xAd CEO: Forget Mobile — Location is the New Category for Marketers

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For local technology companies, a mobile tide raises all boats. More users means more data, and eventually more opportunities for marketers, businesses and tech companies to create better ways to connect businesses with local consumers.

That’s particularly true for the handful of mobile advertising companies that have bet big on location. New York-based xAd has doubled its annual revenue in each of the past two years. With offices in London, China and India, the company has grown from one of many ad tech plays in New York into a defensible global business.

We recently caught up with Dipanshu “D” Sharma, chief executive at xAd, to talk about mobile, data and why location is becoming the new category.

Since we spoke last, the mobile-local ad sector has caught fire. What’s changed since the summer of 2013?
The overarching wave we’re all riding is mobile. Everyone has a smartphone and there’s now tons of location-enabled apps which people use throughout the day. Last year, the spend in mobile was about 3% of media spending; this year it’s about 6-8 %; and the hope is to get it to 15% where it would match consumption.

We have a long ways to go but I think marketers have really started to understand that they need to move money to location. The challenge for us, both at xAd and in the industry, is to figure out which strategies work and which don’t. But from a high level, we’re seeing that the movement to location [marketing] is happening faster than other media types in mobile and that’s benefiting all of the companies in the space.

Part of the confusion around location stems from the question of whether it’s a tactic, appended to all media, or a category in its own right that necessitates its own technologies, vendors, budgets etc.
We believe very strongly that location is a category. Like search became a category in the mid-2000s and social became a category a couple years ago, location is becoming the new category. It used to be that location was a part of mobile — now it’s not the same. Particularly for fast food, retail and even automotive, location is the category brands are investing in.

If you’re are a retail marketer, for instance, and you have a budget of $1 million which you are going to spend between social, search, mobile and location, the data shows that location will outperform everything. That data is created by marketers — not us.

The sector seems to have reached a crossroads, with some companies like PlaceIQ expanding into a more data-centric business and others such as Thinknear staying closer to media. Do you see xAd as a location data company with a media business or a media business with a location dataset?
Look, we don’t separate data from media. The reason we don’t is because we have technologies that improve the performance of both. The whole strategy of separating data and media is not useful for the customer or the brand because the performance is not measurable.

The other issue with the data-only companies is that they don’t have good data. They best they might give you is the street-level address of place, but there’s no information on the way people interact with that place — so you’re acting on bad data without understand how the media is converting. It’s garbage-in garbage-out.

When you look at the development of what you’ve called the “location category,” what’s the main story line? Help us understand the arc of the sector.
First, the [positioning] technologies are just getting better over time in terms of GPS. We are seeing 300 billion ad impressions over a given month — and that’s a ton of impressions. Of those, a significant percentage are highly accurate. As we have a better understanding of the accuracy of the data, we can begin to use different data for different purposes.

Naturally, the finer you go [in terms of targeting,] the less traffic there is to purchase. But in many ways, it’s the same as Google search. The less inventory, the higher the prize on bidding. I believe the evolution of location advertising is going to be where accuracy and context of the person will drive a higher purchase price.

Doesn’t that just reflect the broader shift to programmatic? Are there aspects of its development that are unique to location?
It has been very hard to differentiate one impression from another in terms of quality [on exchanges.] Most bidding is happening on the audience-side which is based mostly on demographic or psychographic profiles. There is no easy way to say what the sales lift was based on the buying you’ve done programmatically.

Now, that’s changing. Why did online advertising take off when it did? It was because you could measure the impact of the cookies you were buying. That’s starting to happening in mobile, but it hasn’t happened in the full capacity yet. And in many ways, measurement is the key to price variation within programmatic environments. The lack of measurement in the industry today is why the programmatic prices aren’t where they should be.

One of the largest legacy categories, television, appears to be opening up. What role can location play in the evolution of the TV market?
We think about location as a way to measure offline behavior, and to create a general metric for all media. If your audience sees an ad, and that can be on TV or another media, you can use location technology to see if they went to a location in the real-world. We work with several out of home companies where visitation becomes an offline metric that wasn’t there before.

Steven Jacobs is Street Fight’s deputy editor.