Thousands of SXSW-goers packed like dominoes onto the escalators of the Austin Convention Center on Saturday, waiting to hear Seth Priebatsch, the 22-year-old founder and "chief ninja" of Scvngr, proclaim the future of location-based apps. "The last decade was the decade of the social layer," Priebatsch began. "Now, the game layer is coming."
Dressed in trademark orange garb (with orange glasses to match, perched atop his head), Priebatsch was expectedly bullish about the future of Scvngr and peers like Foursquare, Gowalla, and Facebook Places. In fact, Priebatsch (admirably) used much of his time before the pulpit arguing that properly engineered game mechanics could improve not just consumer loyalty, but also education, environmental regulation, and philanthropy.
But he also criticized today's location apps for their narrow appeal and poorly engineered games, saying that the rewards for check-ins were still too lame, the rules too restrictive, and the marketing potential essentially untapped.
To capitalize on the gap, Scvngr released a new app this week called LevelUp, which is a separate app from the original Scvngr game. Instead of games and challenges, LevelUp offers users better and better rewards and discounts for returning to a business or brand more than once, much the way accruing status in a video game can increase a player's powers. (The original Scvngr app, which lets groups of friends compete in "challenges" tied to a certain place, doesn't contain any advertising or collect any monetizable data.)
The Game Matters
While the rest of SXSW has shown the tech industry congratulating itself on the explosive growth of Foursquare and Facebook Places, and the participation of powerful brands like the Gap (a Facebook Places partner) and Pepsi (a Foursquare partner), Priebatsch says that location-based services are still relatively powerless: They aren't good at building loyalty for the businesses that market with them, and they don't reach a large enough audience to support effective national brand campaigns.
"Right now, [the industry] is using very convoluted game mechanics to create loyalty in the real world," Priebatsch said on stage. Group buying sites like Groupon, he explained, offer real value to consumers may fail to create any repeat business once a Groupon expires. And while check-in apps like Foursquare are good at engendering loyalty to a business, they usually offer generic rewards that don't appeal to everyone. (Foursquare "Mayors," for example, might only get a free drink for the honor).
"The problem with the Mayorship paradigm is that it rewards a select few," Scvngr's SVP and brand alchemist Chris Mahl told Fast Company before the keynote. "We think that alienates the broader consumer base." Priebatsch and Mahl say that smartly designed games can bring check-ins mainstream, and leverage the power of them en masse.
Why Brands Care
Scvngr's principals says they realized the power of "changing the rules" during two pilot programs with Coca-Cola and bar chain Buffalo Wild Wings late last year. The pilots showed that people would pay an incredible amount of attention to the game if they could create their own challenges—in fact, during the Buffalo Wild Wings pilot, Mahl says users played the app for an average of 14 minutes, instead of pocketing their phones immediately after checking in. At the end of the pilot, Buffalo Wild Wings patrons had used Scvngr's user-generated system to create 9,950 new challenges tied to the company's restaurants. The restaurant had pre-loaded just eight challenges in the pilot.
"If I'm a patron and I create a challenge at Buffalo Wild Wings, you bet I'll bring my friends back to the restaurant to do these challenges," says Mahl. That kind of activation and attention is more than enough to excite most brands and local businesses, but Priebatsch and his team say the rules will need more tweaking. "LevelUp is really an experiment," says Mahl, "and the goal is to see if merchants can solve the loyalty problem."