Location-based social networks are the current darling of social media. They are getting a lot of media attention and a lot of businesses, large and small, are experimenting with incorporating these services into their marketing mix.
The most popular location-based applications are: Foursquare (4.5 million users), Gowalla (350,000), Loopt (4 million), Google Latitude (3 million), MyTown (2 million), BrightKite (2 million). The list goes on. Recently Facebook joined in with Facebook Places.
These services are being used in a variety of ways to market to consumers. The most popular are: coupons/discount offers; raffles; specials for the users who check in most often; first checkin specials; location tips; etc.
So this begs a question: are location-based services (LBS) the next big thing?
Some say LBS are any marketer's dream: since real-time social networking that can tag people's eating and shopping preferences; advertisers can now know exactly who their customers are and what they are doing at any given time. This means that companies can reward their most frequent customers, which might spark repeat business. Reaching customers near the point of sale and creating long-term loyalty are just a couple of benefits LBS offer to brands.
However, will these services truly go mainstream? Some have questioned whether LBS provide true business value for brands. And no wonder, when there is a lack of appropriate success metrics. The metrics that really matter to brands are not being tracked by applications today: % of active users, average number of check-ins per day and trends, time spent with applications, % of users who have been inactive over the last month, whether and how check-ins translate into revenue—just to name a few! What really matters to marketers is how engaging the app is. If the user has not returned for awhile and isn't checking in consistently, it is useless for ongoing proximity marketing.
Personal privacy is a huge concern with global policymakers and regulatory bodies increasing protection of consumer privacy. Many countries consider a person's geo-location as personal information. As a result, there has been a focus on user-centric location-based services and applications that give the user control of the experience, typically by opting in first via a website or mobile interface. And still, a lot of consumers are weary.
Lack of critical mass is an issue. Some worry that there won't be mainstream audience participation beyond tech savvy early adopters. It is important to achieve scale if you hope to see ROI in the location marketing space. As far as local business utility goes, some argue that the numbers are way too low when brought down to a local level to impact the bottom line of most businesses. According to Mashable, Foursquare users in New York only represent 2.71% of total NY population; in LA, 1.24%; in Chicago, 0.92%; and in Houston, 0.73%.
There are other reasons as well. There is an oversaturation of specials from bigger brands which makes it harder for other brands to stand out. "Check-in fatigue" has already entered our vocabulary, as the relentless chore of updating one's location becomes overwhelming. There is also inconsistency in both the business and user experience - lack of repeated and ongoing participation from businesses limits the appeal to users. Participants can also lose interest because most of the promotions are targeted at "mayors"—people who check in the most in any particular place. On the business side, there have been complaints that still-small companies like Foursquare are struggling to further develop a service, while trying to respond to the avalanche of request from interested brands.
It is also hard for B2B businesses and ingredient brands to see much value in geo-location services since they don't have retail outfits. Some ingredient brands (like Intel) successfully use LBS at events, but sometimes are limited to just that.
So where is this all going? I do believe that checkin services in general have great potential and here is why. We need to look beyond just location-based checkins. What about checking into a virtual concert or event? Or into a live chat? Or a TV show? Or even a product? There are already companies that are looking at this concept. GetGlue allows you to check into the TV show already. This is very powerful as this will allow you to find common interests among your friends that check in or "like" the same service or product. And in my opinion this is where Facebook is moving as well. Just the fact that they recently acquired the location-based startup company Hot Potato illustrates that. Hot Potato originally focused on event checkins, but later expanded their service allowing checkins into whatever you were doing, not just where you were visiting.
And for the B2B companies and ingredient brands that means that down the road they can get creative with integrating checkin features into their marketing efforts without being tied to a physical location.
Ekaterina Walter is a marketer, thinker, speaker, and connector. As a Social Media Strategist for Intel, Ekaterina works at the intersection of high tech and integrated marketing—driving campaigns and helping colleagues to leverage new media. She sits on the Board of Directors for Internet Strategy Forum. You can find her on Twitter @ekaterina. She blogs at Building Social Bridges.