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Why won’t location-based networks grow? October 25, 2009

Posted by hruf in Internet & Communities, Mobile & Gadgets.
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There is an interesting article about location-based networks and why they currently not have reached the critical mass at : Why won’t location-based networks grow? | VentureBeat.

Some parts could also found here:

[…] We decided to try out several of these apps ourselves and talk to the companies and several industry experts to find out. And what we found out is that there seem to be four factors holding these networks back: users are hesitant to join unless their friends are already on board, businesses won’t join up without a critical mass of users, many phones still can’t handle the necessary technology, and there are privacy and behavioral concerns.

Users are slow to join up

I installed Loopt on my iPhone when it was launced more than a year ago. I stopped using it soon after, since none of my Facebook friends or Gmail contacts were on it. Now it has more than a million users, so last week I installed it again — along with several other apps — but I didn’t have much luck this time either. The closest I came to a successful experience was with Foursquare, where I was able to find a few friends — most of whom haven’t yet responded to my invites. I’m inclined to think it’s not because they don’t like me but because they signed up for the service and never checked in again.[…]

I see three effective strategies in play to tackle the critical mass and chicken and egg problem:

Strategy 1: Build apps that can offer value on their own (stand alone) so that they don’t face chicken and egg problem in the first place. Aloqa, Geodelic, and Where are taking this tack. As Lacy said, social is secondary to location in their app. These applications should be able to draw in an audience purely on the basis of their location data. Once they get wider audience, they can focus more on the social element to make those apps more addictive.

Strategy 2: Introduce virality and game mechanics so that friends can multiply quicker. Though the idea of a stand alone app is appealing, it can also be severely limiting. Foursquare, Going, Gowalla are doing a good job of not only starting with a home page that provides value even without friends (so can act as a “stand alone” app), but also of using virality of social connections. Foursquare, in particular, goes even further by offering engaging gaming mechanics. I think they have a brilliant strategy, and are the company to watch in the space.whrrl1

Strategy 3: Provide apps on several platforms and carriers etc. to widen the reach and pull in more users. Foursquare and a few others lack platform access: they are available only on limited phones. If an app is available only on the iPhone, what is the likelihood that you’ll find your friends on that network? As I’ll explain in a moment, Loopt has a lead here because they invest significant time to make sure their solution is available on several platforms. In addition they already have partnerships with Verizon Wireless and Sprint Nextel, which puts them at a scale advantage. Further scale and network effects can be leveraged by partnering up with players such as Facebook, MySpace, or mobile operators, who have a huge existing base of users, each of whom already has a large address book that will get more location-aware with time. Google’s location-aware mobile app Google Latitude is the elephant in the room here. It has the advantage of Google’s large user base and brand name but doesn’t seem to be focusing so much on social aspects. Instead, it seems poised to commoditize on “Who is nearby” and location technology. And that brings us to the question of what business models are most likely to drive success. (more…)