From pay-per-click to pay-per-drive

First, there was pay-per-impression, beginning in the days of Netscape and providing the first way to subsidize online content.

Then, there was pay-per-click, pioneered by Google, the first online performance-based advertising that allowed more precise ad targeting and data collection, as well as the ability for any blogger to bank returns.

Now, as auto manufacturers integrate more on-board apps, and developers attempt to subsidize the price of those apps with location-based advertising, one company is following the continuum into a novel direction: pay-per-drive.

It’s nascent yet, and Hassan Wahla, vice president of business development of TeleNav, whose Scout navigation system has implemented pay-per-drive, isn’t quite sure when it’ll catch on. “It could be three years, five years, ten years,” he says. “But I have no doubt that it will."

Pay-per-drive is essentially an extension of pay-per-click. 

You’re hungry, so you search for restaurants on your route home from work. Olive Garden, a sponsored restaurant, pops up, and you click on the result, book a table, plug the info into the navigation system and drive over.

In this case, TeleNav just hit a trifecta of advertising, first from the click, second from the booking and third from the drive. 

But say you search for a restaurant on your route home and don’t click on the Olive Garden ad or call the restaurant, but you still drive there. In this case, TeleNav would still get revenue from pay-per-drive. “With pay-per-drive, we close the loop,” Wahla says.

Cashing in on location

Pay-per-drive is one of the first ways that companies are finally trying to cash in on location-based capabilities of both mobile and on-board apps.

Google just tweaked its Offers app so that saved offers pop up when a user is near the location of the promotion. And many in-band radio services are looking into catering their advertising to the location of the listener. (At the moment, TeleNav is working with Ford, GM, Sony and Delphi to test the pay-per-drive concept.)

What pay-per-drive aims to do is take a form of monetization traditional to the domain of browsers and adapt it to the car. And this may work better on navigational apps than radio.

(For more on location-based advertising, see Telematics and the rise of in-car Internet radion, part I and Telematics and redesigning the navigation experience.)

Pay-per-drive (or walk)

On its mobile version of Scout, TeleNav, for example, launched a campaign with women’s shoes, says Eli Portnoy, general manager of Scout advertising. Depending on the location and time of the consumer, different types of shoes would appear in Scout’s map.

Near a gym, an ad for a running shoe might appear, whereas near a restaurant the consumer is known to frequent the app might display something more appropriate for evening ware.

That same strategy can be adopted for use in the vehicle. Depending on both the time of day and the location, an app may be able to suggest a nearby Starbucks in the morning, for example, and Ruby Tuesday at night if the consumer is nearby.

The apps can learn these consumer preferences in a couple of ways.

There is, of course, the increasingly common method of consumers tacitly volunteering this information by logging into an app with their social media accounts, thus connecting the app to a vast web of knowledge of consumer habits.

But there is also the incredible amount of data captured by driving habits, which apps like Scout can then use to discern the driver’s preference. If the driver regularly drives to Starbucks at a certain time of day, for example, an app might start recommending more Starbuckscafesat that time when they’re nearby.

The advantages of on-board

The pay-per-drive concept can work with both mobile and on-board incarnations of an app. But one of the primary advantages of on-board apps is simply the larger screen space — typically, around seven inches compared to a phone’s four inches. This means increased space for incentives like coupons and special deals that might cramp a smaller screen.

However, that might not be such a good thing, says Mark Boyadjis, senior analyst and manager for IHS Automotive. If sponsored results are simply included within a user’s search (“Olive Garden” might be a sponsored result when a user search for “Italian Restaurant”), that might work better than inundating them with coupon information as they start prepare to veer off an exit.

In other words, it’s the difference between push and pull. Google made its fortune on that type of pull advertising. On the same token, Boyadjis says, there isn’t much else out there that competes. When it comes to location-based ads in vehicles, “The market is kind of new.”

Work in progress

With some apps, like radio, location-based advertising is sufficient to make them free. “Those come with their own predefined monetizing advertising mechanisms,” says Niall Berkery, another VP of business development at TeleNav. And Internet radio provides the most intuitive example of location-based ads — no pop-up distractions that app develops have to work around so as not to make the advertising model hazardous to the driver.

But radio is already fairly well established as a mobile program and might not have much reason to shift to an on-board incantation, Berkery says.

Navigational programs like Scout are a bit trickier — the overhead is much larger, and the product is costlier to produce, and, as of yet, pay-per-drive isn’t established enough to fully subsidize the cost of Scout.

Nailing down the exact revenue per click (or call or drive) in order to reach full subsidization can be tough to establish. “The only way to make money is to think about scale, and subsidizing big ticket apps with ads is really tough,” Portnoy says. “It’s really a matter of how many units will be out there, and how many impressions per unit will there be.”

But Wahla says it’s getting there, even if no one is quite sure yet where “there” is. “We’re in the education for advertisers to show them the value, that there’s much greater value for them to use this,” he says. 

“Over time, this could certainly go to an auction model the way other versions of advertising have gone. But right now, we’re making sure all the key advertisers are aware of this new offering that they haven’t seen in the past and start to utilize it and for us to have greater inventory. And once we’ve created the ecosystem, in order to maximize revenue per drive, we can go to an auction per drive.”

Andrew Thompson is a regular contributor to TU.

For all the latest telematics trends, check out Insurance Telematics USA 2013 on Sept. 4-5 in Chicago, Telematics Brazil & LATAM 2013 on Sept. 11-12 in Sao Paulo, Brazil, Telematics Japan/China 2013 on Oct. 8-10 in Tokyo, Telematics Munich 2013 on Nov. 11-12 in Munich, Germany, Telematics for Fleet Management USA 2013 on Nov. 20-21 in Atlanta, Georgia, and Content and Apps for Automotive USA 2013 on Dec. 11-12 in San Francisco.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.