Are Location-Based Services All Hype?

Are location-based mobile applications like








? That’s the potential, at-a-glance takeaway from a new


released today by Forrester Research. Only 4% of U.S. online adults have ever used location-based apps such as these, and only 1% out of those that use them do so more than once per week. Meanwhile, 84% said they weren’t familiar with these apps.

What’s worse, for marketers hoping to tap into a diverse and savvy audience of shoppers, diners, and other local consumers, the details on audience make-up are disappointing. According to Forrester, LBS users are 80% male and 70% are aged 19-35.

So should marketers stay away for now until these services mature? Absolutely not. And here’s why.

Small But Powerful

Yes, the audience for Foursquare, Gowalla, MyTown, Brightkite, Loopt and the other smaller players in the location-based services game is young, tech-savvy, educated (70% have a 4-year degree) and predominately male.

But so is the average early adopter of new technology, historically speaking. As Foursquare’s co-founder Dennis Crowley explains, we’re still in the early days of location-based services. “Go back to Facebook’s stats in 2005 or Twitter’s stats in 2006, and you’ll probably find data that tells a similar story.”

And yet, despite the relatively small size of these apps’ user bases (Foursquare and Brightkite have around 2 million users, Loopt has 4 million, Booyah’s MyTown has 2.5 million, and Gowalla 340,000), these apps attract the ideal customer for marketers to target with mobile coupons, ads and other location-based campaigns. These users are the “influentials,” which, in marketing speak, means they’re more likely to spread the word about a business, share their opinions and encourage others to join in this new-fangled check-in game.

In fact, the report finds that 38% of these users are more likely than others to have friends and family ask their opinions prior to purchase. They’re 14-20% more likely to use their phones for comparison shopping and, in general, they’re more likely to research a product or service before purchasing.

In other words, when these folks get a good deal, they know they’re getting a good deal. And they’ll probably tell someone about it.

Challenges for LBS: Fragmentation & Potential for Big Players to Crush Small Ones

Although LBS apps have the potential to connect marketers to key customers, there are still a number of issues beyond the demographics of the current audience and its size. For one thing, the market is heavily fragmented. Not only are there half a dozen or so “major” players in the check-in business, there are also other location-based apps that focus on different types of experiences. For example, the object-based social network Stickybits allows anyone to tag real-world items with barcoded stickers, while other niche apps like SCVNGR turn checking in into a puzzle-solving game. Although not mentioned in the report, we could add Miso to this list of niche apps as well, as it lets you “check in” to TV and movies you’re watching.

Another potential problem for today’s LBS applications is the potential for a big player to come in and dominate the market. Google already has location-based services Latitude and Buzz, both which have the potential to increase as the Android market grows. Yahoo has partnered with Nokia on mapping and has acquired various location-based services, too. We also have to point out the elephant in the room, even though Forrester did not: Facebook. If the social network with now half-a-billion users ever formally launches an LBS app or service, it could be game over for everyone else.

Is Forrester Warning Marketers Away from LBS?

The knee-jerk reaction to Forrester’s report (as evidenced here in the comments of this AdAge article) is that the research is essentially downplaying the potential of the LBS market. That’s not necessarily the case.

Instead, Forrester not only highlights some high-profile partnerships between LBS apps and major brands (Starbucks/Foursquare & Brightkite, NatGeo, USA Today & The Washington Post/Gowalla, Gap/Loopt), it also recommends particular companies take special notice of the potential here.

Companies engaged in event marketing, those with retail storefronts and those whose online tools translate to offline interaction (Craigslist and ZipCar, for example) could all benefit from using this technology, the report recommends.

And while other businesses may not be able to generate a critical mass of volume with LBS-based programs, now is the time to experiment, says Forrester. Male-targeted companies may have better luck than others, but only for the moment. Other marketers may want to wait for demographic and adoption rates to increase and for the “vendor dust to settle,” though. While yes, Forrester concludes that, in some cases, “the potential for LBS doesn’t match the hype,” that statement ends with an important qualifier: “….YET.”

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