Why location-based services are just getting started

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On the subject of mobile check-in apps, I have been the unimpeachable Mayor of WTF. I enjoy the mild dopamine kick of meaningless milestones as much as the next digital marketer -- a condition that comes from years of monitoring ad click-through rates -- but try as I might, I just can't do geo. Foursquare sits in the dustbin of my unused apps, taunting me with the prospect of countless unearned badges. Facebook Places reminds me that it's now possible to neglect my social network in multiple channels.

So, I had my own special interest in the outcome of my agency's recent study of geolocation app usage among 437 smartphone users. I wanted to know whether I was the lone Luddite in a universe of happy location-sharers.

Nope, not alone.

The study found that while 39 percent of smartphone users who know about location-based services (LBS) are also using them, the remaining 61 percent are thus far choosing to sit out this dance. At first glance, that may sound like a glass-half-full for LBS, but when you look at the reasons why most smartphone users aren't avidly broadcasting their arrival at the laser hair removal clinic, you start to see the tell-tale ruts from consumers digging their heels in. 

The chart below shows the concerns expressed by non-users. We weren't surprised to see privacy at the top of the list, because let's face it: we marketers tend to do the absolute minimum required to reassure consumers about privacy. Even when we're being well-behaved about how we're using the data we collect, we tend not to want to bring it up with users, lest we shatter the illusion that we're simply giving them stuff for free because we like them. We expect that anyone who [shudder] really cares about privacy will read our fine-print policy. As the recent Apple geotracking scandal handily illustrates, the minimalist approach to privacy is a recipe for backlash.

The bigger revelation from our survey was that a combined 45 percent of non-users either perceived no benefit to geolocation services, or saw them as redundant to other ways of connecting. No benefit? Obviously they have not tasted the sweet victory of earning the Lookin' for Love Badge.

Clearly consumers want more from LBS, and we marketers have an unfortunate tendency to translate that phrase as "consumers want discounts." Not so, according to our study and chart below. Only 8 percent of consumers saw discounts and rewards as the most important benefit of a location based service, and only 4 percent are really jacked about the badges (and you know who you are.) One might counter-argue that consumers aren't excited about LBS discounts because the discounts haven't been big enough to get excited about; however, Groupon's recent acquisition of Pelago may put that argument to the test.

For most marketers, there's a longer but more rewarding path to LBS success than discounting or badging. Our survey found that 41 percent of consumers see the LBS social connection as most important, and another 21 percent especially prize the recommendations that those connections provide. In our view, these data points are a blinking red arrow directing marketers to the real opportunity: we need to help consumers make better use of their trusted contacts to get real-time recommendations.

Our Digital Futures Group calls this concept "guided exploration." The simple idea is that a given consumer will try a new restaurant not because of a $5 discount, but because the few friends that really know the foodie scene have recommended it. They don't care as much about what their whole network thinks (sorry, Facebook) or what everyone in town thinks (sorry, Yelp); they want to tap specific personal networks for specific interests.



Eric Anderson
Eric Anderson May 10, 2011 at 4:37 PM

Thanks very much, Dean, and thanks also for introducing me to iLoop -- they hadn't been on my radar. The AR aspect is very interesting and has potential to drive more exploration, if consumer adoption follows suit.

Dean Westervelt
Dean Westervelt May 9, 2011 at 9:31 AM

Great piece, Eric, and grabbed your Whitehorse white paper as well. Your comments (and those within the white paper) point out that third-party LBS might not be needed - seemed to jive with a very interesting MediaPost piece talking about iLoop using AR to drive loyalty, particulary among smaller businesses.


Anyway, thanks, good read.