Monday, May 10, 2010

Real Mass Market Location-Based Services

There’s been a lot of attention focused on location-based services in recent months. Mostly, the hype has focused on popular consumer apps like MyTown, Foursquare, Gowalla, and Brightkite (just to name a few), not to mention Twitter and Facebook jockeying for position in the LBS game. But, how are these companies going to make money on location?

There is very clearly usage of these services. While eyeballs and engagement certainly can be monetized, it’s going to be a challenge for these smaller companies to create profitable revenue models. That’s not to say it can’t be done, but they have their work cut out for them.

To generalize, you could group these apps into several categories including social networking, and eventually location-based marketing and advertising. At least, marketing and advertising are where the revenue generation for many of these services is going to come from.

When you think of “location”, undoubtedly you think of a consumer-facing use case whereby the end user is engaged with an app on their phone… that is, for example, they open up the Yelp iPhone app, and search for “burritos” near their current location and get shown a handful of Mexican restaurants within a few blocks.

Consider this. Location is widely available to smartphone developers for their downloadable apps. But, smartphones are only a little more than 1/5 of the US market. And, for those of you that live in New York and California, no, 95% of the country does not have an iPhone, Android phone, or Blackberry. So, what are some truly mass market location-based services? I mean services that take advantage of location on all phones, including smartphones and feature phones.

There’s a fascinating category of apps that actually require no engagement with the phone. These apps are truly mass market and device agnostic. The idea is that the “app” leverages the end user’s phone location as a proxy for the end user’s location.

Where do you usually keep your phone? It’s usually in your pocket or purse right next to your wallet.

Let’s say every time you use your credit card or take $ out of an ATM machine that your phone is located. Well, wouldn’t it make sense that if your phone isn’t in the same city or neighborhood as where your credit card or ATM card is being read that it’s treated as a red flag for a fraudulent transaction? So, maybe the transaction is denied or more information is requested. Or maybe a pattern of usage is identified over several transactions and then vetted after the fact to auto-detect and prevent further fraud.

This simple two-factor authentication could be used to help curb the more than $191 BILLION in fraud losses incurred each year by U.S. merchants.

You could envision the same verification method being used for monitoring access to secure buildings like hosting facilities or government offices. In this case, the electronic key card is the first factor of authentication, and the location of the person (their phone) who belongs to the key card is the second factor.

How about location-enabling voice calls? Emergency roadside assistance is a fantastic example. Your car breaks down in the middle of nowhere, you call AAA, and tell them to come get you. Here’s how the conversation goes today:
Caller: Hi AAA, I’m broken down, come get me.
AAA: OK, where are you?
Caller: I have no idea where I am.
- Awkward silence -
Then, you could spend 5-10 minutes trying to describe where you are. Here’s how the conversation should go:
Caller: Hi AAA, I’m broken down, come get me.
AAA: OK, I see your phone # is 415-555-6789. OK if I locate your phone?
Caller: Sure.
AAA: OK, I see you’re located within 100 yards of at 125 Oak St, near the intersection of Maple in Smallville. We’ll send a truck out to you immediately. It should take about 25 minutes.
Now that’s customer service. The caller isn’t left frustrated and anxious, and the AAA call center has saved several minutes in call time… and time is money.

Then, there's SMS. There were over 1 trillion text messages sent in 2009. Twitter alone processes over a billion SMS tweets per month, yet let's you attach real-time location to your tweets only if you're tweeting from a phone with GPS.

Why not attach location to SMS? For all the free ad-supported SMS services out there, just think about the bump in CPMs for sending location targeted ads in the SMS response.

Yes, this sort of thing is possible today.

I’m looking forward to seeing more services like this launch as access to mobile phone location becomes more pervasive. I’m hoping to see app developers think in new directions… ones that are not limited to only iPhones or downloadable apps. Ignoring 80% of the market seems wasteful.
The opportunity is there.

2010 is the year when these kinds of services will start to see adoption. Developers? I'm looking at you!


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