According to a new research report from the analyst firm Berg Insight, the total value of the global real-time mobile location-based advertising and marketing (LBA) market will grow from US$526 million in 2012 at a compound annual growth rate (CAGR) of 65% to $6.5 billion in 2017.

This will then correspond to 32.8% of all mobile advertising and marketing. This means that location-based advertising and marketing will represent around 5% of digital advertising, or more than 1% of the total global ad spend for all media.

SMS, mobile search and coupons are today important high-volume LBA formats. The ability to precisely target prospective customers using real-time location is currently one of the most promising additions to the advertising toolbox. Key drivers for LBA include the growing adoption of both outdoor and indoor location technologies, as well as the increasing consumer acceptance of location-based services in general, says Rickard Andersson, telecom analyst, Berg Insight.

Location targeting in combination with other contextual and behavioral segmentation greatly enhances the relevance of mobile advertising, he adds. Major brands are so far the main spenders, but LBA has also opened the mobile channel for small local merchants.

Local businesses can extend their marketing initiatives with mobile components such as location-sensitive coupons using online self-services, while big box retailers leverage enterprise LBA solutions for conquesting and to combat showrooming, saysAndersson. The LBA value chain is still forming and there are a large number of players involved in the ecosystem. Since the value chain is fragmented and the industry has not yet reached maturity, many different roles are involved.