The Present And Future Of Location-Based Services

I just came back form the Geo-Loco conference, which is exactly what it sounds like: a conference focused on adoption of and issues around Geo-Location apps and devices, also known as Location-Based Services (LBS). LBS is the breed of apps and features that allow users to “check-in” to a place and earn badges (Foursquare) and stamps (Gowalla); some LBSs (like Whrrl and Pegshot) allow you to create content around each check-in, which is really cool in my opinion. You can check into a physical location, event, online location or a even a concept (when I’m particularly annoyed, I check into “Over It” for example). Some LBSs are standalone apps like Foursquare, Gowalla, Loopt, and some are features of larger products like Twitter.

Fred Wilson in his keynote referred to the action of checking in as a social gesture. Social gestures can be anything from opting into a friendship on Facebook, to posting an update via Twitter, to posting on someone’s Facebook wall, to commenting on and sharing a blogpost, to checking in on Foursquare, and so on. Foursquare is the market leader in this (still nascent) market segment of LBS, so I’ll focus my discussion on it in this post. However, all of this can and should be applied to the industry in general. Some of below issues were discussed at the conference, and some weren’t; either way, they’ve been on my mind for a while:

We are a long way away from mainstream adoption of LBS, and we are going to stay that way before we fix a couple of things:

• Privacy Is Dicy: Fred Wilson said in his panel that privacy is the biggest issue. I agree; just look at the uproar against Facebook’s privacy changes, and just imagine how much worse it’ll be if your actual physical location fell into the wrong hands, vs. your Facebook content. I agree with Fred when he says that bigger networks like Facebook will have a hard time with their users adopting a ge0-spatial element, because sharing of that information was not clearly and explicitly defined in the TOSs. You would connect with people differently and (one would hope) more judiciously if you knew that those people could track your location. In Fred’s words, the Facebook social graph is not appropriate for location sharing. This is why Facebook users have different expectations around privacy than do Twitter users: FB was supposed to be a network for friends, while the default for Twitter is open communication with people who aren’t necessarily friends. Facebook and Foursquare are double opt-in, whereas Twitter is totally open, and no “follow” relationship needs to be mutual for a conversation to happen. Personal and professional use cases, as well as community norms are different across Twitter, Facebook and Foursquare. Privacy is a showstopper, and the lack of business adoption is going to be just as big of an issue.
• Lack of Business Adoption: Fred spoke about the lack of revenue streams. Of course, that’s a concern for the LBS companies themselves. I think the lack of business adoption of LBSs can also prevent users from adopting the service. Let’s take a closer look. Mainstream users want loyalty rewards, amongst other things. Whereas the early adopters (as defined by diffusion of innovation model) will adopt for the love of technology progress, and have a higher threshold for tolerating bugs, the mainstream market is not as forgiving. If a user keeps checking into a business repeatedly, and the business doesn’t know that he is checking in, and doesn’t even know what Foursquare is — at some point the user will become fed up and defect. I think if people felt like they were getting value out of it, they would feel more comfortable revealing where they are (as long as the privacy thing is taken care of). For now there is still a disconnect between what customers want for adoption and what businesses are willing to acknowledge.
• User Process Is Still Onerous: GPS precision is still not there. Half the time I check in on Foursquare, it tells me I’m somewhere else, and I have to scroll through a list of venues (or even worse – search for the venue – gasp!) or piggyback onto friends’ checkins. It’s a barrier and creates friction; the more the mainstream the user is, the less he is willing to take on friction. There was a discussion of automation at the conference, where the app checks you in automatically based on where you are and what your daily patterns are. I think that’s more of a techie-talking-to-a-techie kind of excitement — it would never work in the mainstream market. Automatically checking in is scary even to someone who is an early adopter, like me, let alone your neighbor who is still deciding if he should join Facebook. However, I’m all for making the process easier: if the system guessed where you are, and prompted you for a yes or no, that could be helpful. As LBS companies deal with making the process easier, they still need to keep the issue of privacy and very explicit permissions front and center.

So far, LBS adoption has been driven by a small, albeit passionate, group of techies, geeks and social media people. First of all, these are early adopters, and a lot of this early adoption does happen in a Silicon Valley Echo-Chamber/Bubble, without translating to the mainstream. Secondly, techies and social media people took to LBSs as fish to water, because a key benefit of social media has been the ability to bring us closer together in person. All of a sudden, tweetups started to pop up, and we started to cultivate and strengthen our online relationships through offline relationships. The “planned serendipity” of tweetups is further enabled by apps like Foursquare where you can identify a critical mass of your friends and figure out where the hot party is that night. Given our higher-than average propensity to get together, and a strong sense of community that surrounds the space, LBSs are but an extension of the way we are. Thirdly, the early adopters of tech tend to be into the gaming aspect more than the average user. Even though the Foursquare community is small (800k active users, per Fred Wilson’s keynote), it’s very passionate and engaged. Fred said that Foursquare reached 1 million checkins in a single day — that’s >1 checkins per person, provided that every person checked in. This level of engagement is simply not sustainable in the mainstream. Moral of the story: because the enthusiastic minority using LBSs is excited now, I am still skeptical to this level of enthusiasm in the mainstream.

Personally, I used to be a very passionate user of Foursquare AND Gowalla. I cooled off to both, and exploring the reasons why illustrate the cautions I state above. This is what happened to me — I kept checking in primarily to be mayor (game mechanics), with a distant promise of a deal (business element), as well to connect with my friends on the fly (planned serendipity). However, the ease of gaming the system and lack of rewards from businesses dampened my enthusiasm. I explored rewards earlier, let’s take a closer look at gaming the system. Foursquare allows you to check in when you aren’t somewhere, which is how I’m convinced I lost the mayorship of my apartment building to someone who was gaming the system. Gowalla is better at preventing this, although when it’s wrong about your location, you can’t check in at all. With GPS precision, it’s damned if you do, and damned if you don’t. Because the thrill of becoming a mayor is gone, because anyone can game the system and take it from me, and because I get no rewards from businesses for checking in, I feel like I’m revealing a ton of personal info, with little return. And this is the key for any consumer app – the return has to outweigh the cost. However, one use case still remains for me: planned serendipity. I still check in when I go to large events and conferences, because I want to find my friends and I want them to find me too.

This is a business blog, read by business people, so who cares about these tools that are still on the bleeding edge and not part of the mainstream? Well, you should care, because there can be implications for business and even (ready for it?) Social CRM. What?!?! What does Foursquare have to do with SCRM? Well, it’s actually quite simple: SCRM is all about better processes to serve and collaborate with the social customer. Foursquare gives you an additional layer of rich information that can help you with this, but only if: 1) your business is right for it, and 2) you know how to use this data. First of all, LBSs aren’t right fore everyone — don’t feel tempted to adopt every shiny new object; you will run out of time and effort and dilute your focus. At Attensity, we will hardly use LBSs to connect with our customers, because it just doesn’t work for the segment we serve. But if they are right for you, you can achieve three major business goals:

• Trial: When customers are in your geographical area, or somehow participating in adjacent activities, why not send a customized offer? When I’m shopping in a pedestiran shopping district, a local coffee shop or brewery could send me a message saying “Hey, you must be exhausted from all his shopping — why not take a break and enjoy 1/2 price drinks?” Make these offers special – you can only get them if you checked in today at a certain neighboring store. Here’s a kicker: stores can work together to drive a sort of a scavenger hunt, where you go from store to store, following clues.
• Repeat purchase: You can give people a customized deal based on how often they walk into the store. 3 checkins, and you get 50% off (of course, the LBS needs to become harder to game first). You can give deals to mayors, throw special events for mayors, and other fun things — just let your imagination run wild! What if you could layer “check-in” data on top of purchase data? If someone comes in a lot but never buys anything, maybe you could nudge them a little with a sweeter offer. Of course, you want to be careful to not go down a sippery slope of constant sales. And remember, rewards aren’t always monetary.
• Engagement: while customers are in your store, why not send them tips? Why not display everyone who’s checked in on a screen in the store? Why not have everyone hail the mayor — digitally and on the screen in the store? Whatever you can do to inspire competitiveness via game mechanics, will increase engagement. Think of fun, innovative ways to delight your customers.
• Make better decisions with richer data: LBS data is just one layer of data, albeit a very rich layer that’s closer to the actual purchase intent than most other social media. For the best result, take a holistic view and relate this data, along with other social media data, and relate it to other internal customer data (the R in our LARA process). The Foursquare API is easy to work into your existing “stuff”. LBS data should be used to uncover trends and preferences about each shopper specifically and all shoppers in aggregate.

If you start thinking through this stuff now, testing it and figuring out what works, you will be lightyears ahead of the competition when this stuff goes mainstream. I believe it will; we just have to work out the kinks first, and better align intentions and rewards from all sides – businesses, LBS platforms and users. After all, they said the Internet was a fad, and Twitter was stupid.