Can telematics make ads profitable in cars?

Can telematics make ads profitable in cars?

NavTeq thinks there's money to be made from delivering ads within navigation systems, and has been serving such ads for over 18 months.

A recent US trial of its LocationPoint ad-serving network found that people were more than 13 times more likely to click on its ads than they were to click on Internet banner ads.

LocationPoint can serve ads to mobile phones, personal navigation devices, and installed navigation units.

Garmin has been very involved in the ad tests with large advertisers, including McDonald's and Best Western.

In the early stages, such companies, with their huge ad budgets and ubiquity, are most likely to be willing to test location-based advertising, according to Christopher Rothey, vice president of advertising for NavTeq.

But this market should expand.

“The goal with location-based services is not only to get so local that the recipient of an ad feels like the offers are very relevant,” Rothey says.

“You also need to get hyper-local on the merchant side. There are many local merchants that over time will find this to be a very useful outlet for them.” (For more on local search, see ‘Telematics and local search: The next big thing ’.)

Another potential ad-server is Apple, with its iAds, which has been positioned as a way for developers to make money and keep app prices low—or even free.

Ad-supported software has been around for more than a decade; ad-supported Internet service mostly flopped, while ad-supported mobile phone service is still at least twitching.

Apple has not said anything about using iAds to deliver ads to navigation services or cars, and there hasn't been any chatter to that effect. (For more on connected vehicles, see ‘Making The Connected Car A Reality’.)

Have model, need volume

One important, but still unanswered, question about advertising on mobile applications, whether delivered via iAds or another platform, is what happens to the in-app ad when the app itself is translated to the car's HMI?

Clear Channel's iheart radio is a free application, but Len Konecny, vice president of business development for Total Traffic Network, points out that there are ways that it, or another radio-like application, could deliver ads to a car.

For example, Internet radio applications could display advertising on the screen that shows the album cover and song information.

The biggest barrier to an in-car advertising industry right now is lack of volume, according to Konecny.

With only around two million HD Radio units on the streets right now, “When you don't have the volume, you don't have the model,” he says.

“Two million people for an advertiser are not that exciting, especially when you can buy a radio station in New York City and get the same reach.”

In-car coupons, anyone?

Ad-supported content and services may get more interesting in light of cellular carriers' limitations on data consumption; the days of all-you-can-eat iPhone are coming to a close.

“Removing the unlimited data tier gives carriers room to negotiate with providers of popular third-party apps,” says Andrew Poliak, director of automotive business development at QNX Software Systems, a vendor of software and development tools for embedded systems.

“They could be bundled with the data plan in return for a revenue share.”
One potential model, according to Poliak, would be a car company partnering with a search provider to include its search in the navigation system, along with coupons for particular businesses, such as a restaurant.

The carmaker could show that a call was made to make a reservation, while the coupon showed that the person actually showed up and how much money was spent.

Google already makes billions on search advertising by collecting a few pennies every time a searcher clicks on an ad.

“Not only searching but showing that a consumer did something resulting in revenue from that search has to have higher monetization potential,” says Poliak.

“That type of creative business modeling could subsidize the cost of built-in electronics and a monthly connectivity subscription.”

But will mobile ads work?

ABI Research analyst Dominique Bonte isn't sure that mobile advertising makes a lot of sense in the car.

“Typical mobile phone usage is based on urgent needs, like looking something up,” he says. “Those are not the moments you're most open to advertising.”
He's even leery of the discount and coupons strategy that have long been touted as the key to location-based advertising.

“When you're driving and want to go to certain specific place, I don't think you will go out of your way to whomever is offering a discount,” he says.
One thing the industry should not do is simply follow the Internet browsing model, Bonte cautions.

“We don't know enough about human driver behavior,” he says.

“You need to start from scratch, look at the behavior and circumstances, and see what's best. That's not been done enough.”

Susan Kuchinskas is a regular contributor to TU.


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