Going Geo-Loco: Lessons on the Mad Scramble to Exploit Location Data

7/22/10Follow @wroush

When you’re a cartogeek like me and a conference on location-based services is going on six blocks away from your own home, you sort of have to go. So I spent part of my Wednesday at Geo-Loco. This was a gathering of entrepreneurs and developers debating how to build profitable businesses around the petabytes of information piling up about consumers’ real-time locations in the physical world.

Organized by market intelligence firm Bancroft Group, the event filled up the conference center at UCSF’s Mission Bay campus, just a stone’s throw from Xconomy’s new San Francisco headquarters in the Potrero Hill/Dogpatch neighborhood (+37.757 degrees latitude,-122.394 degrees longitude, for anyone who cares). As Xconomy’s former infotech reporter in Boston, I was pleased to see such a strong group of familiar faces from the New England tech scene, including David Chang from Where, Laura Fitton from Oneforty, Jason Jacobs from FitnessKeeper, Ted Morgan from Skyhook Wireless, and Seth Priebatsch from SCVNGR.

I won’t try to capture the whole sense of the meeting, but I thought I’d summarize a few of the themes that stood out to me.

It’s not about finding yourself on a digital map; it’s about the intelligence you’re providing to marketers in the process. In a keynote talk, Fred Wilson of New York’s Union Square Ventures said that the location-related companies that interest him most as investment targets are those whose applications involve the generating and sharing of data among millions of people. Citing Comscore statistics, he said 14 percent of all mobile users, or about 80 million people worldwide, access maps on their mobile devices regularly. On one recent day, July 3, over a million people checked in on Foursquare—roughly 5 check-ins per active user (the company has 2.1 million registered users but only 200,000 are active on any given day).

All those searches and check-ins generate massive amounts of data. And this data can be used to tell map providers and other parties not only where people are, but what they’re doing (e.g. visiting Starbucks) and what they’re searching for. “Knowing where someone is in real time—particularly if you have some context around that—is an incredibly valuable marketing opportunity,” Wilson argued. So much so that he’s more interested in whether a location-based-services company has millions of users than whether it has a demonstrable revenue stream.

To gain users for your location-based service, give them rewards, make it fun, appeal to their narcissism–and be nice to journalists. A panel led by Stewart Alsop of venture firm Alsop Louie Partners asked how Foursquare piled up so many users—far more than competitor Gowalla (in which Alsop Louie is an investor). Blair Swedeen, of 1020′s Placecast targeted advertising service, said it was the game mechanics, which offer points, badges, and mayorships to people who check in on Foursquare repeatedly. Perry Evans, the founder of MapQuest and more recently of Denver-based Close.ly, which helps businesses market to their Facebook and Twitter followers, said the process of checking in and letting all your friends know where you are is “appealing to the ego…It’s like tweeting, people love recognition.” And all of the panelists agreed that Foursquare and its charismatic CEO, Dennis Crowley, had somehow captured the imaginations of journalists. “Their press exceeded what they were doing for a long time,” said Kent Lindstrom from PlacePop, a San Francisco startup that offers virtual loyalty cards for local businesses.

Check-ins themselves are becoming passe, so location-based networking companies have to provide value in other ways. Though pioneered by Foursquare and Gowalla, the location-based check-in is now basically a commodity feature, offered by many other services such as Brightkite, Where, Whrrl, and Yelp. So startups have to give users a reason to want to check in with their service rather than someone else’s. “Can you get valuable services from it, where are your friends checking in—it’s all that other stuff that creates value,” Wilson commented.

If Facebook ever gets serious about location, it could be game over for a lot of other companies. The social networking mega-site said yesterday that it had passed the 500-million-user mark. And there have been hints in the past that it’s working on location-related features—including, perhaps, a way for users to check in at various venues, the same way they do on Foursquare or Gowalla. Notwithstanding the unique value that those startups may provide to their communities, it’s hard to see how they will be able to compete with Facebook for monetization opportunities such as location-based advertising, several panelists said. “The first week they launch check-ins, [Facebook] will have more check-ins than any other service in the history of geolocation,” noted Lindstrom. “Having two million users on Foursquare becomes irrelevant in that scenario.”

How location-driven services handle privacy issues could make or break them. Many people who are perfectly willing to share status updates or photographs with everyone over social networks like Facebook may be more choosy when it comes to sharing their current location. Since the existing rules don’t necessarily apply, providers of location-based services will have to provide users with fine-grained privacy controls, and should study the experiences of companies like Facebook that have regularly dealt with privacy challenges, several speakers argued. Startups building services from scratch may have an advantage here, Wilson said: “These large services like Twitter and Facebook and Google and Yahoo and Microsoft may not be capable of building private location-based services, because their social graphs are not tuned for this kind of activity.”

It’s still early days, and there’s plenty of room for innovation by startups. Evans of Close.ly said the big Internet companies like Google and Facebook have “huge blind spots” when it comes to location. “This isn’t just about geography, it’s about a convergence of three swirling worlds—local, social, and real-time,” Evans said. “The probability that a big company is going to get it right is getting smaller and smaller. Nobody knows what will dramatically engage the user next…there are huge markets that haven’t even been touched.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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