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A new beacon for local advertising revenue

“Apple has once again short-circuited an entire industry and started a land grab to connect the realms of digital advertising and physical transactions.”

Believe it or not, Apple may have let local media back in the race for advertising dollars in 2014.

For incumbent news publishers, 2013 felt a lot like 2012. Print advertising declined, and online did not grow fast enough. Pew’s State of the Media 2013 put the ratio at about 15 print dollars lost for every 1 print dollar gained.

damon-kiesowAs the mobile tipping point approaches, the old strategies will increasingly flounder. Display ads worked in print because readers understand a mass medium when they see it: one daily edition, one set of broadly-targeted ads. The clickthrough rates were horrible, but it was the best we could do. Online, an endless supply of inventory and a general lack of personal relevance both devalued advertising and made readers less likely to click. On smartphones, where personalization is a core experience, the problem is much worse.

Unfortunately, while “native advertising” reached buzzword status this year, simply creating new ad units is a shell game. Readers and retailers alike will continue their indifference until we find a way to make “advertising” work for them again.

Enter iBeacons, one of Apple’s least-hyped product releases of 2013 — which almost overnight created a potential new revenue model for advertising in 2014. The keys to its potential are location, connectivity, payment, ubiquity, and eyeballs.

On smartphones, GPS and wifi work together to help locate your position. Unfortunately, GPS doesn’t work well indoors (say, in a shopping mall), and wifi alone is not particularly precise.

Apple’s iBeacons (let’s just call them beacons) use Bluetooth Low Energy (BLE) chips that are relatively cheap and (when deployed correctly) can pinpoint a customer’s location inside a store down to a specific aisle and product. Each beacon contains a unique ID that it broadcasts, searching for nearby devices. Once your phone recognizes a beacon’s signal any number of actions can be triggered including push alerts or product-specific interactions within an app.

As a customer approaches the cash register, the beacon-enabled phone could transition into a payment platform. The merchant’s point-of-sale system would recognize the customer’s identity, prompt for authentication, and process the charges – perhaps via a stored credit card, iTunes, or Google Wallet.

Wait, Google Wallet? Yes, despite the iBranding, this is not a proprietary Apple technology. Based on Bluetooth 4.0, the underlying standard is available on dozens of Android phones from Samsung, Motorola, HTC, and LG as well as all recent iOS devices. That means there are currently hundreds of millions of consumers already beacon-enabled.

Apple has already begun rolling out the beacons in its retail stores. And, mobile app developer ShopKick is using the technology in a test with Macy’s in New York City and San Francisco. The catch is, to participate in those trials customers need to have the Apple App Store or the ShopKick ShopBeacon app respectively, installed on their phones.

As new merchants join the fray, they will be faced with a dilemma: build a beacon-friendly app, aggregate their services under an umbrella such as ShopBeacon, or do both. Customers have a similar dilemma. Which apps do they need, and how many will they install? Is the limit five, ten, or far fewer?

This is where local media enter the picture. Consider this scenario: A local restaurant chain buys a banner ad in a local news outlet’s native app. Readers browsing the news would see the ad — an offer for 30 percent off of lunch. A click credits the discount to their beacon account in the app.

As the week goes on, the ad could gently nudge the reader in-app or provide a geo-fenced alert to remind them of the lunch discount. After arriving for lunch, the app would recognize the restaurant’s beacons and provide an easy link to an online menu or list of specials.

On the way out, the app would access the bill, apply the 30 percent discount, and ask for confirmation to process the charges.

The fact is, none of those steps are particularly new or technically difficult. That scenario has been the Holy Grail for hyperlocal advertising (and companies from Groupon to LevelUp) for years. But BLE technology is the technology that might finally let it all happen.

For local media, the question is: What is our potential advantage? Apple, Amazon, and Google are fighting it out to be your digital wallet. Square and PayPal want to replace current point-of-sale systems. And every major retailer already has a native app.

But local media still has the local eyeballs, both on the web and in native apps. And those apps carry local advertising.

Some of the pieces to make this work are still missing. Under this model, banner ads would probably be sold at a low CPM, and the revenue would be made on clicks or transactions. And tying together payments and discounts at the point of sale might take some work. But our success in this arena is predicated on reaching local consumers — not in which wallet they eventually pay with. Kind of like what the old model used to look like.

Apple has once again short-circuited an entire industry (say goodbye to NFC for payments) and started a land grab to connect the realms of digital advertising and physical transactions. And the race will be won or lost in 2014.

Damon Kiesow is a senior product manager at The Boston Globe where he helps develop new mobile apps and websites for

Updating regularly through Friday, December 20