Why I Won’t Touch LBS with a Ten Foot Pole

Pitch any VC and you’ll find certain markets, uses cases, and other oddities that have left a bad taste in their month.  No matter how interesting your product, or how much traction you have, they’re just not going to go there.  This can be frustrating and make you feel like they are being ignorant or bull headed.  I even though so, until I recently realized that I get annoyed by every single location based services idea I hear – mostly as a result of having worked on Whrrl.  People will tell me “the opportunity is huge” and all I can do is smile slightly, thinking that I know better but there is a no way they will understand, when I ask, “Really, why?”

And why is the location based services opportunity huge, exactly?  Is it really an untapped need people have to get information about the world around them on the go.  While this might seem cool to a very small niche of geeks, is this anywhere near making it to the mainstream world?  I used to think so, and to believe that it was simple a problem people didn’t realize they had.  At a time, it was my job to evangelize a product that would help people to capture their experiences and share their location with friend.  Fundamentally, doing this is all about collecting “footstreaming” data on the company’s end so that they can slice and dice users in a different way, and sell advertisers on segments like “visits urban bar 2+ nights per week” or “goes to McDonald’s more than 3 times per month”, etc… you get the idea.

People Will Balk When Location Data is Used for Advertisements

Right now people are having fun using location data to share their location with friends on Foursquare, but the minute I begin to receive advertisements on Foursquare (or Twitter/Facebook where I am publishing my location) I am going to feel like my privacy has been invaded, and I am going to stop sharing.  Nevermind that the information is already public and that I’m already explicitly putting it out there for the world to read – right now only humans are answering back (if at all).  Getting advertisements related to my checkins would be the equivalent of interaction with bot Twitter users – lame!

Possible Location Based Network of Choice: Facebook

As I wrote in early November, Facebook seems like the best option for a successful location based network because it already has the critical mass of friends who I actually know and trust in real life AND the granular privacy settings that LBS users on every product have been clamoring for from day one.  A few weeks after my post, Jason Kincaid echoed my sentiment in his post “Watch Out Foursquare, Facebook is Poised to Dominate Geo”.

Facebook Privacy Management Isn’t Great

I have to wonder if anyone even remembers the debacle with Beacon?  It seems to me they’ve been aware of and actively working on LBS capabilities for the social network, along with advertising, for some time now and have probably been waiting for that mess to blow over (P.S. Looks like Facebook settled the Beacon thing for a cool $9.5 Million dollars).  To read more on this visit:

What About Whrrl, Loopt, Brightkite and the Rest?

MG Siegler, who has been covering LBS for a long time and even wrote about the launch of the Whrrl iPhone app (thanks MG!), posted “Location’s Social Paradox” today on TechCrunch, and opened with the statement:

“There’s an absolute eruption of activity around location-based services right now.”

It’s funny, it seems like each year is going to finally be the reckoning for social uses of devices with GPS. With each year comes a new crop of products, applications, companies, and avid users looking to take their products mainstream.  Last year it was Brightkite, a year before that you might saw it was Loopt or Whrrl.  Before that we had Dodgeball, Jaiku, and a slew of others.

For various reasons, these products have had less penetration into the early adopter market than Foursquare.  Of course, there is a bit of an echo chamber when it comes to faddish apps in the Bay Area – but if crossing the chasm is the name of the game for LBS then making a fad and turning it into a trend might just be what Foursquare can accomplish that the others have not.

So, Why Not Touch LBS?

Other than crappy past experience, I’m just not sure the market is as big as I originally believed it was.  I think sharing location is useful with a very small number of people who actually care about where I am, and even then it might be more efficient for me to ask for or tell them location explicitly on a case-by-case basis (over chat, IM, phone, etc.) than to passively send the information out to followers on a network. And that’s just an issue of finding a use case for sharing location. Monetizing it as a business is an entirely different issue, because while I might share my location with friends as a feature of a product I am loathe to consider sharing it with a company looking to leverage my information for advertising dollars.

This begs a deeper question, which is ‘what is the future of advertising’?  At one time, contextual information such as location was considered useful for providing more deeply relevant ads, but is this still realistic or meaningful today.  While a curiousity, it is still to be seen if these more timely and location-relevant ads would actually create more *action* against offers, like visiting a restaurant or cashing in on a special (coupon).  For now, I think this remains a feature – not a product, and it is why Facebook is still best positioned to experiment.  Maybe they will acquire a product with a network and significant traction (such as Foursquare) to nudge things along.