Location-Based Advertising: What is the Value of Physical Distance on the Mobile Internet?

We investigate how location-based services (LBS) influence consumers’ choice behavior in the mobile Internet. LBS are able to make use of the users’ location by the means of GPS-enabled smartphones. Further, the ubiquitous nature of smartphones increases the importance of additional contextual factors such as time and weather. Using unique GPS data on location-based coupons and consumer choice behavior, we analyze when, where and how location-based advertising works. We particularly examine the underlying impact of context-specific factors (e.g., physical surroundings and temporal perspective) on consumers’ coupon choice behavior. Our analyses reveal that consumers’ choices are affected by their geographical location and its characteristics, as well as that consumers’ mobility has an impact on their coupon preferences. We conclude with managerial implications following the discussion of our results and propose a broad range of research implications for the use of location data in marketing.