Can Location-Based Social Networks Reach the Masses?

In today’s online world, mass can be reached in months, not years. For proof, all you have to do is look at Pinterest’s explosion over the last six months, becoming the fastest standalone site to surpass the 10 million unique monthly visitors mark.

So why haven’t location-based social networks had this kind of explosive growth? After all, services like Foursquare and Gowalla have both been highly regarded and used by digital early adopters. Facebook even tried to launch its Places functionality as a standalone piece before folding it into the status update feature. Interestingly, Facebook places so much importance on this functionality that even after it shut down Places, it purchased Gowalla for its developer expertise.

All social networks would love to have the size and engagement rates that Facebook receives, with a user base of 850 million and an average spent time in January 2012 of 405 minutes. However, location-based services are dependent on smartphone penetration. Yes, people can use tablets for these services, but I think we can all agree that the majority of activity will be on smartphones. If we look at smartphone penetration according to the International Telecommunication Union (November 2011), there were an estimated 1.186 billion global active broadband subscribers in 2011, and 796 million smartphones have been sold in just the last two years according to IDC (Feb 2012).

Foursquare, which is the largest of the location-based services, hovers around 1 percent global penetration. So why do these services not have mass appeal? From what I’ve seen, these services face several uphill battles.

The largest issue seems to be that the current focus on the gamification elements of these networks is not enough to motivate the non-hardcore, digitally savvy people to participate. Competition among friends is fun, but without substantial benefits, the gaming element quickly loses users’ attention. The discovery element of unlocking new items is also a nice hook, but these pieces are either random or known only by the coolest or, in this case, geekiest kids in school (for which I am guilty of being one).

When discussing these services with organizations, the first question I get is, “Why does anyone care to be the imaginary ‘Mayor’ of a place?” Of course, when I describe how people are earning real-world perks from either checking in or being a “Mayor,” the business benefit becomes obvious. So yes, the deals aspect holds the strongest appeal for a mass consumer adoption. That said, I think the deal element of these applications remains the buried lead.

Foursquare’s integration of American Express deals is a great example of expanding the deals offering. Also, the partnership with Scoutmob in November of last year was a great step toward delivering more robust deals in the U.S., but Scoutmob is still only in 13 markets with seven more coming soon.

These integrations are great, but maybe the better question is, would location-based services like Foursquare become more effective and reach a greater audience if they were to become part of location-based couponing applications like Scoutmob or even Groupon? This would shift the focus squarely to the deals aspect and could potentially tap a larger audience base.

Even with this type of change, location-based services may be prone to “radical transparency remorse,” a subject that Ann Mack, the head of JWT trendspotting, recently spoke about. Because location-based services are pinpointing exactly where you are and what you are doing, the masses may always feel that this is just too much information sharing for their comfort.

There is also the perceived issue of location-based service stalking, but there are only three ways for people to know where you are – you are friends, you tweet your location publicly, or you are in close proximity to another person using the service.

Finally, the biggest hurdle may be technology. Currently, engaging with location-based services may be too labor intensive in many situations. You have to have your phone out, launch the application, and then find an offering for your location. Now, if you are sitting at a restaurant, you might have plenty of time, but if you are quickly running into a store, this isn’t going to fit easily into your life. Near-field communication and future technologies that will allow for push notifications to be delivered to you could change all of that. Imagine walking into Target and your Foursquare app not only prompts you to check in, but also shows you four exclusive deals.

There are many challenges for location-based services, but I also see great opportunities. As someone who used to run a small business, I know first-hand the challenges that are faced on a marketing level. Location-based services present a great opportunity to engage consumers and offer them something valuable for broadcasting the business they are giving to you.

It will be interesting to see how this space develops from a consumer value position as well as from a technology perspective in the coming months and years.

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