Location-based advertising is choosing who sees an ad by the places that a person's phone has been, such as a mall, an airport or a rival's showroom. It is also called location targeting, or geotargeting. The ad itself appears later, on the same phone, inside an app or on a website.
The location comes from apps. When you allow an app, such as a weather app or a maps app, to use your location, the app can read the phone's GPS position. Some apps share that position with ad networks when they ask for an ad. They send it with the phone's advertising identifier, a number that the phone gives to advertisers instead of your name. A location platform collects billions of these signals and stores where each identifier has been. It then uses geofences. A geofence is a boundary drawn around a place on a digital map. A phone whose position falls inside the boundary is counted as a visit to that place.
Say a furniture chain is opening a new showroom in Gurugram. It wants to reach people who are already shopping for furniture. The platform draws geofences around 12 furniture showrooms and 2 home-décor malls in Gurugram, using building outlines from location intelligence data. It finds about 40,000 phones that stayed more than 20 minutes inside those boundaries in the last 30 days. Short visits, such as a car passing by on the road, are left out. The platform sends this audience to a demand-side platform (DSP), the software that bids for ad space. Over the next two weeks, whenever one of those phones opens an app with an ad slot, the DSP bids to show the new showroom's opening offer. Later, the platform counts how many of those 40,000 phones visited the new showroom. The furniture chain uses that count to judge whether the ads worked.
Location is some of the most personal data a phone holds. It can reveal a person's home, office, hospital or place of worship. In India, the DPDP Act, India's data protection law, requires a person's clear consent before such data is used. Phone makers now ask the user before an app may read the exact location, and let the user share only an approximate one.
Location data can also be wrong or fake. Inside a building, GPS can be off by tens of metres. Some apps send invented positions, to make their ad space look more valuable. This is a form of ad fraud. Most of these signals reach a location platform through mobile ad networks, so the platform has to check which networks send accurate data.