Last week, two very interesting articles about LBS companies (like foursquare, Gowalla, Loopt, brightkite and MyTown) were published and got a lot of attention in the blogo/twitter-sphere.
It all started with Dave McClures’s post which rips into all these platforms in a pretty hilarious fashion using very colorful language. I love reading Dave’s posts because they go straight to the point, no BS, no pretty pictures.
Dave raises a few very valid points around the eventual success of all these companies. Critical areas they need to focus on if they want to win this game:
- provide users with real value (coupons)
- grow VERY rapidly
- get some serious money to finance the growth ($100mil+)
- provide payments (virtual or real cash) as a part of the solution
Nick O’Neill’s post reiterates some of Dave’s points but also states that:
- there is a way to incentivise people to check in without using coupons (i.e. virtual currency, owning virtual properties, etc)
- there is a massive location based marketing pie that everyone is after including Apple, Google, Facebook and Twiter
While I do agree with most of the ideas in these two articles, I think there is another category of companies that are going to be an essential part of the LBS ecosystem, irrespective of the eventual winner(s) of the LBS platform tussle. Let me explain.
All of the aforementioned companies are trying to dominate the LBS space the way Facebook currently dominates the social networking space. Some of the most important parts of this domination will be critical mass of users, identity management, location, social graph and payments. Solving these problems will force all of the players in the space to focus on building robust, market dominating platforms that will revolve mostly around location aware social networking. This will leave an opening for solutions that are more focused on providing real value to users in more specialized areas like shopping, dating, clubbing, community work, etc.
What I’m really trying to say is that “Zynga+Facebook” of today will be replicated by “Niche LBS apps+LBS Platform Winner(s)” tomorrow.
Let’s take HopShopper as an example. HopShopper is focused exclusively on providing rewarding shopping experiences to its users. This means focusing on loyalty, rewards and coupons. One focus, shopping. Not social networking, sharing photos or finding who’s having lunch around the corner. We provide very specialized functionality like scanning coffee stamps with your phone, which would be very hard to integrate into existing LBS applications without cluttering them up.
However, we need all the services of LBS platforms to make our application useful to the masses. We want to check in users into existing platforms, let users share information with their friends over social networks, we need an identity platform and a payment system that will allow gifting and mobile purchases, etc.
There are a bunch of companies out there trying to provide users with real value on top of existing LBS platforms and real value is a critical part of the equation according to both Dave and Nick (be it physical or virtual). I would argue that the LBS platform that is open to working with companies like ours and provides us with essential services will reap the benefits similar to those Facebook got from their application platform. It’s big pie and the race to build the oven is on!
