Why the iPhone Won't Revolutionize Location-Based Advertising (But May Help)

(MoneyWatch)  While the new 3G iPhone will surely sell in massive quantities, will it be able to break open the tough-to-crack nut of location-based advertising? An article at ClickZ speculates:

"What's going to start evolving is applications for more of a content device, rather than more of a communication device. It opens up applications for advertisers," said Maria Mandel, senior partner and executive director of Digital Innovation at Ogilvy Interactive.

In partnership with Apple, Loopt will offer a software app to help users locate and make plans with friends using the iPhone's GPS locator functionality. There are opportunities for local businesses to advertise, or sponsor sessions.

And as anyone who's spent any amount of time with an iPhone can attest, Apple's phone does make surfing the web significantly easier, and thus more eyeballs are going to be looking at web pages from phones instead of computers. But the real promise of mobile advertising is location-based ads, and I still think we're a ways off from those being 1) accepted and 2) effective.

For the first point, the simple matter is that phones are still seen primarily as tools, as communication devices. No matter how much Hard Rock Cafe offers to discount my Harvey Wallbanger, I don't want to suddenly have my phone light up and find out that I'm being solicited when I'm walking by a location. Phones are still perceived as more utilitarian appliance than entertainment device, and we don't like it when our tools are trying to sell us things.

Even if these type of ads become accepted and the number of GPS-enabled cell phones keeps growing, we're still a long way away from any sort of critical mass. The rates of engagement needed for a location-based ad campaign to have any decent ROI would have to be astronomical if the majority of consumers lack the basic technological necessities to see the ad.

That said, the iPhone is the best chance for this new form of advertising to take off, and the Apple brand can make a lot of unpalatable and unfeasible things palatable and feasible (looking at you, iTunes Store). If advertisers can figure out a way to gently nudge a consumer, and the location-based ads are well-crafted and engender good response, it could work. But I wonder why exactly we need these ads beamed to our phones when we're walking around, when there's long been a socially accepted way to advertise to people when they're nearby your service or store. It's called a sign.

Photo from Flickr user William Hook, CC 2.0