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Ofer Tziperman, president of LocatioNet, spoke in detail to smartphone-biz.news about its free navigation and local search service amAze.
A pioneer of ad-funded mobile applications, he gave his views on the revenue model’s future prospects – and the benefits of targeting mobile users with location-based adverts.

When LocatioNet launched its first mobile GPS application four years ago with Orange in Israel it was far from clear if mobile content could be funded by advertising.

LocatioNet took that gamble and from the popularity of its amAze service, it appears to have paid off.

The free GPS service, which was last week named as the winner of smartphone-biz.news’ Product of the Year 2008 award, is being compared favorably to expensive competing navigation systems.

Ofer Tziperman, president of LocatioNet, says he thinks it is an accomplishment just to have cleared the massive hurdle of providing amAze across many mobile platforms, different phones and different manufacturers.

"Today we are supporting more than 500 different handset models, so in terms of reach that is a major issue we have had to overcome," he says.

Ad-funded Model Being Watched Closely

Yet for mobile industry watchers, it is LocatioNet’s apparently-succesful adoption of an ad-funded revenue model that will have wider implications.

Tziperman is quite aware of this: "AmAze is an interesting combination between the features it offers and the creativity of the business model.

"It is the first such product available on the market that takes an ad-funded model."

As the former attorney says – everyone likes something for free – but in the case of applications like amAze, revenue has to be generated somewhere.

What LocatioNet’s internal team of developers did with amAze was build into the client and backend server a full advertising mechanism.

This has been successfully trialled in several markets and Tziperman says it will go live in the next few weeks.

"The idea is that whenever someone opens the application – say in London – then we know that in the backend server," he said.

"A request is then sent to the relevant ad server and they can send, where it’s available, an advert relevant to London – or to the specific street the person is in.

"We send this in the background to the user and it pops up only in idle moments. So the service is ad-funded but it’s not irritating in the sense that it will disturb users."

So during navigation, adverts will not distract people. But when someone is searching for a route, adverts will pop up between the search being sent and the results being displayed.

Location-sensitive Ads

Tziperman says that since the ads are location sensitive, they could, say, be offering coupons for a local restaurant. The establisment could then be located on the navigation system and a routing calculation run – all with the click of a button.

"So on the one hand we are able to provide a very interesting navigation solution to end users, but at the same time what we are aiming to provide is a very interesting tool for advertisers," he says.

"Our goal was to marry the needs of these two segments."

Since there is the ability to expose users to adverts very specific to their location, Tziperman says they could command premium rates from advertisers.

He says ad agencies and advertisers are becoming aware of the advantages GPS-aided advertising offered.

"This is happening right now. It’s not just a vision. It’s all about relevancy to advertisers.

"Already some ad servers are focussing on location-based advertising. The premium that they can sell advertising for is significantly higher than ad banners that lead into WAP sites."

Tziperman says eventually it will be all about the click-through rates. On Internet ads these are below 1%, on websites around 3% and for location-based advertising estimates range from 4% to 10%.

"I prefer to stick to the low numbers at the moment, but there’s no doubt location-based advertising makes it much more interesting from the users’ point of view," says Tziperman.

"The idea is to allow users to ignore adverts on the one hand or to interact with them if they wish. But we have to make sure the basic application is very useful and compelling to get the attention of the user.

"Then we can enrich it with relevant information."

The latter, in the form of coupons for a nearby shop or restaurant, could actually save users money, according to Tziperman: "Even if you get the application for free, you can still save money."

Concerns About Mobile Ads

While you would expect Tziperman to be enthusiastic about amAze, there would appear to be plenty of users who have tried it and found it an appealing service – ads and all.

Tziperman said that wasn’t everyone’s reaction.

"Initially when you speak about mobile advertising it causes some fear because people see themselves being bombarded with SMS-type messages," he says.

"We are not bombarding users but only showing adverts in idle moments."

"We are taking a different approach. We are not bombarding users but only showing adverts in idle moments.
"You can ignore them or, if it makes sense, dig further."

Tziperman describes the path to today’s amAze service as an evolving one. LocatioNet started its mobile business in 2000 by selling LBS infrastructure to mobile operators.

Four years later this had evolved into a fully fledged GPS service that was launched in Israel with Orange. It was – and still is – a great success.

So much so that the company wanted to roll it out to other markets, but realised that first it would have to strike agreements with operators in dozens of countries.

Gamble on Ad-funded Content

Tziperman said it was decided that was going to be a slow process and LocatioNet took the gamble of offering the navigation app directly to consumers.

"We realised that if we had to knock on the doors of a few hundred mobile operators around the world and then wait for them to make a decision, it would take forever," he said.

"So we decided that the best way to approach the worldwide market was via consumers."

It was decided that to get around the billing issue, they would have to count on advertising.

But four years ago, while the business model for Internet advertising was well proven – it wasn’t certain whether it be transferred to the mobile phone.

"The answer wasn’t clear but now we are gaining a lot of momentum," says Tziperman.

Economic Downturn May Favor Mobile Ads

While the global downturn is having a serious effect on the advertising industry, LocatioNet’s president believes the situation could actually work in favor of mobile ads.

"You hear more and more advertisers that want to put their budgets on a more measurable basis – so more online advertising rather than TV, newspapers and billboards," he says.

"Mobile is one section of online, so we think that over time this crisis might even serve us better than others."

LocatioNet has plans to launch amAze as a white label solution – as it did recently as the 11 88 0 service in Germany with Telegate.

Tziperman admits the advertising market is not going to shift overnight so the company is anticipating making money from a "healthy mix" of premium services and ad-funded ones.

"If you look to the future we believe we may be the first business taking this direction, with an aggressive business model, but we will not be the last," he says.

"Two to three years down the road a lot of service providers will be providing ad-funded navigation."

We’d be interested in hearing your views on ad-funded mobile content.