Questionable Future for Location-Based Services

(Ping! Zine Issue 42) – In what many considered the culmination of the big Web 2.0 push, location based services have failed in garnering a large audience, something that CEO of Lasso (location based advertising platform), Chris Treadaway admitted was necessary for justification of LBS.

At the beginning of last year, such LBS leaders as Foursquare and Gowalla achieved less than 0.1% penetration in large metropolises such as New York City, Los Angeles, and Chicago. According to Forrester and Pew Research Center, only for 4% of all online adults in the US use an LBS service. On any given day, only 1% of all internet users are using an LBS.

“I’m a compulsive Foursquare user, I’m checking constantly all the time, but I have to admit I’m not completely sure why I’m doing it,” Neil McIntosh, editor of European edition of the Wall Street Journal, admitted during an interview with Foursquare cofounder Dennis Crowley.

Nationwide location based services require large populations in order to be useful to non-chain/franchised local companies. Even a few million users would translate to almost negligible numbers to the average locality. Foursquare, Gowalla, all have a sort of charm to them, but to most users this charm brings nothing more than idle curiosity. A factor that was demonstrated on the last week of 2010, when the top 10 Foursquare venues had less than a million check ins for the entire week.

One of the target areas for LBS is to coordinate get togethers such as lunch, dinner, going out to a bar or club. However, the “accepted” means of organizing such activities through the Net has been Twitter, which receives more than 1 million tweets per hour.

Are location based services trying to fill a void that doesn’t exist? It is a possibility. Facebook has the market cornered on connecting with friends and family, and to some extant co-workers. Twitter has the market when it comes to quick communication between connections. Geo-targeted advertising doesn’t fare any better with LBS’. With such small local penetration, the ROI for advertising through LBS (non-Google local services) is quite dismal.

Perhaps LBS is trying to fill a niche that is, for all practical purposes, already filled. Alan Wolk, Managing Director of Social Media Strategy for KickApps a social media solutions provider, described other areas where LBS could be successful. If an LBS could provide more valuable information to users and marketers (checking into the service not as an act of whimsy, but due to actual value), deeper engagement between users and businesses, targeted loyalty rewards, and remove real-time syncing between devices and the network, then a wider audience could find a real reason to use it.