Is shopkick The Future Of Mobile Advertising?

After recently writing about how some of the new media companies had failed to embrace new business models, along came my initial introduction to shopkick. Last week, shopkick announced that it has signed up Target (TGT) as the largest retailer to use the service. My issue with some of the new media companies is that the revenue source remains very old media since a large salesforce is needed to attract advertiser dollars.

Shopkick is an interesting app for the iPhone and Android phones that makes shopping more delightful. Users are rewarded with points known as "kicks" for walking into stores or scanning products. These kicks can be redeemed for gift cards, Facebook (FB) credits, iTunes downloads, or donated to charity. Guests can also receive special in-store deals including coupons and discounts.

Brand Awareness

After trying the app at the local Target store, it struck me that no better advertising tool existed for brand products than having consumers locate an item, pick it up, and scan it. In this scenario, a vendor knows the consumer interacted with the product unlike a TV ad or an ad running on new media services such as Pandora (P) or Yelp (YELP).

After my experience at Target, I now know that Bounty, a Proctor & Gamble (PG) company, has three different types of paper towels after performing the scans for 30 extra kicks. Does it make me more likely to buy Bounty? That is questionable since it is an established brand already. The real benefit might be for new products or brands where getting the product in consumer hands provides a huge benefit. Just locating the latest soft drink or gum or toothpaste could provide huge benefits to an advertiser such as Proctor & Gamble.

Retailers

The retailer also benefits as it encourages shopper foot traffic which is potentially better than click traffic via internet searches. As mentioned above, Target just started using the service and Wal-Mart (WMT)already had been using it. Will both retailers just cancel out each other with this service? Regardless, it might be a cheaper and more productive way of attracting users than a circular in the local paper or mail.

Maybe this is the path that new CEO, Ron Johnson, at J.C. Penny (JCP)should've gone with his new promotions plan. Instead of reducing them to simple monthly promotions, he could've jumped head first into a technology solution that drastically improved the promotional process and lowered the expenses versus the costly process of continuously updating sales displays in stores.

J.C. Penny recently reported Q112 results that showed a stammering 18.9% loss in comp sales. Consumers clearly aren't on board with the reduced promotions as much as investors were originally with the concept of eliminating the wasteful costs.

Instead the retail guru from Apple (AAPL) has already allowed fellow department store Macy's (M) to outflank him in this technology area.

Though still early in the turnaround, it doesn't appear that reducing promotions works at J.C. Penny. Unfortunately the department store is probably backed into a corner on adopting a technology solution that would allow for frequent and efficient promotions. Such a shift would counter a plan just recently launched.

Private Company

This is exactly why shopkick appears to be an ideal solution though unfortunately the company remains private. The financials naturally are unknown, but it would appear that the concept of acquiring the revenue dollars commitment from retailers and brands first rather than the user is more ideal.

Monetizing Mobile

This concept does show how mobile traffic can and will be monetized. Maybe not by Google (GOOG) via search or by Facebook via display ads, but location based mobile traffic will be key to the future of mobile monetization.

In this case, customers are attracted to locations where they can use coupons and collect kicks for gift cards. The future potential still exists for locations to alert or contact nearby customers, but that theory still seems questionable.

What consumer wants to be barraged with ads while walking down the street? Does this make shopkick the ideal app? Let consumers find the nearby discounts when they are looking.

Conclusion

While the success of converting shopkick users into repeat customers is still unknown, the process of pulling in foot traffic probably can't be beat in the advertising world. Considering the success of the Target test, look for more innovative brands and retailers to join into the process. These companies might just gain a technological lead on the market.

Disclosure: Long AAPL. Please review the disclaimer page for more details.