Sense Networks: This could be a big holiday for mobile advertising

This could be a big holiday season for mobile advertising as more retailers aim location-based ads at consumers with smartphones, according to Sense Networks, a six-year-old company whose executives include folks who studied data science at MIT.

One company executive is Alex “Sandy” Pentland, who directs the Human Dynamics Laboratory at the Massachusetts Institute of Technology and the MIT Media Lab Entrepreneurship Program. Several years ago, Pentland realized that the large amounts of location data being collected by mobile phones and GPS devices could be useful information for businesses trying to be more efficient in targeting their customers with ads.

With that as a starting point, Sense Networks set out to use algorithms that can make sense of GPS-enabled smartphone location patterns to build a profile of that smartphone user so personalized ads can be sent his or her way.

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Without knowing the identity of the smartphone’s owner, the algorithms can determine where that smartphone has been and deduce from that information the shopping patterns and lifestyle habits of the phone’s owner.

During a telephone interview, Sense Networks chief executive David Petersen said what the company’s algorithms might conclude about him: That he’s a frequent shopper at Target, the giant discount chain, and Lowe’s, the home-improvement chain, and that he’s not a fan of golf and fast-food restaurants. (His smartphone has rarely been taken to a golf course or a McDonald’s.) His travels would also reveal that he’s no stranger to wine bars. And based on the fact that Petersen and his smartphone are often at home for good by early in the evening, the algorithms would guess --- correctly, in this case --- that he’s the father of small children.

Armed with all that information, a retailer could start pushing personalized and location-based ads in Petersen’s direction. Usually, that happens when Petersen is playing a game on his smartphone. Many game apps use the same business model has commercial television: Entertainment is free, but viewers are shown ads, he said.

This kind of thinking has intrigued both retailers and venture capital firms. Although Petersen declined to identify large retail clients, he did say the firm has raised about $10 million in venture funding to date.

With 20 employees, the company is currently headquartered in New York, largely because an executive who studied at MIT now teaches at Columbia University, Petersen said.

Not surprisingly perhaps, Petersen thinks location-based smartphone advertising is about to explode. Not only is it cheaper than traditional forms of marketing such as newspaper ads, but there is a big shift by consumers away from browsing on desktop computers to browsing on smartphones and tablet computers.

Petersen then offers a prediction that a badly aging newspaper man doesn’t much care to hear: When it comes to advertising, “mobile is the new print.”

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