Could the Mobile Ad Industry Spin off a Data Business?

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CPU Unit Server Room Data CenterBy now, Duncan McCall is probably ready to leave Las Vegas. When I spoke with McCall, the chief executive of mobile advertising firm PlaceIQ, on Monday, he was embarking on a two-day long sales trip to the Consumer Electronics Show pitching thirty or so brand marketers on the virtues of the company’s technology. In preparation, the company assembled dashboards — one for each brand — that offered graphics and maps detailing their customers’ goings-on in the real-word.

These kinds of bespoke data visualizations have become killer sales tools for mobile advertising firms. The data collected by mobile companies is often far more comprehensive than their online counterparts, offering insights into the complexities of consumer behavior between places — not just websites. It can tell marketers where a potential customer shops, offer insight into the work life balance of existing customers, and compare travel habits of New Yorkers versus Chicagoans.

Today, those insights are mostly a means to an end — a way to sell media. But the question facing mobile advertising executives is whether that data might actually become a business in its own right. The data business, long dominated by a handful of large providers, offers a way to expand revenues into new industries but most companies are hesitant to move beyond enterprise marketing budgets.

“There’s a ton of interest [in our data] from others, and clearly, there are opportunities to develop ways to break these things off and make them stand alone businesses that could be monetized independently of media,” says McCall. “But one of the biggest problems is that companies often do not have the budgets for data. They may have budgets for media with data, but not data on its own.”

McCall learned that the hard way. The five year-old company originally launched as a data business, mining and selling information to a marketers, analysts and others. Quickly, the team found itself not only struggling to find a market, but also incapable of ensuring that the marketers using the information, often through the agency, used the systems correctly. That loss of control, even more than the budgets, led the company to develop a more media-centric approach.

“The really big thing was that if you do not have media, your data is often being used by another party — and if your data is sophisticated, you will  lose control of it,” said McCall. “We never were able to to have the direct relationship with the client. We were just throwing our data over the wall to the third party and hopig all worked well.”

However, the environment has changed dramatically in the four years since PlaceIQ launched. The number of Americans owning smartphones jumped more than 150% between January 2011 and October 2014 according to Comscore, dramatically expanding the reach of consumer location data. Meanwhile, the number of publishers passing along ad requests to programmatic buying exchanges, which serve as the mine through which these companies extract most of their consumer data, has grown considerably.

Brett Kohn, vice president of marketing at Thinknear, a San Francisco-based mobile advertising firm that competes with PlaceIQ, says the amount of ad requests with latitude and longitude data more than doubled last year. The company, like its competitors, uses the data passed along in mobile advertising request to compile profiles of the users for each device.

Kohn says the company, which is part of mapping giant Telenav, does not currently plan on developing a separate analytics product. But he does believe that the quality of location datasets offered in the mobile advertising industry will reach a meaningful scale by the end of the year.

“A year ago, we had the frame around the puzzle, so to speak, but you were missing a lot of the pieces inside that puzzle. “I don’t think any company has the complete picture yet,” said Kohn, speaking about the consumer profiles the company develops. “But I do think that by the end of this year, there will be two or three vendors [whose] data is getting rich enough that its impacting the brand.”

One startup that has found success building a data business is the Seattle-based Placed. The company operates a panel of thousands of users who share their location throughout the day via a mobile application. The company began offering a market research service to brands but has since developed an attribution product that allows mobile advertisers to measure whether users within its panel saw a marketers mobile advertisement and end up going into a store days later.

The attribution service has grown rapidly over the past two years, and will likely play a more decisive role in the direction of the company moving forward. Attribution is a complicated problem in the mobile advertising industry, and one that will continue to garner more attention over the next few years as investment grows. Non-mobile media opportunities will also emerge as technology allows marketers to better connect smartphones to activity on other devices.

But David Shim, chief executive at Placed, says the market research business, which traditionally suffered from a longer sales cycle, started to pick up toward toward the end of last year.

“Fast forward to the fourth quarter of 2014, and we had people proactively coming back to us — because the market is becoming more proactive in finding new ways for market analysis,” says Shim. “Are they huge budgets? No. But they could grow into them.”

The analytics business may offer more risk than reward for mobile advertising firms today but the market for an offline analytics business undoubtedly exists. Businesses spend billions in shopper marketing and consumer research each year and the methods mostly remain extremely inefficient. The question for mobile advertising firms is whether the opportunity is big enough.

Steven Jacobs is Street Fight’s deputy editor.

Find out more about the explosion of mobile data at Street Fight’s Local Data Summit in Denver on March 5th. Hear from and network with top executives, including Placed’s David Shim. Register now and save $400!