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: http://www.beaconclasssettlement.com/

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.

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  • Hawks5999

    I think you make some valid points about the existing market for LBS and the resistance people will have toward advertising based on location. But I think this debate will seem quaint in another 3-4 years. You have some memory of using devices and connected service without location as a key component. A generation is coming of age that will not have first hand experience with technologies without LBS. Their expectations of privacy will largely be different than yours and radically different than mine. And they will drive adoption by older business and personal acquaintances and friends. Consider facebook. 5 years ago it didn’t exist. It’s inital users were college students and within 4 years it was driven to ubiquity. 2 years ago nobody would care what some friend was doing right now. Now everybody is statusing with sone service. Today, nobody really cares where you are doing it. But in short order it will become a natural part of the status update. Consider also that it was under 15 years ago that ads in your email was considered a serious violation of privacy. “How dis they get my email?”. It was also a serious intrusion to have ads on a website. Today ads in both these places are accepted. Ads in SMS are moving now from a privacy invasion to an annoyance and will soon be more accepted (though the attendant carrier charges make them still dubious). Location ads will go through the same cycle. And it will be driven by generational changes.
    Bottom line, it may not be foursquare but LBS is the near future.

    • I’m not arguing that LBS won’t exist, just that the market isn’t enormous enough to justify/support the 100s of companies/products that have been created in the space. It is a feature, best launched and experimented with inside of a product like Facebook that already has the correct relationship and trust model.

      You make a good point, a younger generation might not be as private about location – but you’ll see that I am not stating privacy as the issue, I already publicly share my location. It’s more an issue of whether I want to see advertising content and, more importantly, whether I will actually be more likely to act on those ads.

      I’ll have to think on this more…

  • I suspect that another problem is the poor nature of the location services themselves. It’s hardly seamlessly integrated with your user experience and managing location services accurately for many users is a tricky problem.

    My gut feeling is even with GPS in every phone, this is something that will need to be “fixed” on the carrier/operator side rather than something which requires users to turn on a service and load an app.

    It strikes me that the separate location based social networking apps and services are going to really struggle compared to people who provide integration into existing services that people use.

    There are probably some niche location based apps around search and similar but you could be right that it’s not going to be a license to print money.

  • hawks5999

    “I’ll have to think on this more…”

    We all will.

    The key will be to create geo-located ad hot spots. When you are in that spot, the LBS app would notify you of a special. For example: You are at the stop light at 122nd and 85th. Coffee Creations could notify you with “$1 Off Latte for the next hour [Save][Ignore][Block this Vendor]”. In that case, your location would make you more likely to act on the ad. And your location makes you more valuable to the vendor.
    The company that executes this style of service well is who to watch in this space. The trick will be to attract users – and that’s where the game mechanics of 4SQ and Gowalla, etc. need to be compelling.

    • Absolutely, because right now the benefit seems to be much greater for the vendor/advertiser than the consumer. I need to try Gowalla btw, it is getting a lot of buzz. Thanks for sharing all your ideas!

  • Great post Danielle. Location is definitely a feature and not a company, at least for the current inceptions of the LBS startups out there. That said, location is going to be treated as first-class metadata – there are too many use cases for it not to be. There’s a lot of use-model/ux experimentation around LBS now and arguably there needs to be more to figure out what useful ends it can offer.

    • Hey Charles, awesome to having you weighing in on this since you’re the creator of the LBS service Acqui. I’m not as familiar with this idead of “first-class metadata”, what else would you say falls into this category of metadata?

  • To paraphrase on first-class metadata – “English…do you speak it!” 🙂

    What I mean by first-class metadata is information that is captured along with any kind of recorded information. Examples of such information includes “title”, “description”, and “timestamp”. Geotag info viewed in this light is best captured as metadata, allowing for interpretation/usage of that metadata based on the context of the user reading it. For example, this is what Twitter is doing with their Geotagging API.

    Location as an attribute is fundamental to so-called location-based “services”, however the form of this “service” in terms of technology and business model and their respective evolution is what many folks are trying to get a handle on today.

    IMHO, the long term vision for LBS is the “Star Trek” computer; always in the cloud and knowledgeable about your context. The hardware and software we have available today are giving us baby steps towards that. More closer to home are the ideas in Ubicomp done in the late 80’s by Mark Weiser, et.al. (http://en.wikipedia.org/wiki/Ubiquitous_computing) where we’re constantly surrounded by small, cheap, networked processors that are aware of our presence – that world will come to us real soon now, definitely before 2030.

    It would be very narrow to only think of LBS as an ad-rev model or one where its sole purpose is to keep track of your social graph. Location is a feature, yes, but it’s a big one where as mentioned above, “we’ll all have to think about some more.”