“Consumers are savvy enough to expect advertising,” said Angela Steele, a director at Starcom USA, an ad-buying agency based in Chicago. “They are accepting of it, but they want it to be relevant. If they are getting something they are interested in, that is great. But if they are sending ads that are not relevant, people won’t want it.”
Location-based ads are of great interest to advertisers who have seen shoppers eschew traditional forms of mass-market advertising on television and in newspapers and magazines.
“The key is to add value,” said Cyriac Roeding, who runs CBS Mobile. “At the end of the day, if the consumer doesn’t win in this game, there is no game.”
Mobile phone users already see ads on Web pages. But with the CBS service, instead of a more or less random banner popping up on the screen, people who have chosen to participate might see an ad from a business in the neighborhood, even one within a block or two.
As with any early endeavor, there are caveats. For now, the ads will be seen only by site visitors who have phones with G.P.S. capabilities and are customers of carriers that have deals with Loopt.
For now the only such carriers are Sprint Nextel and Boost Mobile. Sam Altman, Loopt’s chief executive, said he had been negotiating with all of the major wireless carriers in the last year and expected them to be on board when the service is introduced this year.
By the end of 2008, he said, as many as 50 million mobile phones in the United States could be equipped to get location-based ads. “We have been talking about this for a long time,” Mr. Altman said. “Finally everything is aligned.”
Mr. Roeding and Mr. Altman have been discussing plans to offer location-based ads since last summer when the two met in Silicon Valley to discuss how they could become partners. But, as these things often go, Mr. Altman had to woo various other partners to make it happen, including mobile carriers and other technology companies.
The two sites where the ads will appear had five million unique visitors in the fourth quarter of last year, CBS says.
CBS Mobile has not yet lined up advertisers, but Mr. Roeding expects that national sponsors will be the first to sign up. Local advertising has not taken off on most Web sites because it is hard for advertisers to know where their customers are. But with location-based ads, small retailers could tap more niche audiences.
Mr. Altman said Loopt was working only with CBS for now but would pursue other media deals. He would not disclose the terms of the CBS deal.
As with any marketing on a device as personal as a cellphone, privacy is a major concern. Ms. Steele said she recommended that consumers be required to choose to receive location-based ads, lest overzealous advertisers bombard them with messages, causing shoppers to resist getting them altogether.
CBS Mobile and Loopt are requiring that interested customers “opt in” once the ad service starts. And to further protect privacy, the two executives say the ads are delivered anonymously and the location history is not stored.
Depending on how successful the two are in pioneering the ads, more companies could follow suit, Ms. Steele said. That is what CBS Mobile and Loopt are hoping. “We are doing it first so it doesn’t get ruined for everyone else,” Mr. Altman said with a laugh.