Study Finds Local Online Ad Outlook Strong; Calls for Mobile Regulation

Marketers are becoming bullish about their current and future investment in local advertising, particularly in local online media, according to a study released this week by GMSLocal. However, members of Congress such as Rep. Edward Markey (D-Mass.) believe that the mobile technology that could drive such growth may need stricter regulation.

The GMSLocal study, entitled Perception vs. Execution: Examination of Brands’ Local Business Strategies Reveals Gaps to Act On, reveals that 83% of marketers surveyed expect their local online spending will exceed the projected national growth of 25% over the next three years. The study’s findings include:

• Google states that 20% of all searches have local intent, and that number jumps to 40% when conducted on smartphones.
• Foursquare, the location-based user check-in service, reached 1 billion check-ins as of September 2011.
• A 2011 comScore study indicates that 50% of consumers select a local business based on ratings and reviews of others.

The study chides national brands for failing to take advantage of local advertising: “There is a clear disconnect between a marketer’s perceived actions with local online advertising and the reality of what is actually being implemented,” the report stated. For example:

• One of three surveyed have not invested in local online business directory listings.
• Only 40% have invested in local business listings.
• Only 45% have invested in geo-modified paid search.
• Only 55% have participated in local online review sites.

The study suggests that marketers may not have a clear understanding of local fundamentals and to audit their investments in local promotions. “Nearly 85% of marketing executives for national brands say their local investments will continue to outpace national averages, which confirms the local digital trend and a commitment to the space,” the report concluded. “With this kind of investment taking place, it is imperative to look for opportunities where other brands are not.”

Local advertising’s future hinges, in part, on the interactivity that local consumers can have with business through their mobile devices. “Technology and mobility have opened the gateway for national brands to be able to create personalized experiences with consumers at the local level,” said Steve Scherfy, Local and Mobile Manager for GMS Local. However, this interactivity is falling under scrutiny in Congress.

Rep. Edward Markey (D-Mass.), co-Chair of the Bi-Partisan Congressional Privacy Caucus, released a discussion draft of The Mobile Device Privacy Act, which, if passed, would require businesses that provide mobile devices, applications and services to disclose to consumers if their products have any technology that can monitor and report device usage back to the businesses. Providers also must get express consent from consumers before they can collect and use information about consumers’ use of their devices.

The bill requires the Federal Trade Commission and the Federal Communications Commission to create regulations regarding such monitoring. The bill also gives individuals the right to bring an action if the law is violated.

Rep. Markey remarked in a press release that he was “concerned about the threat to consumers’ privacy posed by electronic monitoring software on mobile phones.” He added “consumers have the right to know and to say no to the presence of software on their mobile devices that can collect and transmit their personal and sensitive information.”  Markey proposed the bill after news broke last month that millions of mobile devices contained Carrier IQ software that can track every keystroke of users and send the information back to the software company.

On January 19, 2011, court records show that Twin Cities resident George Howell filed an action against Carrier IQ and other carriers in the United States District Court in Minneapolis, alleging that monitoring violates federal privacy, wiretap and fraud laws. Similar lawsuits are pending in other jurisdictions, including California.

The regulatory landscape for mobile devices is evolving. The scrutiny is focused on surreptitious tracking of user activity on their mobile devices, such as collecting, using and analyzing users’ keystrokes on their devices without their knowledge. To minimize risk, hyperlocal news publishers should rely on mobile partners who obtain consumers’ consent before services are offered to consumers based on their locations. Such permissions typically are obtained when a user first downloads or activates an application. For example, Foursquare applications for mobile devices give users choices about if and how consumers provide information on their location, such as, providing GPS tracking.

This article is intended to provide general information and not legal advice.

Brian Dengler is an attorney with Vorys Legal Counsel and journalist who covers legal issues in eMedia. He is a former vice-president of AOL, Inc., a former newspaperman, and an EMMY-winning TV journalist. He teaches new media issues as an adjunct at Kent State University and formerly at Otterbein University.