Performance marketing is given many definitions; and depending on where you sit within the digital ecosystem, can be viewed upon as a terrifyingly hardcore marketing medium, reserved only for finance advertisers working towards the strictest of CPA targets or, conversely, as a term that can apply to almost every campaign execution, as each campaign has performance objectives. How performance marketing is viewed is changing; and Google and Facebook have been elemental in this, within search and social channels. The next wave is location. ExchangeWire speaks with Imran Khan (pictured below), head of programmatic, xAd, about the journey of performance marketing so far and how location can solve the challenge of influencing and measuring offline behaviour.

I recently watched a fascinating interview with Gabe Leydon, the CEO at Machine Zone – one of the biggest mobile gaming companies in the world. I’m sure people reading this will have either played their flagship titles, 'Game of War: Fire Age' and 'Mobile Strike', or have seen their tv ads starring Arnold Schwarzenegger, Mariah Carey, and Kate Upton. In his interview at Code/Media, Leydon discussed his views on the advertising industry. It is a hugely insightful piece, which raised a lot of questions about the state and future of marketing.

During his interview, Leydon made a strong case for the need for advertising to be performance-driven. As an example, he pointed out that Google, the second biggest company in the world, is a performance marketing company.

Search was the first performance marketing category, and Google popularised and perfected this. As a result of Google helping consumers to navigate the web through search, it became the de facto measure for online intent: marketers can determine what you might be in the market to buy from the things that you search for online.

Google’s launch of Adwords proved to be an incredibly successful advertising business, as it linked the entire search process all the way from discovery to purchase. It took in approximately USD$75bn (£52.1bn) in revenue last year, with the vast majority of that revenue coming from Google sites, with mobile search cited as the growth engine for the company. Google paying Apple USD$1bn (£695m) to keep its search bar on the iPhone is a testament to the importance of this business line.

If Google made search the first performance marketing category, social is mobile’s first performance marketing wave. We all know the story of Facebook from inception at Harvard, through to IPO, when it went public in 2012. However, in that same year, the social network had seen its stock price plummet to half its value, as the majority of users accessed Facebook through its mobile website with monetisation of those users almost nonexistent. Fastforward to today, Facebook’s stock is worth over USD$300bn (£208.4bn).

So, how did Facebook turn it around? Firstly, it focused on fixing user experience rather than pressure to launch new products, and launched their mobile app in 2012. The next issue the company tackled was solving app discovery. This was a huge mess in both the Apple and Google Play stores; but Facebook integrated app-install ads natively into the Facebook app. It also combined social features into these ads, which acted as a proxy for recommendation. Marry that with Facebook’s global scale and user data and the company’s mobile revenue skyrocketed. As its mobile revenues grew, so too did the mobile app ecosystem. Mobile games, like King’s 'Candy Crush', or Supercell’s 'Clash of Clans', were making millions of dollars a day from in-app purchases.

When speaking to Re/code’s Peter Kafka, Leydon explained that mobile gaming is “the most frictionless businesses that the world has ever seen”. Consumers are able to download a game and pay for it faster and easier than it is to distribute water. Facebook was the perfect marketing and distribution channel for mobile gaming. With the ability to measure CPI (Cost per Install) against LTV (lifetime value), app developers could effectively measure risk versus value on a global scale. This frictionless experience is why Facebook audience network (FAN) has been so successful, achieving a $1 billion run-rate, expanding its discovery platform across other apps. A report from Business Insider predicts that mobile-app install ad spend could reach USD$5.4bn (£3.8bn) in the US in 2016. As a result, Facebook’s model is being emulated by other companies; Snapchat launched app-install ads in February and recently snapped up Sriram Krishnan, founder of FAN.

What’s become clear is that the media industry really needs to care about performance marketing; the fact that two of the world’s largest media businesses are built on this foundation is testament enough. So, what is the next big opportunity in a ‘mobile-first’ world? Location.

If search solved web discovery, and social solved app discovery, then location has the potential to solve real-world discovery. Advertisers have been battling to find a solution to influence and measure offline behaviour; and location is the answer. Being able to understand the consumer in those crucial moments in the real world is vital for most brands, and location has the ability to do this – whether it’s influencing their decision on which coffee shop to buy a latte from, or which brand of sports car to purchase. According to the US Department of Commerce, 90% of commerce still happens in the real world, which is why location is such a powerful tool. By giving marketers the power to tap into offline behaviour, and influence everything from awareness to purchase, location is extremely effective.

Leydon laid out an argument during his interview that all media will become measurable, and that price and value will become fully discoverable both in the real and digital worlds, for everything from a new TV through to a bar of soap. The launch of xAd’s Marketplace at Mobile World Congress offers the first step to the realisation of this real-world vision. It allows marketers to discover consumers in physical spaces, influence them in real-time through location-aware advertising, and measure conversion through actual store visits.

Location enables marketers to leverage the power of real-time consumer intent, just like they can for search, but for the physical world. With this capability, there’s no doubt in my mind that location will be the next big opportunity in performance marketing.