Why Intuition Fails Us in Mobile Advertising

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ProfessorAlbert Einstein has been quoted as saying: “The only real valuable thing is intuition.” But if I can be so bold as to contradict one of the most brilliant men in modern history, I have to say that Einstein’s words do not hold true in mobile advertising. Those who succeed in mobile advertising are guided not by intuition, but by data.

As we watch the industry evolve, we see that the mobile opportunity is exploding. More than 100 million people in the U.S. have smartphones, consumers spend 60 minutes or more on their devices each day, and people glance at their phones about 150 times a day. Last year alone, over $4.1B was spent on mobile advertising representing an 177% increase from the year before. By 2017, eMarketer predicts the number will be $27.1B.

However, now that advertisers are recognizing the opportunity, the focus should turn to whether ad dollars are being spent efficiently. When mobile was in its infancy, it was appropriate to use intuition and past experience as a guide for how to run mobile ad campaigns. However, the time has come for us as an industry to evolve and begin to use data and empirical evidence to guide our mobile advertising. We need to test and validate our intuitions with unique mobile data to optimize campaign performance.

Fortunately for the industry, interesting and actionable data is becoming more available by the day. Telenav (disclosure: the parent company of Thinknear, and my employer) has been powering mobile location services for the last 14 years. The mobile data we have collected is unprecedented. We have powered over 2 billion mobile consumer experiences since 2007, giving us access to valuable data on how users interact with brands and businesses in their local markets. By sharing some of this data on how consumers use their mobile devices, we hope to help the industry make data-driven decisions about the best way to spend mobile advertising dollars.

Distance Matters
When most retail advertisers create a geo-fence (a set radius around which they show ads), they typically pick an arbitrary number of miles around their locations. However, the distance chosen can have a very real impact on the performance of the campaign. We use a metric we call Drive To Rate (DTR) to measure a user’s willingness to travel to a business. As I’ll outline below, there is a clear correlation between how far the business is from the consumer and the DTR. But, advertisers should avoid looking at distance in isolation; that’s the trap of intuition! When we look at data, we see that the local market, the advertiser category and other factors all impact DTR performance and ultimately, campaign performance. This is a critical insight for brands and agencies, and without the data advertisers risk over-paying for campaigns that underperform.

So if you are trying to drive in-store visits, how should you decide what radius to set around your locations? It turns out that there are four key criteria you should look at for your business to determine the size of the radius.

1. Local market dynamics: Consumer behavior differs by city. Manhattan is extremely dense and our data indicates the distance a consumer will travel to a business in New York is less than half the distance they will travel in less densely populated areas such as Houston, Texas. Geo-fence sizes should vary by locality.

2.  Category Variation: Behavior also varies significantly by category. Potential customers will travel further for a cup of coffee than they will for an ATM. They’ll travel longer to shop than they will to eat. And they’ll travel further still to buy a new car. That’s intuitive, but, knowing the optimal distances to target in each category and in each market can make ad spend much more efficient.

3. Time of Day: Leveraging ad targeting by time of day is common practice, but advertisers should think outside the meal-time norms. Did you know that the distance customers are willing to travel to a business varies by time of day? It does! And having that data helps optimize campaign performance.

4. Day of Week: Like time-of-day behavior, day-of-week behavior can also impact campaign performance. Mobile users are typically willing to drive further to reach a business on the weekend than they will during the week, so geo-fences can be expanded to increase inventory without hurting performance!

As you can see, data can help guide mobile advertising strategies that result in real ROI gains. As you consider your next campaign, make sure you think hard about your goals as you manage the balance between intuition and a data-driven approach to mobile advertising. Doing so will lead to better campaign performance and more customers walking through your doors.

Portnoy, EliEli Portnoy is General Manager of Thinknear by Telenav, the only mobile ad network focused exclusively on using location more intelligently to build a better mobile advertising experience for brands, agencies and consumers. Eli can be reached on Twitter at @eportnoy.