OPINION

Location-Based Services Are Becoming Social Network Outcasts

All the recent news about Facebook — from its founder being named Time magazine’s Person of the Year to Goldman Sachs placing a US$450 million bet on its future profitability — makes it clear that social networking platforms are hot commodities.

It’s also clear, however, that not all social networking platforms are created equal. So, while Facebook continues to attract hordes of new users and piles of cash from investment bankers, platforms such as Foursquare and Gowalla — known generically as “location-based services” — are living a lonelier existence.

Location-based services are still attracting a fair amount of media attention. What they aren’t attracting is users — at least not in any appreciable numbers when compared with the likes of Facebook and Twitter — and this failure to connect with the masses could soon force location-based services into extinction.

Few Regular Users

To get an idea of how dire the situation is for these platforms, consider some numbers. To date, only 4 percent of Americans have used a location-based service, and only 1 percent use them as often as once a week, according to Forrester.

When they launched, location-based services promised to take social networking to the next level, by allowing users to “check in” at businesses they patronize frequently — restaurants, coffee shops, stores, etc. Checking in is supposed to allow your online friends to know where you are, and perhaps entice them to join you for some real-world socializing. It’s also supposed to give people a way of discovering exciting new places to shop and mingle by tracking where their friends are checking in.

That pitch earned these sites a good amount of media coverage and a fair number of early adopters. Now, however, the luster associated with location-based services is waning, and it’s largely because that early vision of extending virtual social networks into the real world has not materialized.

In the final week of 2010 — specifically from December 26 to January 2 — the top 10 venues frequented by Foursquare users recorded a total of slightly more than 926,000 check-ins, according to Trendrr, a social media business intelligence service that compiles a weekly tally of Foursquare check-ins for publication on Advertising Age.

I contacted Matt Carmichael, director of information projects at Advertising Age, to confirm that the figures reflected check-ins across the entire country, and not just in selected metropolitan areas. When Carmichael said they were indeed national figures, my doubts about the future viability of location-based services deepened.

The Top 10 Foursquare Venues

The top 10 locations could muster only 926,000 check-ins for an entire week? Twitter records more than 65 million tweets every single day.

A quick look at the top 10 Foursqaure venues also blows holes in the theory that location-based services will help people find exciting new places to visit. Every venue on the list is a national chain — starting with Starbucks, which recorded 146,865 check-ins for the week.

Barnes & Noble attracted 10,416 Foursquare enthusiasts to earn the 10th spot on the list. Sprinkled in between were Target, Wal-Mart, McDonald’s, the Apple Store, Best Buy, Burger King, Costco and Ikea.

It’s easy to see why people aren’t tossing aside their keyboards and rushing out to meet their friends at these places. It’s also easy to see why even some people who describe themselves as avid social media users are questioning the value of location-based services.

“I’m a compulsive user of Foursquare, but I have to admit I’m not completely sure why I’m doing it,” Neil McIntosh, editor of The Wall Street Journal’s European website confessed while interviewing Dennis Crowley, a Foursquare cofounder.

Crowley responded that Foursquare, when used properly, could be considered the digital equivalent of a loyalty card, allowing users to earn discounts or free goods and services at businesses they patronize on a regular basis.

Badges and Titles Are Worthless

There’s a major flaw in that theory, however, and it’s one of several reasons I think Foursquare and its peers can’t last for the long term — at least not without making some major changes.

Foursquare’s big shortcoming is this: It gives users badges for checking into particular venues a certain number of times. It even declares the Foursquare user who checks into a venue the most the “mayor” of that location.

If you go on the Foursquare site, you’ll learn that mayor of a certain location is supposed to be entitled to special services and discounts from that business. The problem is, in most cases, Foursquare has neglected to let the business owner in on the game — meaning its badges and titles, no matter how lofty they sound, are completely worthless.

I found myself literally laughing out loud while reading a recent letter to an advice column in Wired magazine in which a Foursquare user wanted to know if it was OK to ask the owner of a local cafe for some freebies after having “spent a fortune” to become mayor of that location.

The user was advised to tread lightly for fear of being transformed from “that nice guy who’s always here to that pushy guy whose sense of entitlement deserves its own ZIP code.”

If Foursquare operated its business properly, its users wouldn’t have to fear being labeled at all. Foursquare would figure out a way to work out deals with merchants beforehand to ensure that its badges, titles, and whatever it decided to bestow on its members had some real value.

The Right Mix of Enticements

Carmichael, the Advertising Age project director, stated it another way: “Location-based services need to figure out the right mix of enticements for the users if they’re going to achieve the kind of wide audience and habit-forming behavior needed to succeed. Simply sharing your whereabouts probably won’t do it. Connecting consumers and savings will be the key.”

This sounds like a fairly simple formula, and one that Crowley said Foursquare was starting to use. Still, there are two reasons it may be too late for this particular form of social networking to really catch on.

First, most technology trends can only support one or two major players. In the social networking realm, Facebook and Twitter already have captured those spots, with Google and Apple looking like the most-likely candidates to move in if one of the top two should falter.

Second, Facebook and Twitter have started adding location-based features of their own, and Facebook in particular understands the dynamics of forming partnerships with businesses. That’s a skill the operators of platforms like Foursquare and Gowalla have yet to locate — and unless they do so quickly, they will find them banished from the circle of real social media players.


TechNewsWorld columnist Sidney Hill has been writing about business and technology trends for more than two decades. In addition to his work as a freelance journalist, he operates an independent marketing communications consulting firm. You can connect with Hill through his website.

3 Comments

  • I agree that the social function, helping people find each other or new places, does not work all that well in the pure checkin-checkout solutions. Location-based services are not limited to social networking though, as an ingredient that enhances existing content and functions or as foundation for new ones it can go into many directions.

    The services this opinion focuses on presented themselves as games when starting out. As a game the value of virtual rewards or badges matters less, we even see games that get to a point where virtual goods get a real-world value. With compulsive gaming it’s also not so strange to feel that: "I’m not completely sure why I’m doing it", just like Neil McIntosh, editor of The Wall Street Journal’s European website.

    As businesses though, it’s true that if no enough people are willing to play, these services will need to change or at least add more function. Looks like this will be real-world rewards and discounts and a lot of players are getting into that field.

    Seems like anybody doing anything with (mobile) technology and internet will eventually run into Facebook, Google or Apple. But maybe these companies cannot (easily) move into any subject they like. It’s interesting to know that Google bought a service similar to Foursquare called Dodgeball in 2005. The founders left Google in 2007 and one of them, Dennis Crowley, later started Foursquare. see: http://venturebeat.com/2009/03/10/dodgeball-founder-pegs-google-in-the-face-with-foursquare/

    I think there will be room for services that focus on combining location with other functions, like gaming or a focus on content for specific niches. A play focused purely on search of social networking will indeed have a hard time beating the big guys.

    I’ve also summed up your points on locationfever.com in combination with my opinion.

  • How hard can it be? You want to provide a service that gets your users incentives for frequent consumption of the business services or products? Negotiate with the business executive ownership FIRST then list THOSE companies on your website. That way,people will be driven to those businesses knowing they can indeed receive preapproved incentives and the website can negotiate advertising programs for successful ad clients. How dare these websites allow their current systems to infer a business will grant them incentives just because a consumer uses an app on their smartphone! It’s a bait and switch scenario and it’s obvious the consumer is speaking loud and clear by not participating. Thanks for a good article that helped me to better understand how these sites work. I never had a good feeling about them.

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