Location-enabled social networks are not new. As a matter of fact, there are more than 100 companies providing some type of social networking with location features. Some of them have been integrated with Facebook for a long time. So why are these changes important for marketers and business developers?

What

During the last six months, I’ve had the opportunity to speak at many forums and conferences about Location-Based Services in Mobile Marketing. I try to keep my presentations updated to new developments in the industry, but sometimes it’s a challenge. On the use of location in social networks and business intelligence, I have to change my presentation every 10 days.
Why? During the first weeks of March, USA Today published an article on how geo-location applications would be the hottest tech trend at South by Southwest. ReadWriteWeb featured a blog about Google patenting location-based advertising. During the last weeks we read about FourSquare passing the 2 million users, and Facebook acquired Hot Potato mobile check-in startup and released Facebook Places aiming to bring Location Based Services to the masses. Twitter officially became a location-enabled application last November.

“…Mobile advertising is only one part of your marketing mix. Mobile marketing is broader and includes not only delivering ads or coupons to the customer, but also other activities like collecting information that will feed your strategic marketing decisions…”

Why

If we look at the raw numbers, there are around 1.3 billion phone lines in the world. The number of TV sets and personal computers is higher, around 1.5 billion of each. On the other hand, the number of mobile phones has surpassed 4.6 billion globally. Look around you during the day — on a bus, at a restaurant, walking on the street, or sitting in your office — and try to answer the question: If I want to reach that person right now, what should I use? A telemarketer, a TV ad, direct mail, or a notice to her phone?

“…WHERE is an inherent question in your mobile marketing strategy, and location-based information is a key component of your solution…”

Where, That is the question

It’s important to know the difference between mobile marketing and mobile advertising. Mobile advertising is only one part of your marketing mix. Mobile marketing is broader and includes not only delivering ads or coupons to the customer, but also other activities like collecting information that will feed your strategic marketing decisions. As a marketer, you may need to answer these questions:

• Where do my customers live, and where do they buy?
• Where are my competitors?
• Where are my marketing efforts invested?
• Where are my opportunities? i.e. Where should I put my next Point of Sale?
• Where are my sales representatives?
• To what advertising medium do my customers respond? Billboards? Mobile coupons? Where were they when exposed to my campaign?
• Are products sold better in particular zones? Where and why?

WHERE is an inherent question in your mobile marketing strategy, and location-based information is a key component of your solution.

The hidden power of location information

Location plays a role in every critical area of your business — marketing, distribution, logistics, sales, finance, customer care, and more.
Twitter added location capabilities to their platform late last year, meaning that if your customers or target market opt-in, every single message will come geo-coded with the location from where that message was delivered.
Imagine you are in the shoes of one of the most famous customer service managers in the U.S., Comcast’s Frank Eliason, and now you can map the location of every single tweet. Very soon, you will be able to elucidate where the most troubled areas of your network are located, where you should invest in improving your infrastructure or where should you focus in an image improvement campaign. Now extrapolate that idea to a politician or rock band. Wouldn’t you want to know where to focus your political campaign according to “mood maps”? Wouldn’t you want to know where your fans are and organize your concerts to maximize your revenues?

Facebook added location to their platform, so what?

Not long ago, my login page on Facebook changed. A mobile phone is displayed and a title asks me “Heading out? Stay connected – Visit facebook.com on your mobile phone.” Over 100 million users access Facebook through their mobile devices. Facebook now start using location information, but it seems they are collecting it for a long time. In the privacy policies section, you see this: “When you access Facebook from a … mobile phone … we may collect information from that device about your … location…”– no opt-in, no opt-out.
Let’s take a look at the power of ad targeting inside Facebook. Today you are allowed to create a marketing campaign and create segmentation by location (where you live), demographics (age, sex, sex interest, type of relationship, languages), likes and interests, education, work, etc. Imagine if you could add the ACTUAL location of your target market.
If this option is available, you could create a marketing campaign targeted not only by a certain demographic but also to customers that at the time of ad delivery are close to your business, or close to a competitor, or located in a certain place at a certain time. During the football season you could offer discount tickets to fans who are close to the stadium minutes before the game. You could send a beer coupon to New Orleans Saints’ fan page members who are located at the stadium every time the team scores a touchdown. And after the game, you could send to more than 500,000 of those fan page members a coupon with an address and map to their closest TGI Friday’s.

“…We live a mobile lifestyle in which immediate contact is important. Place and time matter. Location makes the occasion, and in the occasion lays the opportunity. Are you ready to seize it?…”

Where occasion meets location

The availability of your customer location allows you to create powerful tools. Companies like Foursquare and Gowalla are redefining what it means to be a “regular/patron;” others like SenseNetworks provide you with tools to dissect location information and give you human predictive analysis. Companies like Waze offer users free navigation and redefine the concept of “driving” customers to your business, and there are those pioneering location-based mobile marketing, advertising and content management like 1020 Placecast.
We live a mobile lifestyle in which immediate contact is important. Place and time matter. Location makes the occasion, and in the occasion lays the opportunity. Are you ready to seize it?

From conversations I had with friends and colleagues, I believe this will be the first of a series of “last parts” regarding business models for Mobile Location Based Services.

I’ll assume through this post that you have read the preceding articles (LBS Marketing Concept / Value Chain 1 / Value Chain 2 / Location Based Social Networks 2.5) as many of the keys for further business models discussions reside there.

In my first post I defined the “Location Based Service concept” as the company’s effort to transform geographical positioning information into valuable and relevant data for a customer, to make a profit. The question here is: who is the customer that is willing to pay for that data?

Tim O’Reilly defines in “What is WEB 2.0” Data is the next Intel Inside and he presents a key question: Who owns the data? And I would add, What Data?

In the following Business Model the LBS service provider owns the data. I reviewed many Location Based Social Networking sites and in most cases “some kind” of lack of privacy is the base of their business model. Differently from carrier fee based pushed services (top – down), this model is based on bottom-up. The LBS provider enables a platform for people to interact for free. In this scenario the handset is usually subsidized by the carrier, interested in generating traffic. The free service is now growing in viral mode and at this point the customers should be called by their real function: “data collectors”.

The idea is to collect your customer location, and delete identifiable information (name, photo, address) but keeping the demographic (sex, age, likes, dislikes). This customer’s “Location Information” can be indeterminably retained by the LBS service provider. The data can be aggregated, and provided to interested third parties willing to pay for certain content, segmentation, information about people movement habits, and many others. Are you starting to get the picture?

Let’s figure some scenario

Location Based Social Network Raw Data

Segmentation - Location Based Social Network

The <– left figure shows the data collected in NYC in one month time. The right –> figure shows different types of segmentation of the same data. Now with the valuable data on hand, you just need to find your real customers, those ready to pay for the information. For example, a person planning to open a few coffee shops would find valuable where and when its target demographics meet and hung out. Retailers would like to know where their potential customers meet, what their usual routes are, where they stop, for how long they stop, etc.

The concept of Location Based Advertising gets now a new dimension. Most companies tried to implement on cellular networks the same advertising models used in desktop computers to discover that customers are much more resistant to receive any kind of adds in their cellular phone. Additionally, the cost of sending coupons or ads to every potential customer walking by your store makes this model almost prohibitive.

Do you remember the movie The Minority Report? Tom Cruise walked through some screens and the advertising shows up completely customized to his person. The mistake with today’s Location Based Advertising is to assume that the media used to collect your location information should be the same as the media to deliver the message back. Your cell phone is good to know where you are, not necessarily to receive ads. The second mistake is to assume the message needs to be completely personalized. The ads displayed (billboards, info kiosks, signs, etc.), can target certain population according of the demographics visiting the area.

Going back to our business model and to provide an example from real life, we can mention Google maps for mobile devices. While this is not a LBSN application it still fits the model mentioned above. Google lets customer use their Mobile Google Maps for free. Every time a customer with a GPS enabled phone (the data collectors) used the application, Google maps collected information about closest cellular towers. Today, and thanks to the help of million of free data collectors, Google can provide Location Services in their system, using the cellular tower information collected, also to customer without GPS enabled devices. LBS Developers (the customer) can use this features now, for a fee. Brilliant!

As I expected when I start writing this post, I still have many topics to talk about this issue, i.e. can companies that offer LBSN survive only on that feature or will they be swallowed by the big ones (Facebook, MySpace). Is privacy overrated? Will the marketing/advertising agencies have to add more technical/engineering people to their staff?

Be expecting more than one post a week! And please link / share / comment . THANKS!