demands for specific targeting since their aim is only to attract traffic to their stores. Although with the advanced criterions NMS will be able to serve the large retailers with high accuracy in their campaigns, providing a core competency in the LBA industry.

The model by Krum (2010) implies that very narrow targeting will increase the relevance, attractiveness and yield of specific ads. With this in mind it is interesting what TW explains, that in practice, to much targeting will only decrease the yield of conducted campaigns. In figure 11 (page 34) TW provides his view of how proper targeting is done, where it is key to extend the targeting outside the customers what is defined as “Potential to become MVC” to maximize the yield of the campaign. The evaluation of According to Krum (2010) advertising campaigns should be evaluated success either by Impressions and CTR-rates for brand awareness campaigns or solemnly by ROI-measurement if the campaigns aim is to encourage customer into taking action and making purchases. NMS solemnly focus on actual results via their abilities to track consumers to the point of purchase, the full information about their measurement capabilities is defined in table 6 (page 33). TW explained that the measurements differed regarding the size of the buyer of the campaigns, where large retailers demanded a close loop to ensure high accuracy and SMBs was in general satisfied by the post-click-actions leading up to the storefront and check-in. The empirical studies show that NMS takes the theory laid out by Krum (2010) to another level where they use different strategies and measurement capabilities & accuracy to satisfy different customer’s needs. This shows an interesting notion where the theory and practice differs; the theory specifies that one of two ways of evaluating the success should be used. Whereas a market leading actor as NMS tweaks their measurement capabilities, which are very highly developed, to suit different actors to avoid over shooting the needs of different customers.

5.1.2 Conclusion RQ1 The empirical data gathered has shown that LBA campaigns conducted by NMS, in the position of a premium location-based ad-network, follows the theoretical guidelines on how to conduct an effective mobile advertising campaign as defined by Krum (2010). Although there is some interesting differences that the research study has revealed, the use of location in harmony

with the high technology capabilities that modern smartphones leverage on a daily basis will provide an advertising that is location tailored, with high relevance, to end-users at all time. The use of location and the other automated targeting capabilities will provide advertisement with relevance that usual mobile advertisement has been unable to provide. The conclusion is that ad-networks follow the model defined by Krum (2010) with the exception that everything revolves around location, providing an enhanced set of targeting capabilities. NMS provides some other exceptions from the theory where NMS breaks the theory down and goes deeper into some aspects in their quest for higher relevance and advertising yields.

5.2 Research question 2 How does industry actors define the market for mobile advertising and LBA?

5.2.1 Application of Drummond and Ensor market evaluation model as seen on page 11 Market factors Mobile advertising and LBA Segment size All interviewees agree that the market for mobile advertising in general is in an early stage, which limits the size and reach of the conducted advertising efforts. According to Martin the market is disarranged and lacks the proper structure. This is interesting since Peter was confident that the mobile ecosystem will evolve with the shift into a more defined set of platforms (Android, iOS, WP7) which will provide the needed reach to evolve the mobile medium, this might imply that the market is starting to acquire a define structure through the big platforms and there associated application stores.

The application revolution as Peter defines it, resulted in people spending more and more time on their mobile units for all aspects of everyday life. Both for leisure activities as games and also for work activities as mail, the increasing amount of people that are constantly connected via their mobile units will provide a market size for mobile advertising that is not matched by any medium. The empirical data also showed that one of the reasons the mobile medium has been unable to establish itself as a strong competitor to the traditional advertising mediums is the conservatism in the advertising community. Both Fran and TW agreed that there needs to be a transfer of funds from traditional medias into mobile, since companies will not increase their advertising budget to cover another medium. It is interesting to see that companies are starting to adapt faster than the advertising agencies, as Peter said that mobile advertising is usually done per request of the companies buying the advertising. This switch could force the agencies into gaining basic knowledge of mobile advertising, understanding that traditional medias might not be superior, and using the mobile medium and LBA in particular to a greater extent. When large advertisers are involved they will demand a clear structure and value chain before investing based on what TW explained about the larger companies being more strict and keen to know every part of their advertising efforts. The big retailers have started to show interest and as Fran said, Best Buy in the US has started to use LBA with great appreciation.

The key feature apart from application based LBS is that according to TW

people use mobile search with the clear intent of finding something in the proximity, which is interesting when reflecting that search on the PC will always be research and not true search as the mobile unit enables.

Both Peter and TW agreed that an incentive is needed for advertising agencies to shift a larger part of their media budget into LBA. Currently the majority of the advertising spending on the mobile medium goes into Blind Banner advertising as Peter explained. Fran said that NMS have been able to acquire CTR rates that is five times the industry average, with more campaign numbers like this it could act as the incentive for agencies to rethink their strategy and focus more on mobile and LBA. Segment rate of The mobile medium is growing in a fast pace, partly because it’s still in the growth early adopters stage according to the interviewees, although as Martin said mobile advertising is projected to outgrow TV advertising by 2015. Fran provided numbers of a CAGR of 100 % over the next five years which is in line with what Martin believed, what is interesting is that the mobile advertising market is still nascent, Peter provided numbers of an increase of 50 % on a month. What is clear is that the market shows great potential and growth, the growth pace will decline once the volumes increase according to the empirical data. This is logical since it is currently experiencing very high growth with low volumes. The unwillingness to invest large volumes in the mobile medium and LBA is nothing new according to Fran, as he defined that this happens to every new medium that emerges amongst traditional medias and big corporations tend to be slow to implement.

One interesting aspect that TW provided information about was the possibility to leverage LBA with social networking, to achieve what is called LBSN. This could be a major aggregator for LBA since the extensive use of social networking in every country, both developed and developing. The viral effect that Facebook, for example, can provide can achieve a greater reach and automated targeting as TW said; friends usually reside in the same area and have the same preferences. This can be a force to recon with in the growth of mobile advertising. Segment The empirical findings have showed that there is great potential for profitability mobile advertising and LBA. Martin expressed that premium advertising within mobile advertising, as he defines it, using a more consultancy approach will drive up end-user relevance and hence advertising yields. For LBA Fran explained that you can achieve a differentiated product with demonstrated results, since their LBA have achieved CTR-rates of 2-3 % whereas traditional mobile advertising has accomplished up to 0,5 % they can increase their pricing and hence profitability. Ad-networks like NMS have the ability to drive premium rates for their advertising, since they positioned themselves outside the blind banner segment, where competition is fierce, enabling them to keep price integrity. This is one of the main value propositions for ad-networks that are conducting LBA, keeping away from the mainstream blind banner segment and positioning them-selves as a form of premium mobile advertising. Customer price The price sensitivity of the buyers of mobile advertising will be high in the

sensitivity classical mobile advertising medium, of blind banner advertising, keeping down campaign rates according to Fran. The strength of LBA is that it automatically targets the smartphone owners, as TW explained the profile of smartphone owners are usually the ones with the highest disposable income, are early adopters and tech savvy consumers in general. This implies that when you buy LBA campaigns, you reach a very attractive set of customers. When you add the measurement capabilities, providing accurate ROI, LBA actors like NMS will be able to charge premium rates. TW described that buyers of advertising does not matter paying a higher rate, if the campaign works, hence the customer price sensitivity for LBA is low in difference to regular mobile advertising. Stage of industry The empirical data is coherent in the aspect that the market for mobile life cycle advertising and LBA is in the early adopters stage, when as Martin emphasized; the current global spending on mobile advertising in regards to total spending. All interviewees agree that the market shows great potential and shows great growth potential, Fran was confident that it is in a early stage but that it will surpass the internet advertising space, when agencies and companies realize that ads on the mobile device provides greater target ability and the fact that mobile phones is widely more distributed. Peter explained his belief that the market share of smartphones needs to hit 40 %, from the 20 % market share that both Peter and TW estimated it to be at present. Hence the jump from early adopters to early majority is not far away. The combination of an increased market share of smartphones with greater awareness for the mobile medium and LBA can boost the investments necessary to establish mobile advertising as a strong media. Pattern of demand The empirical findings shows that the risk in the demand pattern should not pose a problem for mobile advertising or LBA, since 95+ % of all transactions are generated in brick and mortar establishments according to Fran and TW. This provides a great opportunity for LBA actors to monetize since it has been proven, as TW said, that LBA has proven very effective into directing traffic into storefronts. The seasonal and cyclical demands in consumption should rather work as an aggregator for mobile advertising and LBA since during these periods retailers spend large sums on advertising. With the year around need of retailers and SMBs to attract customers, LBA should not experiencing any problems with irregular cash flows that dangers their operations, Christmas for example, should only be an opportunity for actors to increase awareness of LBA that will benefit the year around sales of advertising campaigns. Potential for The potential for substitution is high according to all interviewees, since substitution agencies are comfortable with their traditional medias. Mobile advertising and LBA needs to drive awareness to their channel, this should not be to hard considering what Peter expressed that the application revolution is increasing the time people spend on their mobile phones. What Fran said about the four focus areas for advertisers is interesting; Reach, Frequency, Relevance and ROI. According to Fran and TW mobile in general and LBA in particular can meet and exceed these criterions better than any other active advertising medium today. When agencies acknowledge this the potential for substation will be greatly lowered.

5.2.2 Conclusion RQ2 The conditions for mobile advertising and LBA are good, from what this research study has concluded it is a market clearly on the uprising. It suffers some drawbacks derived from the fact that the advertising community is filled with some conservatism and skeptics towards new emerging medias. The empirical data showed large advertisers needs a clear value chain defined for them before allocating larger volumes, since they want to know every part of their advertising efforts. As Peter and Martin concluded that the mobile eco-system benefits greatly by the more standardized platforms of iOS, Android, WP7 and this might provide a more structured eco-system with a clear value-chain might emerge that provides acceptable clarity for the larger advertising agencies. The increasing market share of smartphones will contribute to the attractiveness of the market, this in association with the evolution of social networking on the mobile phones where LBSN provides a strong viral effect, can provide the strong momentum needed to get the eyes of the general public onto LBA and the proven capabilities that it possesses.

The application revolution as Peter explained and the opportunities from a application perspective as Martin discussed has clearly showed that one of the big pressure points for mobile advertising and LBA will be with the 3rd party content and service providers.

The shift, which is likely to occur in the near future, based upon this research study and reading “The mobile computing revolution” by Morgan Keegan during the literature review is that laptop computers will be replaced by more sophisticated personal digital assistants (PDA), the technology was leveraged by Apples Ipad that launched in the middle of 2010. They will assist individuals with everyday life and be more integrated with functions as alarms, TV and stereo control and carports for example. When this shift occurs these mobile units will be the most valuable advertising platform. The mobile phones today is not an all integrated unit yet but they are well on their way and the location based services is key to this integration providing great opportunities for the mobile advertising medium as a whole.

5.3 Research question 3 How will the business models evolve with the tracking & measurement possibilities that LBA will provide?

5.3.1 Analysis over the application of business models

Interviewee TW CPM According to TW the premium publishers will continue to use the CPM- model, since they provide premium exposure on their sites. When regarding the Wall Street Journal compared to a small local web based newspaper, paying a higher exposure fee is understandable. What is interesting in the empirical findings is that TW is of the conviction that the CPM-model needs to be integrated with the CPC- or CPA-model since the incentive of paying for results is greater than just paying for premium exposure. CPC The blind ad-networks will continue to use the CPC-model since they focus on volumes, and disregard the post-click actions taken. This model is widely understood, mobile advertising was based on this model from the beginning. Although with the tracking capabilities of LBA advertisers will be

keen to move away from the volume based, with possible click-frauds, into actual results. This however is based on LBA viewpoint, regular mobile banner advertising will surely continue to use the CPC-model since it works on a similar basis as the online advertising medium. CPA The empirical data provided from TW is clear to point out that the CPA- model is the future for LBA, since you have to base the pricing of different campaigns on the achieved results. This is simple and understandable but the most interesting fact from the interview is that everyone agrees about the superiority of the CPA-model when you can base it on actual results, via accurate campaign measurement.

Interviewee James CPM Will be used to pay for exposure, as the classical business model of online advertising transformed into the mobile medium. Although from what James explained, buyers of advertising are keen on paying for results and moving towards the CPC- and CPA-model. CPC Used by the big actors to move the bulk of ads, provides less risk than the CPM-model. CPA According to James this is the most preferable business model since you will pay on actual results with less risk of click-fraud that the CPC-model attracts.

Interviewee Peter CPM Holds the CPM-model dominant in the industry since the market is fairly nascent with low volumes and the CPM-model provides an easy way of charging for campaigns. CPC Google has brought awareness to the CPC-model and buyers of advertising have started to realize the benefit of paying for results, even if they are not based on actual post-click actions as in the CPA-model. CPA Holds this model as the future for LBA, but it is clear that he thinks that it will take time before the market will become acquainted with this model since LBA is still in an early stage.

5.3.2 Conclusion RQ3 All interviewees agree that currently the CPM- and CPC-model is dominant. The CPC-model will always suffice the blind ad-networks that purely focus on moving volumes with no interest in post-click actions. The CPM-model will be used by premium publishers that is focused only providing exposure to attractive audiences and by larger brand as Starbucks or McDonalds where the goal is to attract exposure and awareness that will lead to customers visiting any of their stores. The CPA-model provided the most interesting empirical data, all interviewees agree that this is the way forward for LBA where you actually charge clients based on the transaction volumes achieved; the charged actions can be check-ins, routings, saved ads and ultimately transactions when the delivered coupon support integration with the merchants stores. This is possible through the tracking & measurement capabilities that has risen with the implementation of ads inside LBS, the consensus from the empirical data is that everything will go towards a CPA-model where you track customers from redeeming an offer into the brick- and-mortar store using geofencing technology as NMS does. The most interesting aspect that

came to light from this research question is the definition “closed-loop” where there is a possibility to provide truly hassle free results from campaigns and charge advertisers based upon a ROI measurement that is calculated from the actual sales amount generated. According to the empirical findings this is possible when you can integrate BAR-codes or digitalized coupons with the API of retailers POS-systems but this is overly complicated and hence it has not been widely adopted yet. Although what could set this into motion is the new smartphones that are capable with NFC-technology that allows end-users to swipe their phones over an NFC-reader at the cashier inside brick and mortar establishments. According to TW, NFC- readers and integration with different API’s for POS-systems are fairly uncomplicated but the bottleneck is the low market share of NFC-enabled smartphones in this current state.

However, TW pointed out that there is no universal way of pricing with the CPA-model yet; it has to be based on different verticals. The need to customize every campaign based on the actual product and company selling it, this could provide trouble, since ad-networks could be inclined to charge higher rates for Mercedes as oppose to Fiat. This results in what TW points out that there is need for a bidding system that allows different actors to provide their product information then buy advertising based on a bidding system. However as TW explained, NMS have been successful in using the CPA-model but NMS is only one actor in a larger industry. There is need for a consensus that all actors accept and base their business models on to get the CPA-model applicable for the entire industry.

5.4 Research question 4 How can LBA actors minimize the potential privacy intrusion and spam affiliation?

5.4.1 Analysis using the 6C model as seen on page 18 MMA 6C Empirical findings Choice The research concluded that actors follow the model and guidelines provided by Caruso et.al 2011, as TW explained that the first thing in the process of providing LBA is to acquire an Opt-in permission, according to TW this is imbedded in the T&Cs that needs to be signed before using an LBS, to receive advertising. This way of handling the Choice criteria is further supported by Appello whom does exactly what TW defined; the Opt-in is imbedded in the T&Cs. Martin concluded that there is a general consensus in the mobile industry about what applications are allowed to kick-start mobile phones and advertising is not hence the Opt-in is crucial to protect the privacy of the users. Caruso et.al 2011 supports the pull marketing approach instead of the push marketing approach, this is somewhat disproven by the empirical findings since both TW and Peter concluded that end-users Opt-in for ad- serving that is push based inside the LBS applications. What might keep the ads popular by the end-users is that they are accurately targeted and constantly tweaked to fit the proximity of the end-user. Control According to Caruso et.al 2011 end-user should be given the options to stop receiving ads from the various applications. This is not in line with the empirical findings, all end-users agree to receive ads inside LBS application, according to Fran end-users expect to receive ads in free application (ad based applications) although to stop receiving ads entirely one either needs to terminate the application or as Peter described, buy premium navigation (or some other form of perk that involves a transaction) after which the ad- serving will be turned off. The interview with TW however concluded that

the LBA inside the applications do not drain the usability of the service. Customization The research concluded that all the personal information that is provided into the LBS applications is used to better serve the specific end-user with relevant ads. James, whom explained that when end-users agree to share personal information, as location information for example, the targeting and relevance will be enhanced, supports what Caruso et.al 2011 defined in the theory. However it is likely that people will be reluctant to provide personal information, according to TW everybody wants something relevant but they lack the knowledge that to make the ads highly relevant the ad-networks needs some individual data. Consideration TW described that ads are only spam affiliated if they do not provide relevance towards the end-user, when there is proven value in the served ads the spam affiliation will disappear. Increasing relevance will increase the perceived value, which is what Caruso et.al 2011 suggests in the model regarding consideration. According to Fran NAVTEQ have done studies that concluded that users expect to receive ads for free content and what is the most interesting aspect is that if the ads are constructed and served correctly the end-users sees them as an additional service adding on to end-user value. James concluded that actors can effectively use perks to get end-users to agree with the T&Cs regarding Opt-in for ads, where end-users can be given free navigation or speed camera alerts, this is in line with what Caruso et.al 2011 suggests in their 6C model. Constraint According to TW avoiding spam affiliation is also part of NMS targeting features, named frequency cap, which limits the repeatability and determines which ads should be served at what occasion and location. This is in line with that Caruso et.al 2011 suggests in their model, although NMS is only the ad- network what is interesting is that the publishers always have the final say. Publishers can tweak their ads according to their own preferences. Although Peter explained that Appello is in line with the theory, they work out max limits for how long the ads are showed and to keep a long interval between ad servings. TW further concluded that in the T&Cs content providers could ask end-users how many relevant ads they would like to be showed. To further avoid the possible intrusion Fran described that NAVTEQ have a consultancy approach to their partners in designing ad-placements where its key for the ads to be non-obtrusive and provide the most value for end-users and their partners. Peter explained that in association with NMS they measure the effects of different ads and phase out the ones with low interest, this is according to what Caruso et.al 2011 defined and as well it provides the ability to tweak specific campaigns to acquire higher relevance, and hence yield. Confidentiality The confidentiality sections is where the major concerns is at present with end-users, derived from the Apple “Location-Gate” scandal that both TW and James discussed. From a LBA perspective different actors will acquire sensitive information regarding end-users location and activities. James and TW was both very clear to specify that NMS uses a strategy where they do not keep any form of individual records, although they keep records to report on campaign statistics, once that is done they delete the information that can identify specific end-users. This is in line with what Caruso et.al 2011 suggests about consumer information being shared with non-affiliated third

parties. From the interview with Peter it became clear that Appello also followed this model, they keep the geo-data in a dis-identificated form on a third place never together with the user-data that provides Appello with the targeting. James finished off this subject by expressing that when content providers follow these guidelines it is geographic targeting and not geographic tracking.

5.4.2 Conclusion RQ4 To minimize the privacy intrusion it is key to acquire an Opt-in before sending any form of advertising offers, that specific Opt-in should conclude that the end-user agrees to receive ads but also that their position will be used to increase the relevance of the ads served. Ad- networks should also see to it that ads are served with an industry acceptable frequency and avoid the repetitiveness of specific ads. To further take away the spam affiliation of LBA the ad- serving engine should automatically take in statistics regarding specific ads to phase out the ones with low response rates and leverage this ability in the strive to serve ads with the highest possible relevance.

Although it is also very important that actors shine light to the end-users regarding how the individual location information is harvested and refined, this should conclude that the LBS deletes all cookies that enable identification of specific end-users after the ad-networks have tracked people to the storefront and acquired either a check-in or any other form of action. The end-users should be notified that the information is purely being used to increase the relevance and the perceived benefits of the various LBS services. Embedding all of these aspects in the T&Cs and keeping them easy to read should minimize the possibility of LBA being intrusive.

6 RECOMMENDATIONS FOR FURTHER STUDIES In this final chapter of the thesis the recommendation for further studies within the research area will be defined.

6.1 Recommendation 1 The first recommendation has derived from RQ1 and RQ3, where the combined empirical data allows for an integrated research study regarding the “closed-loop” where one can examine the state of NFC-technology and how far it has to go before it is possible to redeem coupons at brick and mortar establishments in a greater extent. This is closely tied with the expansion of smart phones, and it drives only from the increasing number of smart phones that has integrated NFC-chips providing the possibility to swipe phones at the POS-systems to confirm the redeeming of individual coupons that has been served in advertising promotions. In order to complete the closed-loop, the investigation should apply this technology, described in the empirical findings on RQ1, with the CPA-model, described in the empirical findings on RQ3, and investigate how the industry could form a consensus regarding uniform pricing, either via a bidding system as the empirical data suggested or via an defined model that takes different verticals in consideration, i.e. transaction volume (pricing and quantities), creating brackets for different priced goods.

Ad served to a customer

Campaigns can be priced based on highly accurate Customer performs post- click acons; i.e. save-ad or results but also be tweaked click-to-navigate to increase relevance

Hassle free campaign stascs reported to Customer acquires a check- in via geofencing technology adversers

Customer redeems ad coupon at the POS-system via an integrated NFC- reader

Figure 15: Illustration over a simplified model for the “closed-loop” Source: Self-constructed

6.2 Recommendation 2 The second recommendation originates from RQ4, where the empirical findings concluded that consumers are very careful regarding geo-data that is harvested in such a way that allows ad- networks to identify specific users based on saved cookies for example. This in regard with what the interviewees explained that if people would be willing to provide some individual data the targeting efforts would be greatly enhanced and provide higher relevance, hence LBA could move further away from the existing spam affiliation. Therefore there is need for a research study, that is conducted in field study manor, where one examines the public generals view on how location-information being harvested, if they could be willing to give up some privacy in regards to cheaper LBS services and greater ad relevance.

The goal of the study would be the following: I. Get the general view on location-based information that enables identification of specific end-users II. Educate the general public about the benefits of giving up some private location- information with the perks that comes with it.

Increased geo-data harvesng by ad- networks

Higher relevance in served ads and addional perks; i.e. free navigaon or speed-camera alerts

Figure 16: Illustration over the possible pros- and cons of geo-data harvesting Source: Self-constructed

7 CREDENTIALS

7.1 Bibliography Ø Location systems: an introduction to the technology behind location awareness, 2008, by Anthony LaMarca and Eyal de lara, Morgan & Claypool publishing, ISSN1933-9011 Ø Principals and practice of marketing 2007, David Jobber, McGraw-Hill Education, ISBN-13 978-0-07-711415-2 Ø Michael E.Porter On Competition 2008, Michael E.Porter, Harvard Business School Press, ISBN-13 9781422126967 Ø Inside the Tornado: Strategies for Developing, Leveraging, and Surviving Hypergrowth Markets, 2004, ISBN-13-978-0-0607-4581-3 Ø Creating Value: Winners in the new business environment 2002, Michael A. Hitt, Raphael Amir, Charles E. Lucier and Robert D.Nixon, Blackwell Publishers Ltd, ISBN-0-631-23511-6 Ø Managing innovation and entrepreneurship in technology-based firms 1994, Michael J.C. Martin, John Wiley & Sons. Inc., ISBN-0-471-57219-5 Ø Principles of marketing 2008, Philip Kotler, Gary Armstrong, Veronica Wong and John Saunders, Pearson Education Limited 2008, ISBN-978-0-273-71156-8 Ø Intervjumetodik 2007, Annika Lantz, Studentlitteratur AB, ISBN-978-91-44-00832-5 Ø Exploring Strategy 2010, Gerry Johnson, Richard Whittington and Kevan Scholes, Financial Times / Practice Hall, ISBN-13-978-0-2737-3700-1 Ø The Good Research Guide for small-scale social research projects 4th edition 2010, Martyn Denscombe, Open University Press and McGraw-Hill education, ISBN-13-978 0 335 24138 5 Ø Tech Terms: what every telecommunications and digital media person should know 2006, Jeffrey Blaine Rutenbeck, Focal Press by Elsevier Inc., ISBN-13-978-0-240-80757-7 Ø Using everyday numbers effectively in research 2006, Stephen Gorard, Continuum international publishing group, ISBN-0-8264-8830-7 Ø Methods for evaluating interactive information retrieval systems with users 2009, Diane Kelly, Now Publishers Inc., ISBN-978-1-60198-224-7 Ø Research methods for business students 5th edition 2009, Mark Saunders, Philip Lewis and Adrian Thornhill, Pearson Education Limited, ISBN-978-0-273-71686-0 Ø Foundations of Marketing 3rd edition 2009, David Jobber and John Fahy, McGraw-Hill Education, ISBN- 978-0-0771-2190-7 Ø International Direct Marketing 2007, Manfred Krafft, Jürgen Hesse, Jürgen Höfling, Kay Peters, Diane Rinas, Springer Berlin Heidelberg New York, ISBN 978-3-540-39631-4 Ø Strategic Marketing, Planning and Control 2nd edition 2001, Graeme Drummond and John Ensor, Butterworth – Heinemann Publishing, ISBN 0 7506 5236 5 7.2 Primary sources Ø E-mail correspondence with Jeff Mize, Executive vice president of global sales, NAVTEQ. Ø E-mail correspondence with James Winters, Key account executive and head of advertising affiliation for EMEA, NAVTEQ Media Solutions Helsinki Office. Ø E-mail correspondence with Daniel Nordberg, Business Development Director; Portfolio Strategy, HTC Corporation. Ø E-mail correspondence with Fran Smith, Director of Global Planning and Ad Operations, NAVTEQ. Ø E-mail correspondence with Ulf Ivarsson, COB, Appello Systems.

Ø E-mail correspondence with Peter Tyreholt, in charge of product management, Appello Systems. Ø E-mail correspondence with Martin Svensson, Senior Associate at Media Services & Marketplace, Sony Ericsson. Ø E-mail correspondence with Tae-Won Song, Director of Ad Strategy and Business Development, NAVTEQ Media Solutions.

7.2.1 Interviews Ø Martin Svensson, 2011-03-14, Approx. 60 minutes. Ø Tae-Won Song, 2011-05-12, Approx. 300 minutes. Ø Peter Tyreholt, 2011-05-16, Approx. 60 minutes.

7.3 Secondary sources

1 Vision 2020 by Ogilvy and Acision, http://haroldcabezas.posterous.com/mobile-advertising-2020-vision-from- 2 Location-based advertising by Peterson Mobility, page 6/34, http://mmaglobal.com/research/location-based- advertising-peterson-mobility, 2011-04-06 3 Location-based advertising by Peterson Mobility, page 6/34, http://mmaglobal.com/research/location-based- advertising-peterson-mobility, page 6/34, 2011-04-06 4 Location-based advertising by Peterson Mobility, page 14/34, http://mmaglobal.com/research/location-based- advertising-peterson-mobility, 2011-04-06

5 Location-based advertising by Peterson Mobility, page 14/34, http://mmaglobal.com/research/location-based- advertising-peterson-mobility, 2011-04-06

6 Location-based advertising by Peterson Mobility, page 14-15/34, http://mmaglobal.com/research/location- based-advertising-peterson-mobility, 2011-04-06

7 Accuracy of mobile advertising campaigns as compared with traditional mass media as an advertising medium, http://mmaglobal.com/articles/accuracy-mobile-advertising-campaigns-compared-traditional-mass-media- advertising-medium , 2011-04-06 8 The need for mobile measurement, http://mmaglobal.com/articles/need-mobile-measurement, 2011-04-06 9 Forget Foursquare: why location marketing is new point of purchase, published in Advertising Age; 3/22/2010, Vol. 81 Issue 12, p1-19, 2p. 10 Geo-Fencing, http://www.readwriteweb.com/archives/is_geofencing_the_next_evolution_for_location_apps_location_labs_think s_so.php, 2011-04-06 11 Smaato White Paper, http://www.smaato.com/media/Smaato_WhitePaper_Europe_BIGFIVE_10262010.pdf, 2011-04-20 12 NAVTEQ LocationPoint Advertising, introductary white paper, 2011-05-18 13 Mobile advertising 2020 by Acision & OgilvyOne, page 3/13, http://www.slideshare.net/andrewgrill/mobile- advertising-2020-vision-1794651, 2011-04-06 14 Article; the death of competition, James F.Moore 1993 15 The mobile computing revolution, Morgan Keegan report 2011 16 Location-based advertising by Peterson Mobility, page 15/34, http://mmaglobal.com/research/location-based- advertising-peterson-mobility, 2011-04-06 17 MMA; mobile advertising, http://mmaglobal.com/wiki/mobile-advertising, 2011-05-03 18 Location-based advertising by Peterson Mobility, page 1/34, http://mmaglobal.com/research/location-based- advertising-peterson-mobility, 2011-04-06 19 IAB; Interactive glossary, http://www.iab.net/insights_research/1494, 2011-05-04 20 Location-based advertising by Peterson Mobility, page 1/34, http://mmaglobal.com/research/location-based- advertising-peterson-mobility, 2011-04-06 21 MMA; location-based services, http://mmaglobal.com/wiki/mobile-advertising, 2011-05-03 22 Mobile Marketing 2010, Cindy Krum, page 116 23 Mobile Marketing 2010, Cindy Krum, page 117

24 Mobile Marketing 2010, Cindy Krum, page 117 25 Bluetooth technology, http://classic- web.archive.org/web/20080117000828/http://bluetooth.com/Bluetooth/Technology/Works/, 2011-05-06 26 WiFi alliance, http://www.wi-fi.org/knowledge_center/kc-howandwhyofwi-fi, 2011-05-06 27 Telia; NFC, http://nyheter.telia.se/2420/teliasonera-och-vasttrafik-testar-ny-mobilteknik-i-goteborg/, 2011- 05-06 28 Transit NFC, http://www.huffingtonpost.com/2011/04/06/nfc-mobile-wallets-public-transit- utah_n_845595.html, 2011-05-06 29 Mobile Marketing 2010, Cindy Krum, page 119 30 Official information page regarding GPS, http://www.gps.gov/systems/gps/, 2011-05-20 31 Investopedia, http://www.investopedia.com/terms/r/returnoninvestment.asp#ixzz1kZWYMapM, 2012-01-26 32 Defining CPM, CPC, CPA and CTR, http://ezinearticles.com/?What-is-CPM,-CPC,-CPA-and-CTR-?&id=1099007 , 2011-04-11 33 IAB; Interactive glossary, http://www.iab.net/insights_research/1494, 2011-05-04 34 Mobithinking, http://mobithinking.com/mobile-ad-network-guide, 2011-05-04 35 Mobithinking, http://mobithinking.com/mobile-ad-network-guide, 2011-05-04 36 Mobithinking, http://mobithinking.com/mobile-ad-network-guide, 2011-05-04 37 Mobithinking, http://mobithinking.com/mobile-ad-network-guide, 2011-05-04 38 Mobile Marketing Association and Out There Media, Permission, Privacy, Measurement “The Way Forward” 2011,, http://www.mmaglobal.com/MMA_OTM_Whitepaper_FINAL.pdf, 2012-01-28 39 Mobile Marketing Association and Out There Media, Permission, Privacy, Measurement “The Way Forward” 2011,, http://www.mmaglobal.com/MMA_OTM_Whitepaper_FINAL.pdf, 2011-05-25 40 Sony Ericsson; profile, http://www.sonyericsson.com/cws/corporate/company/aboutus/profile, 2011-05-02. 41 Sony Ericsson; profile, http://www.sonyericsson.com/cws/corporate/company/aboutus/profile, 2011-05-02. 42 Sony Ericsson; mission, http://www.sonyericsson.com/cws/corporate/company/aboutus/mission, 2011-05- 02 43 Sony Ericsson; financial news, http://www.sonyericsson.com/cws/corporate/press/pressreleases/pressreleasedetails/q4financialreport- 20110120, 2011-05-02 44 Sony Ericsson; Company facts, http://www.sonyericsson.com/cws/corporate/company/company/company- facts, 2011-05-04 45 Nokia annual report 2010; keydata, http://phx.corporate- ir.net/External.File?item=UGFyZW50SUQ9ODc3ODV8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1, 2011-05-02 46 NAVTEQ; history, http://corporate.NAVTEQ.com/company_history.htm, 2011-05-02 47 Nokia annual report 2010; keydata, http://phx.corporate- ir.net/External.File?item=UGFyZW50SUQ9ODc3ODV8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1, 2011-05-02 48 NAVTEQ Media Solutions, http://corporate.NAVTEQ.com/industries_media.htm, 2011-05-03 49 CAGR business definition, http://www.investopedia.com/terms/c/cagr.asp, 2011-05-18