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Google announced today that it’s launching location-aware mobile display ads for iPhone and Android devices. This will be an offshoot of its local extensions ads for mobile search. Extensions let advertisers specify many locations in AdWords so appropriate local addresses and phone numbers are shown, based on a mobile searcher’s location.

The difference with today’s announcement is that it’s being extended beyond text ads to also include display ads. Advertisers with display ad campaigns can now choose the option to activate a double arrow icon (see screenshot) in their ad.

Clicking this brings the user to a map showing the closest location, clickable local phone number and directions. Google will charge advertisers for clicks to activate calls or get directions. This will be the same rate as a normal click, as is the case with its existing pay-per-call program (see our writeup).

As you can imagine, this is well suited to national advertisers, which  1). are the largest buyers of display advertising; 2). often have many locations. To these advertisers, Google is essentially offering a tool to boost CTRs through greater location relevance.

This comes down to the simple fact that the location relevance of the ads (vs. a generic ad) is known to increase ad performance. In fact, Google says that CTRs are 8 percent greater for location targeted mobile text ads, and 6 percent greater for location targeted click-to-call ads.

This also complies with our long view of Google’s mobile efforts in that they are walking the fine line between simplicity and more granular targeting. The former is to not scare away advertisers at early stages. The latter is to accelerate comfort levels with tools that will do better justice to the acute targeting that mobile devices are capable of.

Expect to see more tools and features for mobile targeting integrate with Google’s ad products. Today’s move is simply a step in that direction. You could say it’s a natural extension.

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