ShopAlerts: Location-Based Advertising that Sticks

By March 29, 2010

PlaceCast’s ShopAlerts is a location-based advertising platform that launched February 25. The service uses geo-fencing around locations that, when triggered by subscribers in the vicinity, send them branded messages and ads.

If a customer enters a geo-fenced area, they’re sent a branded message. Sometimes it’s a promotion, sometimes it’s helpful information.

For example, in addition to geo-fencing its stores, North Face can geo-fence a mountain and, when users enter the area, send them an SMS saying, “Here’s the weather on the trailhead. Take more water.” No pull, but the brand stays prominent in the mind.

As an opt-in service, ShopAlerts brings a high level of customer loyalty to its platform, which helps explain the fact that 65 percent of users make purchases based on ShopAlerts messages. The people using the service are already brand-loyal, which ensures a high conversion rate.

Users can sign up in-store, on the store’s website, over social networks or via SMS.

PlaceCast sees marketing as a service, not an intrusion (the maximum ShopAlerts the service will send in a week is three). The company believes in advertising as conversation. As social networking has taught brands, communication-based advertising is a powerful way to increase loyalty and engagement.

What’s interesting about ShopAlerts is that generally subscribers don’t make impulse purchases based on the ads; on average, the purchase is made in the following three days. The message sticks.

“It’s not digital, it’s physical. It’s tied to something,” PlaceCast founder Anne Bezancon explained. “They (consumers) might be driving by the place a few days after they got our alert. Seeing that place makes them think of our message.”

PlaceCast launched at the perfect moment, entering a market so young there are no major players, but at a time when the space’s visibility is growing quickly.

Forrester predicts that mobile advertising revenue, which totaled $391 million in 2009, will reach $1.3 billion by 2014, and Juniper predicts that revenue from all location-based services will rise from $3 billion in 2009 to $12.7 billion in 2014.

PlaceCast is doing something we don’t see many in the mobile space attempting, “scaling backwards,” targeting feature phone (standard cell) users as well as smartphone users. While the majority of services today are focused on the smartphone market, it is still only a small part of the mobile ecosystem: of the 234 million U.S. mobile users, 42 million owned smartphones in January 2010, according to comScore.

This gives PlaceCast a much bigger reach than services solely dedicated to smartphones. Especially as GPS becomes increasingly standard.

InStat reports that GPS is one of the most sought-after upgrades for feature phones, and it is expected to become much more common in mid-range feature phones during 2010, according to Berg Insight.

Location-based services are poised for break out. SXSW helped further mainstream buzz, and second-wave adopters are beginning to use services like Foursquare or Gowalla. While the mobile market’s makeup means that location won’t explode like Facebook or Twitter, expect it to reach critical mass in 12 to 18 months (it’s slowed a bit by being dependent on the GPS ecosystem).

“Relevance in place and time is very novel,” Bezancon said.

The fact is that social networking, now that it has matured with Facebook and, to a lesser extent, Twitter, is accelerating the adoption of new services – Foursquare is an example of this, as is ChatRoulette.

Note: Last week PlaceCast raised $3 million in funding Quatrex Capital , ONSET Ventures and Voyager Capital, bringing total funding to $12 million.

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