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Location based services will be a boon to retailers and will be worth €420m by 2015, says analyst

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Mobile location-based services are set to boom and retailers will be one of the key sectors to benefit, as they allow more targeted marketing, relationship building, interaction with consumers, as well as providing a tool to assess marketing conversion rates, says Berg Insight.

According to a new research report from the Swedish analyst, mobile location-based service revenues in Europe are forecasted to grow from €220 million in 2009 at a compound annual growth rate of 12% to reach €420 million in 2015. Local search, navigation services and social networking are believed to become the top applications in terms of number of users.

Berg Insight estimates that one third of all mobile subscribers in Europe will use some kind of location-enhanced application on a regular basis by 2015. The social networking category is forecasted to experience the highest growth in the coming years.

“Location-based services are finally on the verge of mainstream acceptance. Increasing sales of smartphones are driving end-user awareness of mobile Internet services and applications in general,” says André Malm, Senior Analyst, Berg Insight. “On-device application stores enable access to mobile services for a broader audience at the same time as flat-rate data plans make pricing more transparent. More and more developers are now adding location support in their applications to enhance the user experience”, said André Malm, Senior Analyst, Berg Insight. He adds that integration of GPS in handsets is an important driver. “The installed base of GPS handsets in Europe has recently surpassed 15 percent of total handsets and will increase to 50% three years from now.”

And retailers will be able to capitalize on this growth in location services, says Malm. “I believe that retailers will use location to enhance brand-advertising campaigns, search advertising and push SMS campaigns in the future,” he says.

The revenue model for many mobile applications in the consumer segment is shifting from premium fees to ad-funding. This is especially the case for location-based services where now also navigation services are becoming free for end-users and developers monetise their offerings through ads and various bundles. However, revenues may not grow at the same rate as usage because the mobile advertising ecosystem is still nascent. It will take some years before a successful model has been established that allows advertisers to reach out to a critical mass of active users. This is especially the case for emerging location-based advertising.

“But for retailers, location can possibly be of greatest value when used as a tool that measure the conversion rate from click to store visits,” says Malm. “Today, advertisers lack good tools that measure the conversion rate from click to purchase when users shop in physical stores. Location can be used to determine if the user enters a store after clicking on the ad. Another possibility is to use coupons that can be redeemed and thus prove that the advert led to user action even if this occurs at a later time.”

But don’t expect this to happen overnight. “Retailers need the proper tools to create mobile campaigns and access location information,” warns Malm. “Enough people must also use their handsets for mobile web services and applications. Today, an estimated 15% of European subscribers have data plans and roughly 25% use the mobile web or applications on a regular basis. 15% currently have GPS-enabled handsets. All these figures are growing steadily.”

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