SAN FRANCISCO (Reuters) - Mapping technology advancements from Google Inc and Facebook Inc that provide more precise user location data than ever before are starting to dent advertisers’ longtime skepticism about boosting mobile ad spending.
In recent years, major retailers have restricted mobile to 10 percent or less of their ad budgets because of difficulty gauging their effectiveness and a limited ability to target shoppers by location.
Targeting is now much easier, to the extent that a consumer walking past a given retail outlet can receive ads in his or her Facebook or Google app showcasing some particular product available at that store - perhaps offering a discount coupon to lure them inside. That is a tantalizing prospect for companies if it leads to actual sales.
Gauging the ads’ ultimate effectiveness remains a challenge. And privacy advocates say the location tracking and targeting is intrusive and gives companies too much ability to track users’ movements over time.
“It’s unfair for the companies to pull data from the user this way,” said Marc Rotenberg, president of the Electronic Privacy Information Center.
But for Facebook and Google there are early signs the new technology is already paying off. Six advertising firm executives representing more than 50 clients combined, told Reuters in interviews that clients have invested significantly more since the holiday season in mobile ads as a result of this new technology.
In some cases, these advertisers, including major retailers they declined to name, are investing up to 40 percent of their advertising budgets on mobile ads, four times as much as at the end of last year.
With consumers spending more time on smartphones - Google said in May that mobile searches outstripped desktop searches in the U.S. and nine other countries - millions if not billions of dollars are at stake in winning advertisers over to mobile platforms.
Facebook and Google are widely considered to be at the forefront of this shift. Google claimed 37 percent of U.S. mobile ad revenue share in 2014 and Facebook had 18.5 percent, according to data from research firm eMarketer. Twitter, which had the third-largest share, was far behind with 3.6 percent of the share.
Other tech companies that cannot keep up risk losing a share of the fastest-growing part of the advertising industry. U.S. mobile ad spending more than doubled in 2013 to $10.7 billion and is projected to increase 50 percent in 2015 to $28.7 billion, according to eMarketer.
Responding to privacy experts’ concerns, Facebook said it uses privacy-protecting measures when targeting users to ensure location data is not misused. Google declined to comment for this story.
Advertisers say they are aware of consumers’ privacy concerns. But federal and state laws do not regulate location data and collection.
While this new effort has improved mobile ads, it is still difficult to show their effectiveness. On desktop computers, advertisers can easily see who clicked on their ads and made purchases, whereas it is nearly impossible to prove a mobile ad drove someone to a store.
Facebook and Google have advanced that technology by offering more precise location targeting, but in many cases are still unable to show whether a mobile ad drove in-store traffic.
Facebook said that it is determined to prove to businesses that mobile ads drive people into their stores. The company can sometimes determine if the ads drove purchases by looking at in-store sales and matching them to the number of times an ad is clicked on mobile.
“If they are able to crack that code, there are going to be a lot of retailers investing a lot. It won’t just be the Macy’s and Walmarts that have the money,” said Valerie Davis, senior vice president of paid digital media at PM Digital, which represents Steve Madden, L.K. Bennett and other retailers.
Editing by Stephen R. Trousdale and Christian Plumb