The Promise of Hyper-Local Ads

Wi-FiApple Watch is now being promoted as a platform to deliver hyper-local ads. These are ads that are provided to you locally at a given store or other location – essentially instant specials that are provided at the point of shopping or purchase. The advertiser’s dream has always been to use hyper-local ads to get you to pause to look at things you might have otherwise walked past, or even to lure you into a nearby store you might have otherwise gone past.

This is an idea that has been around for many years; advertisers are chomping at the bit to make this work. The problem has always been finding a method of transmitting the ads to people in a way that can be widely accessed and used by enough shoppers to make it worthwhile for the advertisers.

For a long time retailers have been working on ways to make this work using a smartphone. But there are issues with that. The primary issue is that a shopper needs to download an app for each store they shop at in order to participate. This works fine in large department store or a grocery store, but it’s unimaginable to make this work in a busy mall or shopping district with hundreds of stores.

There are also privacy issues. Currently the easiest way to contact strangers would be to send them a text message, but it’s against FCC rules to send unsolicited text messages to people with whom a business doesn’t have a relationship. Plus texts are quite limited in content and looks and don’t have the pizazz that advertisers want.

A lot of stores have customer loyalty programs today that are a tiny start towards a hyper-local ad system. For instance, my wife likes Target and she uses their shopping app. When shopping she can scan any item with her smart phone and the app will tell her more about the product and also offer coupons if there are any. But this is not hyper-local advertising and my wife describes this more like a scavenger hunt where it takes a lot of effort to find the best specials in the store.

There is also the technology platform issue. Apple has assumed that an eventual winner for hyper-local shopping is going to be beacons; they have built the ability to communicate with beacons into all of their devices using the iOS7. Beacons are small devices that will communicate with shoppers using low-power Bluetooth technology. This means that the communications will be very short-range and a person needs to be pretty close to a beacon to get a notice from it.

There are retailers now testing beacon technology. Target, for example, just installed beacons into 50 of their larger metropolitan stores. Even in this first run Target is worried about overwhelming shoppers. They are making a shopper confirm three times that they want the beacon messages and they are then limiting these messages to two times per given store visit. Of course, power shoppers like my wife are probably going to demand many more pings!

With beacons the retailer can provide coupons to a shopper as they shop. And with loyalty shoppers they can provide the coupons that they guess will be most effective based upon that shopper’s past purchasing history. When fully implemented this will be one of the first truly hyper-local ad experiences.

The precautions that Target is taking highlight the risks of hyper-local ads. If they become too overwhelming or annoying then most customers will likely turn them off. And off course, reluctant shopper like me are never going to use this, and so the system is not going to work with everybody in the store. And there are still going to be technical issues. If a person has turned off their Bluetooth then this isn’t going to work.

One of the biggest concerns expressed by a survey of Target shoppers is that they don’t want the store to use the technology to track them when they are in the store. Target says they will not do this, but one has to suspect that they are going to have a hard time not mining that data when it’s lying right in front of them. The more any given store knows about the overall habits of their customers will help them increase sales. But even scarier, the more they know about you personally, the more they can coax you to spend.