“2010 will be the year of LBS”. Well it’s about the end of November and we can start changing the song to “2011 will be the year of LBS”. And as if Location wasn’t enough we added Indoor LBS to the mix. Everybody speaks about Indoor Navigation, and most of them refer to a completely different concept

The business opportunities

Most of the Interactive Maps apps are primarily themed for Malls.

From the marketing perspective and looking at the “mall potential users” we see that only 17% of the population has a smartphone, and close to 31% of mobile internet services users are female. That means only 5.27% of the population are females using mobile internet services. From the total of female smartphone users only around 21.5% use some kind of location services. That leaves us with target market of 1.1% of the mobile phone owners. Mall demographics show that females outnumber males 2:1, and in most cases they shop in places that are familiar to them. That means that about 1 out of 100 customers entering a mall is a POTENTIAL user, and if you consider that these apps are only available for certain phones, the target market is even smaller. Can you imagine a customer that visits the same mall every week, turns on the wi-fi to navigate to a store he/she knows?

From a mall application I would expect more. I would like to be able to enter a specific product, and have the app connected to the stores’ actual inventories. Look for prices, show me the places where I can have it now, and even offer alternatives. It’s not about finding a store; it is about helping the users to find their way to the products they want.

At this point of time, Indoor Navigation shouldn’t be the focus. Positioning interactive maps as such is a much better strategy, as the users receive what they have been told, and a small commercial ecosystem can be built around that concept.

Interactive maps can better serve other indoor venues. A clear example is trade shows, where there is a larger concentration of Smartphone users, there is a need to locate places in a venue that is totally unfamiliar, and the opportunities for advertising are larger.

The Boy Who Cried “Navigation”

I was recently putting in order my library and I found a very old book with Aesop fables. It was one of my favorites as a kid. Here is an adapted version of one of them:

“…There once was a developer boy who sat on his Mac, sipping a latte and watching the village customers pass by. To grab their attention he took a great breath and sang out, “Indoor Navigation! Indoor Navigation! We have Indoor Navigation!” The villagers came running and installed the app. But when they arrived to the mall, they found there were interactive maps only. Later, other developer girl sang out again, “Indoor Navigation! Indoor Navigation! We have Indoor Navigation!” To her delight, she watched the villagers installing the app again. When the villagers, familiarized with their TomToms and Garmins, saw they have turn by turn directions but not the same customer experience sternly said, “Save your happy song for when there is really navigation, like in our cars!” Later, a third one released an app that worked exactly like the GPS in our cars. Excited, he leaped to his feet and sang out as loudly as he could, “Indoor Navigation! Indoor Navigation! We have Indoor Navigation!” But the villagers thought they will not receive what they expect, and so they didn’t install the app at all. The End.”

Let me be clear at this point. I have seen amazing apps coming to the market during the last year, with huge investment, lot of work behind, and some of them with a real value proposition. My point is that we need to create a common language that will allows us approach the market without confusing the users and the customers, and in a way “killing the golden goose” (as Aesop would say)

Can we agree on the definitions?

What do I expect to receive from a basic Indoor Navigation app? 1) An app that automatically identifies where I am and shows me an updated layout 2) After determining my destination the device will find the best route 3) While moving towards my destination the map will show my movements without my intervention 4) If I take the wrong route, the device will notify me and create a new path 5) The device will notify me when I arrived to destination.

If your car GPS device would require from you to input where are you, move the map manually, figure out if you are in the right path, guess if you arrive to destination, etc. we would agree that by today’s standards, we will not call that navigation. So why call that user experience “navigation” indoors?

The best way to describe what we have today is “Interactive Maps”. Interactive maps include all the features you can find in apps today. Search and discover, turn by turn directions, locate products and services, identify facilities, ATMs, and other POIs. Look for an exhibitor in a trade show. Find your gate in the airport, and the eateries in your way there. Trigger promotions to consumers when they enter the vicinity of a store, and many more. In a stretch you can call it “Indoor Location Services”, just don’t call it “Navigation”.

Crossing the chasm to real indoor navigation

Are we ready today to provide indoor navigation? Technically maybe. Practically?… I doubt it. For real indoor navigation, as defined above, you must have certain hardware infrastructure. In order to approach a mass market, there will be a need to create a hardware infrastructure for each site, which will most probably be based on Bluetooth.
You need to identify the right venues, analyze if users will have a compelling reason and benefit from the use of indoor navigation, and create a business model that will maximize the profits.
The third component is accuracy. If I’m looking for an exhibitor in a tradeshow, I need at least 10 foot accuracy.
The most viable way to make this happen is having companies like Google, Motorola, Cisco, Nokia, etc. take the lead on developing and providing the required infrastructure. Companies like AT&T, Verizon, etc. may take the installation and maintenance of the infrastructure. There resides the real market opportunity. When this happens, the interactive map applications will get an additional layer of relevancy. Most probably at that point of time the companies that develop, install, and maintain that infrastructure will claim the larger share of the benefits

Last Aesop reference

If Location Based Marketing is in its infancy, Indoor Navigation is in the gestation stage. We don’t know what it will look like, or who the leading players will be. We know not what the standards will be or who will determine them. What I know is that today we have high-quality interactive maps and we can enjoy them in many places. Those apps, while presented and sold correctly, can provide a very good income stream.
At the end of the day, to make Indoor Navigation possible and profitable, we need to create an environment with a compelling reason for users to adopt this technology i.e. users that receive a real benefit; it should 1. Be targeted to a mass market; 2. Provide a product that is comparable to our standards for outdoor navigation, and without a doubt 3. Be based on some kind of external infrastructure. Those that claim you don’t need any of these may fall in the category of “sour grapes” (and that was my last Aesop reference).

Is Indoor navigation a viable business? What are the main business factors that will determine the broad adoption and success of indoor navigation solutions?

A few months ago I wrote an introduction about the opportunities in indoor navigation. Please read the comments as every single one adds an additional piece to the puzzle. My question today focuses more on the business perspective and less on the technical solutions. Who can make it happen? What can we learn from the evolution of Location Based Services in general and Personal Navigation in particular?

Inferences from the LBS industry

If you look at the automobile industry, you will find a defined ecosystem with clear roles and niches. There are auto makers, spare parts manufacturers, dealers, authorized shops, independent mechanics, parts distributors, etc. There are also customers that know exactly what they want. You, the customer, can actually enter any dealer and leave driving.

While comparing the LBS industry with the Auto industry, my impression is that in the LBS industry you have many Auto Parts manufactures, but no Auto Makers. If you want to provide a service (drive anything), you need to buy parts and preassembled kits to build your own car and hope that every piece is compatible with the other. Moreover, when you need a “LBS mechanic”, they usually know how to fix specific parts for specific models. Does a LBS ecosystem actually exist?

“…While comparing the LBS industry with the Auto industry, my impression is that in the LBS industry you have many Auto Parts manufactures, but no Auto Makers…”

James Moore introduced the concept of business ecosystem in 1993. In his book “The Death of Competition” (1997-p26) he defines ecosystem as:

“…An economic community supported by a foundation of interacting organizations and individuals—the organisms of the business world. This economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organizations also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles…”

Can we include the LBS industry into this definition? Are there any organizations that foster the “LBS world inner laws of nature”? Are there any central companies that the community look as leaders and is aligned to? Are those companies leading us to a shared vision? Is there any shared vision?

“…Are there any [LBS] central companies that the community look as leaders and is aligned to? … Is there any shared vision?…”

In his 1993 paper “Predators and Prey – A new Ecology of Competition” published at the Harvard Business Review, Moore identifies 4 distinct stages for an ecosystem: birth, expansion, leadership, and self-renewal or death. During the birth of an ecosystem the companies try to figure out what customers want, the value proposition, and how to deliver it. After so many years the new LBS industry is in the dawn of the birth stage, trying to figure out the differences between users and customers, how to create cooperation channels and dreaming about certain standards that can unify the community to the second stage (expansion) where suppliers and partners work together to achieve a mass market profitable for all.

Indoor Navigation – The Big Bang

The indoor navigation is – literally – an uncharted territory. There are a few companies that started to produce small components, filling localized and specific needs.

In order to materialize as a profitable business a leader must emerge. This leader will set the roots of the indoor navigation ecosystem, provide the platform technological direction and create the conditions where developers, providers, consultants, contractors, customers and others can gain some benefit.

Going back to Moore, there are two conditions for an ecosystem to expand “(1) a business concept that a large number of customers will value; and (2) the potential to scale up the concept to reach this broad market”. I’m convinced that condition number 1 already exists. The challenge is to identify the organization with the capability and willingness to scale up the concept to a mass market.

There are many companies in the market capable to implement core technologies, foster innovation, attract partners to cooperate and support the right birth and growth of the indoor navigation ecosystem. The only question remains, as usual, where is the money? What are the business models that will support the ecosystem? This is the topic for a third article; and if you consider your company as a viable candidate to lead this new business opportunity I’ll be glad to exchange some ideas with you.

@schapsis Indoor Navigation: The new Gold rush? Part-2 – Ecosystem and opportunities. www.bdnooz.com http://ht.ly/1Q6EP

Comparing D LBS & D Auto industry, my impression is: D LBS industry have many AutoParts manufactures, but no Auto Makers http://ht.ly/1Q6EP

Are there any LBS companies that the community look as leaders and is aligned to? Is there any shared vision? http://ht.ly/1Q6EP

Is Indoor navigation a viable business? What R D main biz factrs that will determine D adoption of indoor navigation? http://ht.ly/1Q6EP

Over 120 persons RSVP to the VBC event in Miami

I’ll post my comments here after the event.

If you had the opportunity to participate, I’ll appreciate your feedback. What do you see in this map now?

Thank you!

Claudio Schapsis

Why is location changing the business of social networking? Because it is the missing link between virtual societies and the real world. Once I can identify the location of each member of my community, I can easily find ways to make money from it.

The value of Location

Location will open the door to a new level of hyper-targeting. Not only can I target customers who answer to a certain demographic profile, but I can do it based on their location, and I can predict their behavior based on past locations. I can be confident in sending an invitation to a football fan who is close to a sports bar, because I know he likes sports, there is a game and he is not at the stadium. I’ll also extend that invitation to the usual friends he meets on game days. Everyone wins — My users enjoy the opportunity to meet in a place and receive a discount; my customer (the bar) will pay me for having my users coming to their establishment.
Location can make money, but it also costs money. Companies that collect location information will need to figure out how to access, collect and provision location data, as well as put systems in place that secure users’ location and identity and provide them with a clear understanding on how their location is used.

But, who is the customer?

For the last two years I’ve been following the rise, shine and in some cases the fall of many location-based social networks (LBSNs). Last year, at the Metaplaces conference, I had the opportunity to speak to an important panel featuring people from leading companies in the LBSN market. I asked them “Is location a feature or you can build a full concept around it? What is the difference between your social network and Facebook plus location?” The general answer I received was that location is an enabler, and that it should be used to provide some compelling value to the customer.
When I build a business model around an intangible technological concept such as a LBSN, my first question is: Who is your USER and who is your CUSTOMER? Usually they are not the same person. A user is a person who will engage your company service because they receive some value back. This value can be manifested in different ways: fun, information, socialization, discovery, access to content, augmented reality, etc. Bottom line, the user is looking for an enhanced experience. A customer is a person who provides you with income.
Sometimes the user and the customer are the same person, and “subscription fees” are the usual business model. That is the case of many family and friend finders sold by mobile operators. There are also “freemium” services, where users can access a subset of features for free but they need to pay for full site functionality. This is common in dating sites.
But models where users become customers are seldom found. Mainstream social networks are providing full site functionality for free and therefore their users are NOT their customers. In this case, the business model is different because we need to find a compelling value for users to continue to utilize your services and find customers who will pay for it. But what is it they will pay for?

“…At this point the users should be called by their real function — “data collectors” or “content generators.” The real value of the social network resides in the data users can generate and in the ability of the company to monetize it, and in the case of LBSN, the idea is to monetize the user’s current location…”

Human Mobile Probes

When LBSNs enable a platform for people to interact for free, they need to find out who is going to pay the bills. There are companies betting on location-based advertising models. There are many question raised here:

• Who has access to and control of the location information?
• Who is servicing the ads?
• Who has the relationship with the advertisers?
• Do I need to give the user the capability to opt-out?

At this point the users should be called by their real function — “data collectors” or “content generators.” The real value of the social network resides in the data users can generate and in the ability of the company to monetize it, and in the case of LBSN, the idea is to monetize the user’s current location.
Recently I read that Facebook will allow users to share their current location. Reading Facebook privacy policy you can see that “…When you share your location with others or add a location to something you post, we treat that like any other content you post (for example, it is subject to your privacy settings). If we offer a service that supports this type of location sharing we will present you with an opt-in choice of whether you want to participate…” Nice! But keep reading “…When you access Facebook from a computer, mobile phone… we may collect information from that device about your… location”
At the user level, you will be able to decide if you want to share your location with other users, but what is implied here is that in any case Facebook will collect your location, along with other information. Why?! To make money, of course!

Probe data for sale

Who wants to buy probe data? Every single company that understands the power of location should. You need to get used to thinking location = business = money. Let’s take Twitter+location as an example. Comcast provides customer care through its Twitter account “comcastcares”. If now I can map where complaints are coming from, I can easily visualize where the company should invest in improving its infrastructure (and their image). Extrapolate this same concept to an artist pushing a new record, a political campaign, a company measuring its advertising effectiveness by mapping its buzz according to local advertising efforts, or a PR company looking at real time mood maps and analyzing trends in specific areas. The accessibility of dynamic location information creates an invaluable tool in real time business intelligence. Can you see the monetary value for companies like Ogilvy, Arbitron, and Nielsen if they can measure in real time the effects of events? If they can give their customers the capability to make informed decisions on where to invest their PR efforts, and later measure their effectiveness?

“…when we introduce location into the social networking business, we may prove wrong the idea that friends and money don’t mix…”

Beyond the Blinders

Horses are just like people — they tend to travel in the direction they are looking. Blinders keep horses looking straight ahead, instead of looking around at their surroundings. Like horses with blinders, many companies run in the same direction of the big ones, missing a lot of opportunities outside of their vision.
In their book “Throwing Sheep in the Boardroom” Matthew Fraser and Soumitra Dutta identify three forms of interaction: personal, organizational and consumer/civic. Social networks are not only about friends, they are also about colleagues, coworkers, members of a political party and others. Many social networks are looking at the power of harnessing personal location and try to fight each other in a very crowded place – the friend space. Think about the possibilities in terms of business intelligence when introducing the concept of location to task forces and large organizations; then make an additional step forward and think in terms of the influence that location can have in other social/civic associations.

A long time ago I coined the saying, “Location-based service is the art of transforming location into money.” In business, money is not everything. It is the only thing. And when we introduce location into the social networking business, we may prove wrong the idea that friends and money don’t mix.

NOTE: This article was originally published at www.thewherebusiness.com

The navigation ecosystem is changing rapidly. I’ve mentioned in previous posts the consequences of the commoditization of GPS devices. During the last two weeks, I had the opportunity to read many articles about how the navigation market is changing.

This is a time of WAR.

The New York Times published in October Stops and Starts of GPS Apps “… those portable devices [GARMIN TOMTOM etc] are under attack from a new source: the smartphone, and particularly Apple’s iPhone. The newest version of the iPhone’s operating system supports turn-by-turn navigation …  According to a report from the iSuppli research firm, GPS applications for smartphones are about to explode, growing from 2.5 percent of users today to 10.5 percent in 2013. And half of those will be iPhone owners…”

Even Forbes Magazine refers to this trend in warfare terms Google’s Navigation Bombshell “…Location-based service providers suspect the search giant is working on a free navigation app… Google, which generally gives its software away for free and recoups its investment through advertising, would likely sell ads within the navigation application rather than charge users… In early October, Google decided to use this data for its U.S. maps, ending a licensing agreement with map provider Tele Atlas…The shift is telling because companies like Tele Atlas require partners (such as Google) to pay fees for each person who uses their data…”

Having Google in the market with free navigation applications redefines the battle. Companies will need to be really brave to fight this giant. Without any doubt Google gave a completely new meaning to “The Land of the FREE and the home of the Brave”…

If War is what we are speaking about, Sun Tzu teaches us three valuable lessons. The first is that “…in war, numbers alone confer no advantage…”.  The second is that “…as flowing water avoids the heights and hastens to the lowlands, so an army avoids strength and strikes weakness…”, and the third is that “… those skilled in war subdue the enemy’s army without battle …. They conquer by strategy…”

If this is about strategy, this is my game!

Avoiding the competitor’s strengths and striking at their weaknesses

All (accurate) navigation systems are based on GPS data. If the weakness of GPS receivers is that they need a clear view to the sky to successfully determine location, the strategy is to attack the indoor world. Additionally, the GPS accuracy lies between 50 to 500 feet, the strategy then is to find customers that need higher accuracy (~10 feet). The third, but not the last weakness, is the need for maps. As we saw before, Google has generated large amount of map data, and in general the market is dominated by TeleAtlas and Navteq. The strategy is to navigate to “uncharted territories”.

Redefining the Battleground – Embracing indoor navigation.

A few weeks ago I was approached by an inventor with a (published) patent. The general idea calls for an indoor navigation system that uses no GPS data. His idea is very good and to my judgment relatively easy to implement.

The system automatically detects a signal directly from sensors, without requiring the communication with a central system, data plans, or even cellular communication. These sensors are small pocketsize Bluetooth transceivers. There is no need for pairing as every Bluetooth device’s tag has a unique ID. This ID can be used for locating the tag.

Indoor navigation – A winning strategy that redefines the navigation ecosystem?

There is infinite number of indoor navigation applications. The most intuitive one is a person walking into a mall that wishes to locate a specific store, or a particular aisle in a department store or even a specific item on a shelf! From here, you can apply the same principle to a customer looking for a specific conference room, a particular booth in a tradeshow, a ride in an amusement park, or a known piece of art in a museum. If not for the convenience, do it to save a tree. No more printed maps. Go Green!!!

The advantage of using Bluetooth is that this technology is ubiquitous, it’s implemented everywhere. Additionally, is a low cost, low power technology, and when it’s relatively free of obstruction it can provide a ~2 meter error range. Furthermore, a Bluetooth infrastructure can be used for purposes like remote monitoring and control among others.

The ecosystem is completely redefined. An architect with CAD drawings is now a map provider. Every single facility is now a navigable site. Every big retailer willing to drive customers to specific products is a potential customer (they can “route” them through the sales isles if they want).  Every shopping property management firm is a customer, as well as convention centers organizations or associations like the Global Retail Executive Council.

We have an ecosystem where the traditional navigation giants are not necessarily present, and there is no defined leader (yet-11/09).

The business opportunity – define a new market

Indoor Navigation redefines Location Based Services as we know them today. The first companies to enter this market will be able to define, create, implement and license ($) new standards and applications. Imagine this: I installed an indoor navigation application in my phone/PDA and subsequently downloaded the map of the mall I usually go to. Next week I’ll visit San Francisco, and upon arrival I would like to visit a local shopping center, or use it at the convention I’ll attend. My application will be useful ONLY if the map of that SF mall or convention center is compatible with the one installed in my phone. For sure I’ll NOT install an additional application per site I visit. This is just the tip of the iceberg.

Sounds interesting? Ring a bell? Would you like to exponentiate these ideas?  Maybe invest time AND money?

Give me a call! (And leave your comments).

In one of my first posts, I noted that one of the main components of the LBS Value Chain is the ability to acquire and transport a user’s location and give access to that data to many service providers. Getting this information is, in many cases, expensive and presents obstacles to online service providers who would like to develop services based on mobile a user’s location. I was looking for the missing link between the mobile and the web world.

While there are many different approaches (and we might present some of those in the future), Xtify, a company based in New York City, caught my attention. They are creating a cloud of location information where authorized service providers can make available services using the location of their subscribers.

As usual, I was more interested in the business perspective of their operation. The following is a synopsis of my conversation with Josh Rochlin, CEO of Xtify.

I want to thank again Josh for his time and kindness to open up his business for us to learn. I believe many will have much to comment and say.
Follow up.

What is the difference between Xtify and other companies providing similar services?
We are currently the only company that is deriving location persistently from mobile devices and then building business rules around it. We source the location directly from the mobile device, rather than through the wireless carriers. This allows us to make location information available on a persistent and affordable basis.

Normally, you will need to pay per dip if you source from the carriers themselves – currently in the US, this is only possible from Sprint – with other carriers working on their own solutions). This approach can only work when you require location data occasionally. If you want to take advantage of persistent user location, a per-dip model becomes unaffordable.

“We are …deriving location persistently from mobile devices and then building business rules around it…We source the location directly from the mobile device…This allows us to make location information available on a persistent and affordable basis”

Xtify allows the mobile user to (1) persistently publish their location to a “cloud” and then (2) provide permission for a third-party to access their data in order to provide location-related information and services.
An example on how Xtify can be implemented is at http://www.seemywhere.com – which requests the latest location of the user.

So I can see your position all day long without your permission?
No! SeeMyWhere is designed to expose my location only to those with for whom I choose to share it.
Another example can be seen in at http://www.myeverymove.com. This application keeps a diary of your locations throughout the day. Because Xtify sources persistent location, I can choose to have the diary automatically update, without any user input.
These applications are only examples of services leveraging our push and pull API’s information from the “cloud”. A typical implementation using Xtify might not provide this level of visibility into my whereabouts. The location information would simply be used by an algorithm to inform a service, message, or advertisement.
To try www.seemywhere.com or www.myeverymove.com you can point your smartphone browser to either of these sites and download the applications.

Can you give me an example of a commercial application
Take, for example, companies that provide text-based mobile content (i.e. www.4info.com, www.chacha.com/, and http://pingmobile.com/). The way they work is that the user sends some these services a question, and the service replies with an answer, usually through SMS. I was trying out one of these services recently and I received strange answers to my question “Hotels in Manhattan.” The “IN” was interpreted as Indiana (a state in the USA) and the results came for hotels in Manhattan in Indiana. Then I asked for “Hotels NYC” and the results where close – I received hotels in Upper East Side of Manhattan. But at that specific moment, I was in the SoHo district of Manhattan, several miles away.
What Xtify can provide today is the capability to geo-tag an SMS that comes to the system and do this in such a way that the system will know where I am; replying with answers (and advertising) that are geographically-relevant and will therefore garner higher advertising rates.

“What Xtify can provide today is the capability to geo-tag an SMS that comes to the system and do this in such a way that the system will know where I am; replying with answers (and advertising) that are geographically-relevant and will therefore garner higher advertising rates.”

Can you elaborate on the implementation?
As I mentioned before, Xtify sources location from the mobile device. We use the best available source, GPS, Cell Tower and Wi-Fi information to determine your position and push that information to our secure servers. When a user sends a question to an SMS service, they could route that message through the Xtify database, then correlate a location-relevant advertisement to be included in the response. Xtify can communicate that “this phone is currently in SoHo, NY” and that service provider can associate an advertisement that was paid for by a business in SoHO, New York. Now the answer and the advertising have complete geo-awareness.
The market has been waiting for a solution that adds location context to their service – a solution that Xtify now provides.

So how do you make money?
We charge based on the value we bring to a customer and on the basis of the volume of transactions or processes. Let me illustrate this with another example. On many occasions, Madison Square Garden (MSG), an arena in New York City, could have unused tickets before a concert or a game. We could provide a service to MSG to set up promotions based on time before the concert and distance from the MSG arena. We can set radii around MSG (i.e. 5 blocks, 15 blocks, 1 mile). We then set time intervals (i.e. 3 hours, 2 hours, 1 hour before the event). Xtify can then push a promotional message to the people who are proximate to the venue and who have asked for a discount ticket promotion from MSG.

“Xtify can … push a promotional message to the people who are proximate to the venue and who have asked for a discount ticket promotion … This model applies to any business that has perishable inventory such as empty restaurant tables”

This model applies to any business that has perishable inventory such as empty restaurant tables.
Of particular importance to our business model is the way that Xtify is shipped on every Peek device [www.getpeek.com]. This allows developers to create services similar to the one we’ve just discussed, as well as services similar to www.peekmaps.com.

So, is it fair to say that your business model is only a B2B business model?
Absolutely, we are not a customer facing company. We provide persistent user location information for use by marketers, business developers, and web application providers. We have products and API sets that offer the ability to take an action (i.e. send a text message) based on the location of customers and users. We also look forward to working with carriers and handset manufacturers in the same way we have integrated with Peek.

How is the location relayed from the phones to the cloud?
We install a small application that pushes location information into our secure servers (“the cloud”) using TCP/IP protocol via your mobile data connection. We have intelligent algorithms that adjust the reporting frequency as necessary. That means, if you are stationary, there is no need to continually resend the same information. This minimizes the data transmitted.
Note that Xtify works today only on smartphones. Xtify requires a mobile device that can run the Xtify process in the background. We currently function on Blackberry, Windows Mobile, Symbian, and Android Devices. Once the iPhone allows background processing, we will run there as well.

“…we need to encourage service providers to rethink the way they collect and access location and realize that a much affordable solution exists…”

Who do you think are your competitors today?
The biggest competitors for us are time and intertia. Meaning, we need to encourage service providers to rethink the way they collect and access location and realize that a much affordable solution exists. Additionally, other companies will soon realize the benefits to our approach and attempt to enter the market.

A question about privacy. How are people reacting to the fact that 100% of their location information is going to be recorded and available somewhere in a cloud?
We believe the user must have complete control of his privacy and location information. Our location servers do not collect any personally identifiable data, and therefore we don’t know who is in the cloud. There is no profile, phone number, or personal email that can identify the person. All we can see is a bunch of secure user IDs running around the world. The user opts to have a trusted relationship with a service or advertiser or any other business. The user then shares their information with that service provider based on the conditions of that trusted relationship.

But the system is prone to misuse, isn’t it? What can block me from installing the application on that person’s phone without their knowledge and track them all the time?
We specifically chose to include a shortcut / link / bookmark on the mobile device so that the owner of the mobile device will know that it is there and can turn location notification off if desired. However, there is nothing that we can do about human nature, any technology can be misused.

“…We believe the user must have complete control of his privacy and location information. Our location servers do not collect any personally identifiable data, and therefore we don’t know who is in the cloud…”

Is your application for domestic applications only?
There is nothing about our business that is only domestic. Our system can work any place a mobile device works around the world. We welcome companies outside the United States to leverage Xtify for their local or global business needs.

So there is a reason for you to come to Miami to speak with the Latin American operators at LBS LATAM 2009
Absolutely! I am looking forward to participating at the event.

Personal Notes after the meeting:
It was hard for me to process during the conversation the concept of “know ALL my personal where” available in a cloud. Then I understand Josh’s point on inertia. I remember then Newton’s First Law of Motion that, when translated to business terms, can be defined as, “The tendency of the market moving in one direction, to remain in that motion direction, unless it is compelled to change that state by forces impressed upon it”

I can see now many forces that can influence this process, but this is a subject for other conversation (and for your comments).

NEW

INTRODUCTION:
For a few months I’ve been writing about Location Based Services business models and how to monetize LBS applications, particularly in the newest area of Location Based Social Networks.
I invited a few companies to share their vision and show how they approach this market. I would say it takes leadership and real confidence in your business to open your company strategy for others to learn. It is not surprising that the first company to accept this challenge was GyPSii. They were recently awarded a core patent in mobile social networking, but GyPSii goes beyond the mobile social networking platform, it is a mobile digital lifestyle application.
I had the privilege to share some time with Shane Lennon, GyPSii’s SVP Market Development (Thank you again!). The result of our conversation is summarized in the following text. In my next post I’ll evaluate the interview, add the full interview on podcast, and comment about their market / business approach. In the mean time please leave YOUR comments

Q: Can you please give me a few words about GyPSii, how it started and your perspective of the company?

GyPSii is a global company, unusual for a start-up. The founders are based in Amsterdam. They had a mobile lifestyle vision that’s more than an LBS vision: “I want to capture my world; I want to be able to share with others”. On the technical level, it translates to creating a searchable mobile index of user-generated content based on the actual world. This is different from what you see on Internet today, which is built by companies, indexed on search engines, and driven more from their perspective and less from that of the user.

We wanted to make it easy to capture what we do in the real world, therefore most of that is text or image based with added contextual information, such as location. That creates context around the user experience. That was the main vision for GyPSii.

During the last year and a half, we focused on a broad strategy: “let’s build a good application that can run on several different devices, but let’s work very closely with people in the ecosystem, particularly with the device manufacturers.” We felt that the adoption and conversion of mobile, location-based applications really needed to be embedded in phones. Then we focused during the last six months on aligning our products while manufacturing bring their devices to market.

“…Some kind of location technology will be standard in every phone whether it is built-in or via a back-end server-based…”

One of the things that is happening to accelerate the market is that the low-end cell phones seem to be disappearing; the mid-end has become the new low-end, and smartphone capabilities are pretty much available in every phone. Some kind of location technology will be standard in every phone whether it is built-in or via a back-end server-based. System Maps will be there, coming free from Nokia and Google. The mobile interfaces are improving, although they still have a long way to go.

We are new starting a promotional phase on building a user base. We see social networking as a tool. If you need to grab location to tie to content, for whatever use in the consumer market, you can get it through the cell ID databases. Traditionally, LBS infrastructure has become commoditized from the consumer market point of view and it is not a necessity to be targeted to GPS chip resolution. Navigation and business-based applications need higher accuracy and there is still a huge market for LBS in that area.

We provide a platform that allows us to build other clients through an API. We provide a “platform as a service” (GyPSii OEx product). The user manages all the content and leveraging the social networking and LBS-based services, integrating their experiences through a single application in their cell phones.

Q: I had the opportunity to list almost 100 location-based services that are social networks. From the customer perspective, what makes GyPSii difference? How does GyPSii stand out from the other social networks with LBS?

Most of what I’ve seen, which are so-called social networks, have evolved in most cases from “friend finders”. The concept was “where’s my friend?”, “Here I am”, “Where I’m going”. To me that’s a very point-based application, it’s not something that’s going to encourage people to contribute, comment and use the application on a nearly daily basis.

We are focused on what users want and in providing user content generation capabilities; the ability to make it easier to create content whether it has to do with video, pictures, putting text or changing your status, actually creating a continuous conversation. We’re integrating user generated content tools with social networking tools – including the capability to add a location context. And yes, if I do want to locate a friend that’s great, I can see them. But that’s a small feature with us.

Q: It would be fair to say that GyPSii is a mobile social network where location is another feature between all the features you offer.

“…making it easy to create and share content…there is a location context to the content… We index that information in a searchable database…That has a much greater value than a traditional search…”

Yes. We actually call it a mobile lifestyle application focused on making it easy to create and share content; facilitating to connect with others in order to share that data or basically to send messages to each other. Of course there is a location context to the content. We also index that information in a searchable database. That’s a user generated searchable index, so depending on your privacy settings people can grab and see what you recommend, the restaurants that you suggest, etc. That has a much greater value than a traditional search, which is always paid for by a third-party. The ability to explore and discover that content is critical as well.

Q: I’ve seen many applications that build their business model based on the premise that they will deliver mobile ads. I don’t see many people willing to receive ads on their cellular phone. Can you comment about GyPSii’s business model?

We have moved beyond the early stage to a market evolving fast (with estimates at $2BN/$3BN in 08) rapidly growing to $10BN plus in the next couple of years. There is a challenge in the industry based on today’s SMS or WAP experiences. Usually the ad is not relevant, has no context to you, is probably an intrusion, and cost you money. On the WAP one it’s just a banner. Even for the marketing person spending money, it’s not accurate, it’s not a captivate read and call for action, and it’s hard to track. If you look at applications like us, when you sign in into our application we actually start to build a profile. We use that algorithm to help serve relevant content, user generated content – to our user base. We also use that algorithm to deliver relevant advertising. We have found that consumers using this kind of application are open to receive advertising if it’s relevant and has context. I think that’s the challenge.

“…We are monetising this via advertising models… We have found that consumers using this kind of application are open to receive advertising if it’s relevant and has context. I think that’s the challenge…”

Companies like us differentiate because of that profiling. For example, we can deliver an aggregated profile of 20,000 students in Shanghai between 21-24 years old that are usually outdoors. 10,000 of them are going out at night, and 10,000 are female doing lot of shopping fashion style. This has real value for marketing people and they are really interested in that.

On the other hand, you have to be careful to serve the advertising in such a way that is not intrusive. We are very careful to serve advertising coming back in a search result that is always related to your search content or refers to other things that are nearby and that are commercial. That is the critic differentiation for both the consumer and the advertiser.

We are in the very early stages of this market.

Q: From the business model perspective, does GyPSii have any contingency plan in case mobile ads don’t work?

Because we have a platform approach, we also have a licensing revenue stream coming from major device manufactures and major brands as they integrate our capabilities into their portals. It’s a combination of software as service revenue.

“..Advertising is going to be a big part of interactive, and lots of mistakes will be made… We’re trying this carefully…”

Advertising is going to be a big part of interactive, and lots of mistakes will be made. We are different. From our testing with marketing people, what we have done with consumers has a minimum negative impact if at all. We’re trying this carefully.

Q: What are the reasons that are stalling consumers to sign up to this type of service?

In China it’s actually the counter of that. They are signing up at a ferocious rate and we’ve just starting a promotion campaign. We have seen multiple spikes on a daily basis. There are networks in China going from 1 to 10,000,000 users in the space of 12 months. One factor to mention is that 80% of these consumers gets to the Internet through their mobile device. They don’t have a PC access or laptops.

“…What is still holding back consumers in the West is a clunky user experience…It all comes down to providing phones that allow application providers to build good simple apps, and apps that can be used on a daily basis…”

What is still holding back consumers in the West is a clunky user experience. Social networking is three times more active on iPhone than any other device. It all comes down to providing phones that allow application providers to build good simple apps, and apps that can be used on a daily basis. I think that’s what the Western market needs in order to catch up.

We are seeing a rapid growth in social networking on the mobile. I think people need to remember that it took Facebook four years to get to the 20-30 million.

Q: What do you think is the barrier entry to this market? Let’s say Facebook is going mobile, how is a company like yours building high barriers to avoid those companies from coming to your market?

Companies like ours are providing an added value service that allow the operators and device manufacturers to share revenue. Currently I’m not aware about any ad revenue share in place to use with FaceBook or Google. On the consumer side, Facebook is pushing a web experience down to the mobile device, but in this case for the consumer every device looks different. So yes, it’s great to check twice a day on your Facebook and see what happened through the day. But if you want to turn it to something that is more real-time I don’t think Facebook has got it there. We watch them closely because they are future competition.

Moreover, Facebook is not picking up in many countries. For example, in Holland they have no penetration whatsoever. Their penetration in China is minimum, same as Google. I think it comes down to that these countries are mobile first.

There is room for several players out there, companies like us that fit into the mobile use case, and to some of the traditional social networks that are trying to push the web experience into cellular phones.

“…I think there will be room for different companies and consolidation is still some long way off…”

I think there will be room for different companies and consolidation is still some long way off.

Q: If we talk about consolidation, who do you think will prevail in this market, and I’m not speaking about names, but what characteristics will have that company?

The market is going to break in a couple of key areas. People need to differentiate between search, “frienders” and directory vendors. There is a crossover going on in Social Networking. There will be one or two dominant search players, and we can guess who the dominant come to be in search. There will be one or two very good directory players who are more likely to be the traditional companies like Yellow Pages that will catch up with companies like yahoo.

In the social networking side there will be two types. There will be regional players and there will be a combination of global players. We fit into the global players. I see that some major players like Facebook will be in there too.

“…The characteristic that is the key is, “Is it contextual to what I do on the move during the day?” Do I need to sit down to view what happen … in the past? … Or is it more interesting to see where I’m going?…”

The characteristic that is the key is, “Is it contextual to what I do on the move during the day?” Do I need to sit down to view what happen on my feeds on Facebook what actually happened in the past? Is this really interesting me? Or is it more interesting to see where I’m going?

Q: The consumers that buy the iPhone have particular characteristics, willing to use all kinds of apps. From your experience, is there any segmentation in the people using location based social networks? Do you identify certain vertical markets?

You have the tracking and navigation apps and the ones that are information-based, like directory/search companies.

A third category is the lifestyle applications with companies like GyPSii, other social networks and friend finders. We see some niche players like dating apps in certain groups.

We certainly see some trends in a very basic demographic breakout: there is probably a group under 20 years old, a group that is between 20 to 30-32 years of age, and the group that is between 30 and 40 now expanding to 45, that are actually the people active in social networks in web and are reaching out to mobile. I’ve just seen some trends that messaging – whether it’s via Facebook, GyPSii messaging or SMS and similar applications – is starting to surpass email. If people get comfortable with daily messaging in their mobile device that will be a major tipping point for applications in general in mobile.

Q: What are the opportunities in this market? What is the big opportunity? How is your company approaching this opportunity?

The opportunity is in creating a tool that is basically about you and your community with the capability of tunnelling the content that is created and is valuable to that community. The capacity to have like-minded people with interesting hobbies actually able to capture the world, and basic searching indexing is critical. Companies that can create an index of searchable content can be very successful applying it to the advertising model. If you can’t make that index, which is made of profiles and content, it will be very difficult to be successful in advertising.

“…The opportunity is in creating a tool that is basically about you and your community with the capability of tunnelling the content that is created and is valuable to that community…”

For “Friend-Finder” only, I don’t see how you can reach above a certain minimum. From what I understand, every friend finder has a tipping point of around 200,000 users in each region. From what I’ve seen early adopters only. Companies that can’t attract the early adopters will struggle in the long term to generate revenues and survive.

People need to listen to the consumer. I hear from many in the value chain “We own the customer”. First of all, the one thing that the Internet did is “The customer owns the customer, nobody else does”. In some meetings people tell me “We are the operator, we own the customer”. AT&T and APPLE – who do you, think own that customer? APPLE does.

I think the reasons why new brands, the digital brands on the web and mobile, are successful is because they continuously innovate based on customer feedback. The ones that don’t innovate, like Friendster for example (because the CEO didn’t like some of the feedback it wouldn’t make the changes), they are the ones running into trouble. We are proud of our application but we are also the first to say we need to improve it based on customer feedback. We can iterate fast. We add features to our web and iPhone version every other couple of weeks based on feedback. That is quite difficult for other traditional players and I do think that the market will change; as a first generation Internet person, it‘s starting to mimic the value chain a little like what happen in the Internet.

Q: Is there anything that I didn’t ask and you would like to add?

“…you need to keep the open APIs. You need to encourage more applications to be built for free, because it’s a commodity for the consumer market…”

I would say to the infrastructure people in the LBS industry – you need to keep the open APIs. You need to encourage more applications to be built for free, because it’s a commodity for the consumer market. I know it has been ten years that required a lot of investment. But for the people who make location available, revenues will come about only if you have more applications built for consumers and business people.

After the long weekend pass and I had the opportunity to summarize many of the emails and twitts received during the last weeks, I was surprised to still find new Location Based Social Networks coming to the market… not. This week I added to my List of Location Based Social Networks:  Match2blue, My Adventures, Snikkr , Mizoon, Nulaz , Toai , and Glympse.

I also found a few social networks closing or going through difficult times and struggling to survive. Then I remembered last Friday I was saddened to find one of my regular lunch places out of business. I just entered the Subway next door and had a sandwich. Today I found a “coming soon” sign at the same place.

Is there any parallel? Certainly there are LBSN for many tastes. There are gourmet types of Social Networks, others that appeal the masses, some that serve particular type of people, some are for dating, some are for business, some you need certain hardware to get in, and others that are by invitation only.

The fact is that in both cases the owners invest a considerable amount of money to get in, they dream to have fun and be unique, and in some cases they understand very little about the business model and end loosing all their savings.

That’s why I tried to contact some of the companies going through difficult times, to understand their process, check if I can help, and see if we can all learn something from their experience. I couldn’t find those willing to share their struggles yet. On the other hand, I had the opportunity to talk with two of the most successful Location Based Social Networks in the market and they shared their vision and experience. This will open a series of notes, that I hope will give some perspective for existing and planned Location Awareness Networks to be.

Not long ago I had the impression this market will soon consolidate to a handful of companies. Now I have my doubts. There is place for a diversity of LBS based networks, and they are as varied as people tastes for food. Now I’m going back to the list of LBSN and I still see much of the same flavor.

What do you have in your menu, how is your business different from the others, how do you make customers to come back, and how do you build a name in a difficult industry. (Am I talking about food or technology now?). Bottom line, there is still a huge space for good marketing work to be done. Power to the marketing department!!!

If you are around here I will invite you to a good restaurant, and we can talk about business, just give me a call or drop an email I’ll be glad to help.

On a final note I wanted to have a restaurant; in fact my friends say I cook very well. I talked with a chef friend about my plan, the environment, marketing, ideas, and he said to me “You don’t understand, the money is not on the tables, the money is in the kitchen.” Yup, I didn’t understand much about their business model…

It has been a while since my last post. Launching a new product line was a tough and demanding task. Nevertheless the break gave me the time to look through a new perspective at the information I was putting together.

Almost 100 Location Based Social Networks after, we start to see the inevitable: consolidation and closings. More interesting, companies are trying to license the accumulated knowledge, without yet finding an appropriate business model to survive. We are still at the same starting point where developers struggle to understand how to migrate applications from Web2.0 environments to the mobile world.

To be or not to be
If we take a look back to my previous notes, one possible conclusion is that for an isolated company it’s almost impossible to succeed in this market. There are many obstacles that need to be solved even before they can try to implement the excellent idea that they have in mind. How are they going to get the location data? How to approach carriers minimizing fees? How to get information from mobile devices without GPS? How to overcome the difference of data between carriers, or even different handsets? and many other.

The good news is that location services are becoming a must. The question is how can we facilitate the go to market process of a carrier/handset agnostic solution without solving again the same problems other 100 companies already solved.

To aggregate or to facilitate that’s the question
In the beginning it was a map – latitude and longitude (a street map of Miami).
Now we add 5 restaurants in the block and by adding data or content to the map the result is Location Based Information.
Now we add context – 2 are Mexican restaurants, 2 are Italian and 1 is Chinese, all of them offer lunch and all close at 9PM. On top we add collaboration – reviews, recommendations, pictures, experiences, etc. now we have created value. If we can share that value and each one use it according to their needs and giving back to the system, we created Sustainable Location Based Intelligence.
We can extrapolate this to any other type of information; weather, news, traffic, advertising, 411, etc.

Now think of a platform that solves all your development and logistics problems, i.e. handsets OS, carrier fees, mapping interfaces and licenses, etc. In exchange you have to share your data, and benefit from other’s contributions. The key is participation and the challenge is to create an open platform where developers can craft on the fly partnerships, and help in building the functional building block that will put together that 13.3 billion dollar market that everybody is talking about. We can call it a Location Based Democracy.

Think of it as a solar system, where each one is moving in its own orbit, some have 1 or more moons revolving around, and all contribute to the mutual equilibrium. In business terms, creating this ecosystem will allow many companies to make a living, establishing micro-LBS-business around others without worrying about reinventing the wheel again and again rather unleashing the real value of “location base contextual valuable information”.

Give them the help and the technology to build cheap cars, and install toll booths
So why will somebody take the responsibility to create this? In the democracy of location based data somebody has to take the initiative to lead. Nobody wins from the chaos, and I believe it’s in everybody’s interest to keep it a “democracy”. It is a give and take game. So what are you ready to give away and what are the core assets you will keep for your company?
And at the end we come back again to the same question “What is the business model?” Is it revenue sharing? Is it success sharing? What is proper compensation for each party? Where is the money? In this case I’ll say “Take a closer look… It’s all over the map.”

In November I started a list of Location Based Social Networks (LBSN) – and in my first post I wrote “The question is how many of those will be alive next year…” Sadly to say, today (February) I started to update the list with those that are already closing or on their way to close.

My answer then was simple, only those with a solid revenue model and clear value proposition will last. Let’s take a first look on what makes a solid revenue model and services that have clear differentiators.

Profit is the only objective. What is the reason we create a new service or put a company together? The only answer is “TO MAKE MONEY”. Any other reason you may think or find is secondary. The source of that money is your customer. The way to get that money (legally) is by providing them goods, services, and solutions. The products and services are not the objective of the company, they exist only as the conduit to get your customers money by providing them something valuable they need and that keeps them happy.

The Business Model IS the differentiator. I may sound extreme here, but what differentiate services and makes them successful is not technology, but their business model. Take a look at the (now) 80 Location Based Social Networks on my list. I don’t believe there is much technological difference between them. Bottom line, only those that will succeed to generate revenues will survive.

Marketing, Business Dev and Sales (MBDS) are a key part of your Business Model. Review the list of LBSN and continue with the following exercise. Cut and paste the message excerpts from their websites WITHOUT the name of the company. Read the document the day after and try to identify who is who. If you are one of the owners of those companies, I dare you to pass the list through your employees and see if they can pick their own company from the list. Close your eyes and imagine taking a goldfish from the water tank and leaving it on the table. That’s your company without MBDS.

Business Models are NOT cross-market portable. Many of the LBSN base their hopes in implementing successful WEB2.0 business models, ignoring that the WEB and Mobile environments are completely different. Messaging in the WEB is free but mobile text messaging cost money. WEB mail has no charge but pushing your email to your blackberry carries its own costs. Even Voice is free over the web (skype, jaxtr, etc) but that’s far from being the reality in the mobile world. Ignoring this and other differences result on a distorted view of customer acquisition costs and wrong operational expenditures estimations that lead to “…We had an amazing and unique technology but we run out of money…”

There are other components in the framework, and each one of the elements here presented has its own subcategories, questions and connectors. Want more info? Quid pro Quo, leave some feedback of value for me and the other readers (or just pay for it). As you may see blogging has also its own business mode

Sundays is usually posting day, today I’ll take a different approach.

I believe one of the most important results in a post is the readers’ comments. They enrich and bring new perspectives to the initial approach. Skipping over those comments and the exchange of ideas is like ordering a banana split and eating only the ice cream.

I would like to refer you to the readers’ contributions on my post on business models for navigation devices combined with social networking. There, new applications were exposed, a few questions remained unanswered (wireless guys, your input please), and there is an amazing exchange of observations on what is Presence Marketing – how to use it combined with Location Based Social Networks, the extension of RFID applications, and Privacy concerns (my next topic).

My remarks on CES and notes on the Privacy Factor on new business models can wait a day or two.

I encourage you to read the comments to the end and most important, leave yours.

I have nothing more to say but THANK YOU!

Press HERE for the post.

This article presents an additional business model associated with a Location Based Social Network, this time applied to a mature market – your automobile GPS devices and fleet management.

If you can recall the definition of social networks mentioned in my previous article about location based services value chain, SNs are: “…online communities of people who share interests and activities, or who are interested in exploring the interests and activities of others.”[1] One thing draws my attention, it doesn’t mention that they must know each other or must have anything in common but sharing interest and activities.

Every morning, I drive over an hour to get to the office. Not only me, but all the other people who are at a stand still on I95 before 8AM. It would be fair to say that we share the same activity (moving at a snails pace on the highway) and we all share a common interest “to get there as fast as possible”. So in that sense we are a kind of social network, we just need the means to communicate with each other and organize our efforts to achieve a common goal. So, if there is a need, there is an opportunity.

Some people have their cellular phone integrated with GPS. Others have cellular phone and a GPS device in their cars. Let’s assume that your GPS device is a new one, and has Bluetooth capabilities in such a way that you can connect it with your phone. At this point we are a social network with the means to communicate.

Assume a nice LBS application developer put together a site for our social network – the “www.SpeedI95ers.com” (fictitious name at the time of publishing this note). If I sign up with SpeedI95ers then I will become what we called in previous articles a “data collector”. As part of my contribution to the network, I’ll transmit my current location every “x” minutes. My location is recorded at SpeedI95ers servers, processed, aggregated with other drivers information to calculate the average speed of my small portion of the road. As there are thousands of I95ers like me reporting, I’ll receive in exchange an accurate view of the road traffic status in real time.

SpeedI95ers developers are happy to see their network growing exponentially, and SpeedI95ers investor are chasing them with “Show me the money before I buy a server farm”

As Tim O’Reilly defined “Data is the next Intel Inside”. Now with the data in hand, let’s see a few possible applications. NOTE: As this is a business forum, I’ll address as much as possible the commercial side without entering in discussion about the technology.

So what would I pay for?

I look at my windshield and I think why my Satellite radio and my GPS can’t be only one device. I already pay for the satellite radio communication, and the road information can be a premium channel for a few dollars more per month. Wouldn’t be nice having your GPS calculating routes and changing the optimal route with dynamic data? Now you can sell the information to/through the Sat/GPS Company.

Here is another nice idea: I would like to save my appointments in my calendar with an associated address. As my phone has a GPS and knows where I am, I will pay a premium price to have my calendar notifying me “Hit the Road Jack” as it knows where I need to be next and the current status of the traffic.

I can continue with many more, delivery routes, movies, etc. But you get the idea.

A few words about privacy. This is a huge concern for many people. What if they use my info to know where I’m all the time? What if the police/insurance companies subpoena my usual speed habits? Technical problems, technical solutions – assure your customers that collected data is ripped of any personal data before it comes to the servers, and once aggregated you save ONLY the aggregated values and NOT the individual contributions. Meaning there is NO individual histories. Information is money, but don’t be so greedy. Most importantly, make sure you have a good Privacy Advocate on board that can direct the company to good business practices.

The business of combining old with new is complex, and requires out-of-the-box thinking. The solution presented in this post can be easily combined with other mobile 2.0 models and strategies presented before.

Can you see the new solutions coming? How can you monetize them? Did you consider milking the off-line cow?

More to come – but I would appreciate your comments.

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!