frankly speaking

The LBS Wars

There’s an emerging technology emerging from Silicon Valley, Austin, Texas and New York that’s going to change offline consumer behavior and customer acquisition. It’s called location based services (LBS for short), and quite simply it allows people to ‘check-in’ with their mobile phones and tell people where they are.  It has tremendous benefits if you’re a product or establishment owner because you can send personalized marketing promotions to your consumers whenever they check-in at your store or restaurant.

Lots of companies have jumped into the LBS space. Some of them include Loopt, Wrrl, Gowalla, Foursquare and most recently Facebook (with Places). The two players that have emerged as the one’s who will be around for the long-term are Foursquare and Facebook. I’m not saying the other companies won’t survive, I’m just saying that based on current user behavior (i.e. number of users using each company’s respective app), the number of advertisers they work with and the popularity of the service, it’s hard to see how the other companies will be able to compete. For the purposes of this blog, I’ll focus mostly on Foursquare and Facebook.

Product

Let’s face it, in order to be an LBS company, you have to have a good product. This is where Foursquare and Facebook separate themselves from the rest of the companies out there. Foursquare has been around for about a year and a half and had a chance to develop the premier LBS product.  Their product was so hot that I remember a year ago I was emailing everyone I knew to try and get their Beta Blackberry app. The product is simple – you fire up the app, choose your location and check-in. You also have the option of syndicating your location to Twitter and Facebook. One small but I think huge difference between Foursquare and Gowalla’s product is that with Foursquare,  the way locations are presented to me is much cleaner, crisper and less redundant. For example, when I was testing out Gowalla’s product, I was frequently given two options for one location to check-in to. This is a horrible user experience, not only for the end user, but for potential partners as well.

When Facebook launched their Places check-in product only a few weeks ago, they made the simple but effective decision of including it in their current iPhone App. In order to check-in via Facebook simply launch the app (as you normally would if you were going to catch-up on your newsfeed) and click the location button which is conveniently and strategically located next to the ‘What’s on your mind’ entry box.



Advertiser Depth

We all know Facebook has been extremely successful in acquiring a huge advertiser base to advertise on its web platform. It will be interesting when they start allowing advertisers to advertise when users check-in to Places. Imagine for instance that you’re just checking in to the Cheesecake Factory and up pops an ad in your app promoting the fact you can get Adam’s Peanut Butter Fudge Ripple Cheesecake for 15% off when you checkin. Tell me you wouldn’t take advantage of that! What’s more, advertisers could, theoretically, service the ads themselves when they log into Facebook to check on the other ads they are running with the platform.

Likewise, Foursquare has done an incredible job of lining up major brand advertisers with their products. I still think some of the mom and pop advertisers will struggle with their ability to run ads on Foursquare. Why? Because it’s just one more thing they have to do during their extremely busy day. Foursquare would be doing themselves a favor by creating a simplified web interface that lets advertisers and location owners start and manage their Foursquare promotions.

Customer Base

Foursquare is one of the pioneers in LBS apps, and therefore has a headstart in terms of the number of people who are actively using their product. Like other company’s before it, there has been massive adoption by geeks, hipsters and people who work in technology.

The problem I see with Foursquare is mass-customer adoption. It’s going to be difficult for them to convince Joe Schmoe who lives in Ames, Iowa to get the Foursquare app, let alone use it. Sure, there’s a huge value proposition for using Foursquare, but the question is, are there enough Advertisers (Big Box shops and Mom and Pop shops) running promotions in Middle America to encourage users to download and actively use another app on their mobile phone.

Facebook, as you may have heard, just signed-up it’s 500 millionth customer. While, by no means, are all 500 million actively using Places yet, because their mobile app has such great distribution, it wouldn’t take much from Facebook (or their Advertisers) to incentivize  them to use Places. However, like Foursquare, the success of Places is more dependent on Advertisers using the product; customer adoption will come with time.
 
End Game

Who do I think wins the LBS Wars? If you held a gun to my head, right now I’d say Facebook. The reason I think Facebook wins is because they clearly have the advantage when it comes to Advertiser and customer depth. I’m not saying Foursquare doesn’t have a chance, because they certainly do. Foursquare has a great team in place from it’s investors, its CEO, and its Product and BD team. However, we all know that living in an era where barriers to product development are low, it’s very difficult to keep out the 800lb gorilla who knows what he wants.

I think in the end, Foursquare will sell itself to Facebook, and Facebook will then start to rival Google for web supremacy.