Making Mobile Ads Smarter

 

Takeaway

  • McCombs professor's algorithm matches ads with smartphone users
  • Targeted mobile ads could help bricks-and-mortar stores compete with online retailers by encouraging impulse buying

In the 2002 film "Minority Report," set in 2054, Tom Cruise walks past store windows that bombard him with personalized ads, in the form of holograms. At the Center for Research in Electronic Commerce at the McCombs School of Business, professor Andrew Whinston is bringing that sci-fi future a step closer – with smartphones.

His idea: As a person walks through a downtown or a shopping center, her phone sends out a GPS signal. A nearby business sends her a mobile display ad, offering a meal or an appliance at a steep discount. The deal is only good for the next 30 minutes.

“The general idea would be impulse buying, versus buying online at a place like Amazon, where you have a more rational thought process,” Whinston says.

In September, Whinston published an algorithm, an electronic matchmaker that decides which ads go to which smartphones. Like the personalized display ads on Facebook, they’re based on data about demographics and buying habits. The difference for location-based mobile ads is that much of the data gets crunched in a few seconds.

He notes that Google is already trying out similar ideas, as mobile ads undermine its bread-and-butter search engine ads. “Everybody’s trying to find a new revenue stream,” he says.

There are still bugs to be worked out, like how to distinguish pedestrians from drivers. Not to mention the fact that many smartphone users are already queasy about having their locations tracked.

But the concept, he says, could give local stores a leg up on online vendors. “You’re in the store because of the discount and you’re feeling and touching the product,” Whinston says.  “It’s kind of sensual thing. In the case of Amazon, you just see pictures.”

This article is the second in a two-part Texas Enterprise series about the intersection of traditional retail and e-commerce. The first installment covers the financial advantages of connecting with customers both in person and on the web.

 

Faculty in this Article

Andrew B. Whinston

Professor, IROM

Andrew B. Whinston is a professor in the department of Information, Risk, and Operations Management at the McCombs School of Business. He also...

About The Author

Steve Brooks

In a quarter-century as a journalist, Steve Brooks has won two Neal awards for excellence in trade reporting and a Press Club of New Orleans award...

Comments

#1 Interesting. The discount

Interesting. The discount will have to be steep enough to offset cheaper prices from online retailers. Otherwise, many people will simply just walk into the store, see the item, make a note of it for later, and then find the item online. (In fact many apps exist just for this purpose.) But too steep a discount (or given too often) and you of course risk undermining profitability. Maybe retailers will simply use this to promote "loss leaders"; items that are already heavily discounted just to get people into a store so they see more expensive/profitable stuff available.

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