Social and Mobile Data: A Marriage Made in Marketing Heaven

With every Facebook “Like” and public check-in to Foursquare, consumers contribute to a widening pool of social data â€" data marketers are beginning to capitalize on with more targeted and contextually relevant advertising.

Nihal Mehta, CEO and co-founder of LocalResponse, recognized this opportunity early. A serial entrepreneur with a background in mobile, he left advertising holding company Omnicom in 2008 to found a startup called Buzzd, a location-based mobile application designed to help users gauge how crowded a particular bar or other public venue is at any given moment. Buzzd enjoyed some success â€" the company raised $4 million in venture capital and grew its user base to 2 million, but Mehta says he soon realized it was very hard to generate revenue on a mobile ad network model.

“A phone knows who you are, where you are and where you’ve been. But no ad platform was taking advantage of that [at the time],” Mehta recalls.

In April 2011, Buzzd changed its course and became LocalResponse, whose mission is, in Mehta’s words, “to better monetize mobile traffic by leveraging things we know about the user.” LocalResponses leverages a vast amount of social data, most of which comes from Facebook and Twitter, and combines it with language processing to surface intent and serve ads based on that intent. For example, if a person named John were to tweet “I’m hungry,” from Twitter.com, LocalResponse could serve a display ad for Pizza Hut on the next CNN.com page John opened in Safari.

“Because of the social media boom, there’s all this amazing data that people are broadcasting,” says Mehta. “We’re using that to deliver ads that are so finely targeted, they become content.”

Mehta says LocalResponse is able to deliver this kind of advertising to 50 million U.S. Internet users per month. The company is able to track these consumers by dropping cookies after they connect to a partner website using their Facebook or Twitter credentials. Consumers can opt out of this kind of tracking at any point by clicking on an icon in the upper right-hand corner on any banner ad that uses it.

LocalResponse has worked with more than 100 brands to date, about half of which are Fortune 500 companies, says Mehta. Among them are Coca-Cola, Kraft, McDonald’s and General Electric. Mehta said he had originally planned to target the small, local business market, but early found that ROI was better on bigger brand campaigns.

And just how successful is this kind of targeting? Mehta says that click-through rates on the desktop are five to 10 times higher than what a normal display ad generates, and five times better on mobile. Post-click conversions â€" depending on the campaign, that could count as an email newsletter signup or a purchase â€" are also five to 10 times higher on average.

Beyond intent targeting, which accounts for about 90% of revenues, LocalResponse also has a messaging product that enables brands to “respond in-stream” to users. If John were to check in to a Walmart, for instance, he might receive a tweet back from Walmart welcoming him to the store and sending him a link to a list of promotions and discounts available in that location. Mehta says the average click-through rate for the product is a whopping 60% â€" but the problem is that there’s not a ton of inventory. “You can only respond to people who are checking in to a Walmart on Twitter. If you only say, ‘It’s hot out,’ we won’t let a company respond because we consider that spam.”

LocalResponse’s third product is an analytics dashboard called LocalResponse Pro that allows clients to track their customers and develop their own campaigns.

The company has around 30 employees, most of which are headquartered in San Francisco.

In the future, Mehta hopes to incorporate image recognition as another data source for intent. Imagine, he says, if Nike or Budweiser was able to deliver ads to people after they posted an image of a baseball field to Twitter or Instagram.

He also wants to get more location-specific. “I always talk about Minority Report,” he says. “Imagine you’re on a bus tweeting about X Factor and you look up to see an X Factor ad. That’s our billion-dollar vision, to connect marketers to consumers in the most local media possible.”