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A Short History Of Location Marketing: Retailers And The Blockchain

  • Written by  Gary Schwartz, Location-Based Marketing Association

 

0aaGary Schwartz LBMAI recall having coffee with Asif Khan, the founder of the Location Based Marketing Association in 2014, when he explained how location was soon going to become the “new browser cookie.”

“Your location tells us more about your intent to take action than any other single data point,” Khan said.

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Over the past few years, retailers, brands and services have designed their applications around location data sent to them from the always-on mobile consumer. The consumer’s latitude and longitude are used to optimize advertising, drive loyalty, inform communication and media attribution.

Foursquare proved that we could influence behavior of consumers based on location rewards: scavenger hunts meet coupon clipping. Although Foursquare badges incentivized behavior, by 2014 it lost momentum.

Why? Foursquare is not simply a technology. It needed to demonstrate to consumers that it had momentum to drive adoption and sustain engagement. 

Foursquare’s Social Graph required a mass network effect. For this reason, leviathans such as Google and Facebook were able to coopt Foursquare’s marketplace.

In this blog, I take a look at the potential of decentralized location-based marketing networks and question if blockchain architecture can be a new tool for brands and retailers outside of traditional online strategies offered by centralized advertising such as Google and Facebook.

The Rise Of Location Marketing

In the late 2010s, it became clear that location was a differentiating data point for the ad networks:

  1. We know where the consumer was in the world;
  2. We also know the consumer is mobile and on a journey that can be interrupted and influenced.

But location had more value than an additional data point.

Location allowed brands and retailers to build a bridge between the virtual world and the physical world. This is an invaluable tool in a market where offline-to-online (O2O) shopping is becoming a challenge for every retailer on Main Street.

However, the question is: with foot traffic down, how can retailers capitalize on proximity? Network scale becomes crucial to the success of any location-based marketing platform.

Back in the 1980s, Robert Metcalfe showed that combining many communication devices allows for a network effect. Networks such as the Internet, social networking and the World Wide Web all demonstrate that any network is the square of the number of connected users in the system (n - squared).

Where can retailers look for new network audiences to drive engagement?

The Distributed Network

What is exciting about the blockchain is that there exists a global, distributed and trustless network of captive users. Harness this community and we will see an explosion of use cases that the earlier Foursquare and Pokémon Go communities could not imagine.

The combination of location services on a transactional network that allows for the free flow of value is an exciting opportunity.

We saw some initial (non-location based) mania around the ERC 721 CryptoKittie, a game that allowed users to purchase, collect, breed and sell virtual cats. In December 2017, the CryptoKittie game congested the Ethereum blockchain network, causing it to reach an all-time high in transactions and slow down significantly.

Pokémon Go had previously showed the success of combining location and augmented reality. Pokémon Go captured the imagination of consumers by elegantly blending fantasy with the real world. The game’s algorithm used climate, vegetation and time of day to select character. (Hunt in the evening and users found nocturnal Clefairy. Hunt in the canoe in a lake and users found a Seadra Seahorse.) Interactions were targeted and rewarding.

Can the blockchain plus a location-based marketing bridge into the real world drive this level of engagement and move consumers effectively? What models could drive network effect and engagement in 2019?

  • Geon.network is an interesting model as they are creating a virtual economy where users can virtually locate, fund and mine for coins. 
  • Verses.io is creating a blockchain augmented reality digital twin that users can interact with to game, or as commercial pay services. 

The blockchain network combined with location and AR enables a new economy of consumer-friendly services. Google, Amazon, Facebook and Apple’s dominance is primarily driven by the network effects of big data and AI. They play the middleman and we pay the middleman.

GEON.Network and Verses.io’s model drives efficiencies and eliminates this costly custodial layer. For companies that rely on brokering data insights and brokering payment fees, this new network architecture is difficult to absorb into their legacy business.

As these new networks optimize distributed design for the new blockchain consumer, their communities will grow. As they leverage the blockchain to create consumer-centric solutions, they may become an interesting option for retailers and brands seeking customers.

Here is a short list of location-based marketing milestones:

  • Pre-Internet: We had postal code and clumsy direct marketing list management.

  • Late 1990s: With Internet and the unique mapping of IP addresses marketers began digitally buckshot targeting areas the size of a postal area.

  • 2000s: With a phone in the consumer’s pocket, we could begin to target the owner and their digital behavior.

  • Late 2000s: As smart devices entered the market with GPS capability, satellite positioning allowed for geofencing.
  • In 2009, Foursquare took the mobile world by storm driving consumers into retail locations using GPS to promote loyalty services globally.
  • Early 2010s: Accuracy and indoor navigation was solved by combining smart WiFi services. Meraki and Aruba WiFi units powered better consumer targeting and engagement in browser. Cost-effective Bluetooth beacons provided the same hyperlocal (within one meter) targeting for mobile apps.
  • Mid-2015: We saw a boom in proximity marketing solutions in sports stadiums and malls.

  • In 2017, location went social. Millions of consumers held their mobile phones up to catch Pokémon Go using augmented reality to collect fantasy creatures.      
  • In 2018, companies such as GEON.Network and verses.io are beginning to create new platforms combining location, augmented reality and cryptocurrency to drive engagement and network value, all on the blockchain.

Gary Schwartz is the author of The Impulse Economy and FAST SHOPPER, SLOW STORE and is the Global Director of the Location Based Marketing Association. Schwartz has played a leadership role in the North American technology industry, founding, investing in and managing a number of companies in the adtech, healthtech, fintech, social media, automotive and blockchain verticals.

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