Did you know that this past April 16th was New York City’s first annual Foursquare Day? Beyond the mathematical pun (4 squared is 16, hence the date 4/16), even if you know what Foursquare is, or are in the even larger minority of people who actually use it, why would a city choose to designate a day to a location based app? For NYC, it is about showing support behind a widely know local tech start up that is focused on getting people to engage with their surroundings, but beyond the hype, what is really happening with the barrage of location based social networks and apps? We have talked about Foursquare in the past, along with the other apps that focus on people announcing their location, and that this was considered on of the biggest tech and media trends of the last year. Now though, the numbers are in, and it does not seem like people are engaging with social media as much as expected, or users have signed up for services and then left their accounts inactive. One of the biggest drivers behind people using location aware apps is access to coupons and deals that are unlocked based on proximity or frequency of visits, and as seen in the below infographic, dominates over all other uses.
Not only are people not as actively as originally anticipated, but the economic benefits for companies driving the promotions turns out not to be very substancial.
“In the tests we’ve seen, we generally haven’t seen much of a lift in performance,” Marek says. “There just isn’t the reach in these things today to actually be able to drive the level of change in business as you could drive with a successful capital investment.”
Marek says APT generally sees a revenue bump in the “2% range” in a successful promotion from services like Facebook Places, Foursquare, Yelp, or Opentable Spotlight. Marek is also skeptical of other foot-traffic drivers like Groupon and Living Social, which have gotten much more attention for their successes (not to mention failures). “You may see a bigger bump in sales from something like Groupon–but only on a temporary basis,” he says.
The issue, he continues, is that the economics of Groupon’s daily deals just don’t have a sustained return, especially for national chains and brands. “When food costs may be running 40% of your sales, and you’re going to give a $100 deal for $50–$25 of that going to Groupon–you’re then working off $25 for a $100 offering,” he says. “While you might get a bump in sales, we wouldn’t call that successful unless you were able to see something sustained–and we just haven’t seen that yet.”
All of this is leading to people proclaiming 2011 to be the year that check-in died, that despite all of the hype, people are not that interested in voluntary shedding of privacy, and that the benefits of checking in are not substantial enough to promote long term use.
Why do people check in? Why should they?
- Finding people near you, a.k.a. serendipity: When your friends happen to be at the same location, it’s like magic. Especially useful at conferences, this is check-ins at their best.
- Points and the hoped-for rewards: Whether it is rewards on SCVNGR or deals on Foursquare, people hope to get a discount: a free appetizer, a dollar off coffee. These deals are in their very early stages on location-based services.
- To remember things: In new cities or new venues, I’ll often check in (privately) just to remember the place I went. Marshall Kirkpatrick has discussed this use case as well.
- Personal branding: While most people wouldn’t use this term, it is what’s going on. People are creating a personal online identity for themselves, showcasing who they are by telling everyone what they’re doing. (Less charitably: they’re bragging, and I’m just as guilty of it as most).
Here’s why none of these are going to lead to significant growth for the LBS players.
- The serendipity factor is very much a creature of big cities, certain demographic segments, and New York in particular. If you’re in New York, where all your friends are within 10 blocks of you and can quickly get from one location to the next, this is actually awesome. But it’s not so hot in big cities like Los Angeles that are too spread out for these serendipitous moments to happen.
- Games are fun for about two weeks, but most don’t have staying power. Like a lot of folks, I really dig Call of Duty: Black Ops, but I can only kill so many zombies before it’s time to do something else. Games are a novelty and have a very finite shelf life. So long as check-ins are “just a game”, they’ll be subject to the short life cycle of a game.
- Remembering things holds promise of long-term value; a digital memory bank of places I’ve been could be really handy. It’s just not clear that most people really need it. Unless you spend all your time traveling and going new places, there’s just not that much to remember.
- Personal branding is most common amongst the digital elite – the bloggers, social media mavens, tech execs (ok, I plead guilty). Outside a niche set of people who want the personal branding (or ego boost) of the check-in, most people not only don’t want to check-in, but they don’t know why they should. Most women I talk to are creeped out by broadcasting their location.
This though does not mean that location based aspects of apps are going to disappear, but that services whose model is based solely on location awareness are going to need another value add or face failure. Despite not always being the most economically beneficial for the promoting companies, Groupon continues to grow because of the services that are offered to users beyond just location, in this case access to coupons. Like a lot of new technology, location awareness is a tool, not an end, so while it is an impressive hammer, people need to create a nice selection of nails.