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With mobile advertising expected to get scorching hot over the next three years, digital ad firms are scrambling to get into the game – literally.
Foursquare, a game for the mobile phone, gives players incentives to check in at restaurants, bars and retail establishments — broadcasting their location to friends and potential advertisers. Advertisers have seized on the model as a way to serve up location-based ads and special offers, without annoying mobile phone users.
“Foursquare’s funnel is overflowing now. They’ve got so many people that want to work with them that they can’t handle it all,” said Michael Schneider, vice president at Watertown ad agency Allen & Gerritsen Inc. “We’re kind of stuck with the vanilla experience of go to the site and fill out a form.”
Mobile advertising will grow exponentially, to $13.5 billion by 2013 from about $500 million last year, according to a Gartner Inc. report last fall. The projected growth has come just in time for startups like New York-based Foursquare Labs Inc.
According to Web traffic tracker Compete Inc., Foursquare’s Web traffic quadrupled in the first quarter of 2010, to 2.1 million unique visitors monthly. With a $1.4 million Series A round of venture capital in its pocket, Foursquare last week reportedly turned down an acquisition offer of more than $100 million from Yahoo Inc. (Nasdaq: YHOO).
Meanwhile, Boston restaurants and hotels are advertising special offers to the Foursquare user who checks in most often. Jessica Green, owner of a Pita Pit restaurant franchise in Brookline, said she’s drawn in customers when her own special offer popped up on mobile phone screens as users checked in from nearby competitors, such as a Starbucks next door. The Middle East Restaurant Inc. and Toscanini’s Ice Cream Co. Inc., both of Cambridge, employ the same strategy, as does the Back Bay Hotel.
Hubspot Inc., a venture-backed Web marketing company in Cambridge, is betting location-based mobile advertising will take off with business-to-business users, as well. The B2B-focused company recently developed software to analyze user activity on Foursquare. CTO and founder Dharmesh Shah sees big possibilities for event planners and nonprofit fundraisers.
“Lots of B2B companies hold conferences and have events,” he said. “We saw a relatively good uptake in terms of Twitter being used at events. Foursquare actually might work better. It actually has that geo-component built in. You know who is physically there, because they can check in.”
Other Boston enterprises are linking mobile media and entertainment, too. Untravel Media CEO Michael Epstein recruited six Beacon Hill businesses as stopping points for “Murder on Beacon Hill,” a location-based movie that plays out on the iPhone, taking the viewer through a string of real-world Boston locations.
The movie experience leads viewers to the concierge desk in the lobby of the Liberty Hotel, where they play a board game related to the movie. “From my aspect I said this is a marvelous opportunity to solidify our anchor in the neighborhood here,” said Sean Reardon, director of sales and marketing. “I thought it was a natural fit for us.”
Boston-based Scvngr Inc. has begun to let sponsors include promotions in its citywide scavenger hunts — but founder Seth Priebatsch said it’s a delicate balance to ensure the game doesn’t become too commercial. Backers, including Google Ventures, the investing arm of California-based Google Inc. (Nasdaq: GOOG), and Lexington-based Highland Capital Partners, have put $4 million into the startup, which did $1 million in sales last year, Priebatsch said, and has 30 employees in its South End headquarters.
“Location-based gaming is an interesting space and I think only going to get more robust,” said Highland General Partner Peter Bell. “It’s probably three years ahead of where I thought it would be, a year and a half ago when we invested.”
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