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

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.

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.”

Buckley Brinkman – Change Catalyst

These platforms and the technology behind them make the entire world much more visible. Experts will still be valuable, but expertise will become more widespread. The holes in our knowledge will become much clearer. My Dad calls this understanding the periphery of our ignorance. Clarity both makes our individual weaknesses much more visible and collaboration much more important. The ability to embrace the tools and become comfortable with our own personal shortcomings will be the difference between success and failure in the emerging economy.
I believe one of the keys to success is understanding what translates from platform to platform and how each platform works. One advantage for us is that there are no experts. There is a mismatch between management perspective and knowledge of the technology. Younger people generally know the technology and what it can do, but do not have the experience to apply it effectively. Senior managers understand business and have the C-level perspective, but don’t understand all the implications of the new technology. There are no experts. They are being developed day-by-day as we all learn.

Buckley Brinkman

…

Peter Kemp – Managing Partner

“The funny thing about mobile marketing is that the technology that makes it interesting also makes it irrelevant. Mobile marketing is a bit of an answer looking for a question. The web has generally made physical location irrelevant for everything but the most basic functions – and ones you are unlikely to need unless you are traveling out of an area you live or work in and already. I think it is a big idea as a marketing tool for travelers (business and leisure), but it may only be a very tactical tool, but then it is really only valuable for businesses for which I already know the quality – starbucks, pizza hut, kinkos – or I need someway to evaluate the quality (telling me there is a chinese restaurant around the corner is almost useless to me unless I know the quality of it. On the other hand, combine it with facebook, twitter, or even Match.com and it suddenly becomes an interesting social networking tool…or a creepy big brother stalking tool. Overall, I think it will be another tool, but not a game-changer.”

Peter Kemp
Managing Partner, Old greenwich partners
www.oldgreenwichpartners.com

…

Jonathan Paisner – Founder and President

As our tours appeal as much to locals as they do to tourists, location based social networking has increasingly gained our attention. To date we have had the most success among bloggers with our Rock and Roll Tour of Manhattan, reaching out to those who show an affinity for rock music and history. We will continue to foster relationships with subject matter pundits and thought-leaders, particularly as we reach out into new geographies with our tours. Locally focused community sites are a great way for us to build word of mouth and to look to share the enthusiasm that our customers have for the products. This is less a matter of buying media and more a matter of fostering a dialogue and relationship with opinion makers in local regions. Beyond marketing, we will look to these new networks of customers to help us identify new product opportunities and to engage them in spontaneous events that can add a new dimension to our user experience.

Jonathan Paisner
Founder and President – CityListen Audio Tours
www.citylisten.com

…

Mike Wittenstein – Consulting Chief Experience Officer

“In my opinion 90% of marketing dollars are wasted. Why? Because we have to communicate to people who have no interest in a particular product or service when it is mentioned to them. Location Based Services may save marketers more than half the wasted effort and expense by using “where-you-are-and-where-you’re-going” information as context to interpolate interests and intent. So, the right information goes to the right person with a need to know in the right format at the right time. It’s the way advertising should be!”

Mike Wittenstein
Consulting Chief Experience Officer
www.mikewittenstein.com

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.

The general impression I had after putting all of them together in one page, is that many of the LBSN are “me too” applications, and at this point I can’t pinpoint one that present a marketing message with a unique offer, a distinctive value proposition or main differentiators from the others. I included standalone sites, and applications that complement as add-on Social Networks such as Facebook, Twitter, Flicker, YouTube, etc.

The directory is provided as “info only” without recommendations or endorsements. I’ll appreciate though, if you can review the list, and leave your comments.

The page is dated December 20, 2008. It would be interesting to review it in one year time and see if it grew, shrunk or consolidated.

For the list PRESS HERE or press the LBSN Links button in the top menu.

Please leave your comments, and Link/share/quote/ping. For additional posted comments follow this link

Thank you for your support!

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!

We are witnessing a new evolution in the online world. The “WHO are you” and “WHAT are you doing” is rapidly evolving to “Who are you” “What are you doing” “WHEN are you doing” and “WHERE are you”. We can fairly say that the WWW became the WWWW

The When and Where pose many questions, most of them associated with privacy. For example:

1- How is the location captured: Automatic by the system, Others on demand, You on demand
2- What type of location notification: Descriptive text (i.e. “At gym”, “at Starbucks”), area in a map, zip code, exact address, a point in a map
3- How is the sharing: Reciprocal, one way, only on authorization
4- Location History: Movement patterns, Tracking, Monitoring
5- Location Ownership: Resale and/or disclose of the information

But the same concerns for privacy were raised before we published our family photos and videos to the world. The fact is that the accessibility of technology creates communities and services. The simplification of web page building facilitated the rise of communities like FaceBook, MySpace, LinkedIN and others. The commoditization and accessibility to digital cameras, camcorders, and webcams has paved the way to communities like YouTube and Flicker or services like SnapFish. GPS devices became a commodity, and soon GPS in a cellular phone will be as common as a camera. As a matter of fact, you can get your position without a GPS (see Google maps) and Location Based Services can simply be added as a feature to mass social networks like Facebook. Location Based Social Networking is not a question of IF, it’s a question of WHEN and the when is NOW.



“A social network service focuses on building online communities of people who share interests and activities, or who are interested in exploring the interests and activities of others. Most social network services are web based and provide a variety of ways for users to interact, such as e-mail and instant messaging services”. [1]

The key of the social networks is interaction, and mobile interaction = money. Who is going to pay the bill?

Virtual meet Mobile: Interaction in the virtual world is free. On the other hand, interaction in the mobile world is expensive. On the virtual world all messaging services are free (MSN/AOL/ICQ/Yahoo messenger) but in the mobile world you pay for every single SMS. On the virtual world email is free (Gmail/Hotmail/etc…) in the mobile world your BlackBerry pushed email comes at extra charge. Even voice services are free in the virtual world (Skype/Jaxtr) but that’s far from reality in the mobile world.

In my next article I’ll address some business models and we’ll see that everyone in the value chain has something to gain: wireless carriers, handset manufacturers, application developers, maps providers, etc. The ultimate question is “What is the real value for the end user?” I doubt you can base your business model on the hope the Facebook / MySpace “exhibitionistic” generation is ready to buy “stalk/being stalked” as a main added value.

As I mentioned above, the accessibility of technology creates communities and services. So, is there a case for Location Based Social Networking? Yes. But as I wrote in my first post, before you start wondering about your business model (profit), think about what is the service and real value you provide to your customers. Otherwise, after the novelty period they will run away or simply stop using it – particularly if they need to pay for it.

Have you read PART 1? I’ll strongly recommend reading part 1 first.

As mentioned in part 1 the main components in the LBS Value Chain are: the location based service provider or developer (LBS APP), the data carrier (a cellular provider like T-Mobile, AT&T, etc), and the customer.

As Part 3 will talk about Web 2.0 strategies for Location Based Services and particularly for Location Based Social Networking, we need to completely understand every piece of the puzzle. Otherwise your model will be leaking money (pouring in some cases). Moreover understanding the players and trends will allow you to craft long term solid strategies.

A more comprehensive value chain shall include:

Location Based Services complete Value Chain by Claudio Schapsis

MAPS: Most LBS applications utilize maps; therefore their cost shall be added to the equation. The map market can be considered a duopoly dominated by Navteq and Teleatlas.

Consider: those companies were acquired recently by Nokia and TomTom.

Ask: How can they affect your business by controlling the LBS market. Can your application change the map provider easily? Do they cover all the areas you plan to service? Can you grow to other markets (internationally)? Does your international strategy fit your provider’s existing maps? What are their plans of expansion? How are you getting charged? What layers of information are included in that charge? The list of questions doesn’t end here and is closely related on the type of service you are planning to offer.

MAP INTERFACES: If you want to use map providers like Navteq and TeleAtlas you will need to pay a premium price to companies that provide interfaces to those maps – such as Autodesk, Decarta, etc. Your applications can also be based on Google maps (TeleAtlas data) or Microsoft maps (Navteq data) API’s.

Consider: 1) This factor is almost unavoidable and in some cases the API selection will link you to a specific map provider. 2) While is true you can freely use Google and Microsoft interfaces, bear in mind you will need to pay them for the use of the maps when you start making money.

Ask: What is the price structure? Is the payment per map? Are you getting charged for each customer you serve? (oh yes, you do). Can your API support other map providers? Can you add your own maps? How much will cost to add specific regions? Do the charges include Points of Interest? Does the price include point to point routing capabilities? Can you provide PSAP information? What platforms do you support? How will you display information in different types of cellular phones?

Remember that once your development is committed to one of these platforms, it will be expensive to migrate to other. Again I strongly recommend checking their pricing structure. Most start for free but you will “pay the price” later.

M2M PROVIDER: In most cell phone based services, the communication costs are paid by the customer (SMS or IP-Data). If your service is based in a specific device (like a pet tracker) you will need to include a cellular operator or aggregator to fulfill the mobile communication. You will probably use a GSM provider and your device will include a SIM Card. Those carriers are known as Machine to Machine providers (M2M). Today the M is interpreted in many ways – Man-to-Machine, Machine-to-Man, Machine-to-Mobile, Mobile-to-Mobile, Mobile-to-Machine, etc. Usually M2M providers are small mobile operators with roaming agreements and/or mobile resellers/aggregators with services provided in the background by companies like AT&T, Telefonica, T-Mobile, Verizon, Vodafone, etc (Big Carriers).

Companies that fall in the M2M category are  Jasper Wireless, Kore Telematics, Wyless and many others. As these companies usually buy large quantity of network capacity, or have roaming agreements, the solution you will get is usually better, more focused and cheaper than approaching directly the Big Carriers. Moreover, many Big Carriers require particular certifications, and with these M2M providers, the process is usually transparent.

Consider: 1) Choosing a M2M provider is a long term commitment. Imagine you have thousands of devices in the market and you need to recall them to change their SIM card (I don’t think so…) 2) You can use SMS and/or Data transmissions (TCP / UDP). Each one has pros and cons. Just remember to use the * symbol in excel you will be amazed with the numbers. For example, if your model is based on SMS (let’s say $0.08 per SMS), and you have just 5000 units, reporting every 5 minutes half day; your annually bill will be more than $20,000,000 (yes, twenty million). Is your projected income covering that?

Ask: What is the price structure? Do you have a minimum volume commitment? Can data (or SMS) be pulled? If using data, what is the rounding per session? Do you provide VPN services? Will your device have a fixed IP address? Do you have an activation portal/API? Do you charge activation fees? If SMS, do you provide SMPP gateway services? Do Mobile Originated and Mobile Terminated messages have different prices? What type of certification do you require (FCC, PTCRB, EC, etc)? Does your service require non standard certifications (particular of a Big Carrier?) Do you provide roaming? How much will you pay for roaming? Where do you roam? Can you permanently roam?

GPS ENABLED DEVICE: Now you need to write the application. If your service is not installed in a cellular phone, you will need to provide your customers with a device with GPS and mobile communications capabilities i.e. most Personal Locator Devices (PLD). This is a topic by itself and I’ll devote a different post for it.

Bottom Line: The sum of all those expenses + YOUR PROFIT is what the customer usually will pay for some Value Service. This is your Average Revenue Per Unit (ARPU) or your Customer Acquisition Cost depending on the business model you choose (see part 1). If your customers are reluctant to pay your fees, or your investors consider the burning cost and risks associated too high, most probably you have done something wrong along the way.

Having almost all the components clear, I’ll elaborate on part 3 on Location Based Services business models based on Web 2.0 strategies particularly free Location Based Social Networking and their specific value chain.

TO THE READER: as my list of considerations and questions is limited for readability I’ll appreciate your comments, particularly on:

What else would you recommend to consider for each category?

What else would you recommend to ask to the providers in each category?

Thank you again!

In the first one the LBS APP provides an application to the carrier and the carrier provides the service to their customers for a fee – or free of charge to encourage the use of data services. For example companies like Loopt are offering their LBS social networking services through carriers like Verizon Wireless, applications like Autodesk family finder, and others.

Location Based Services Value Chain 1

The main challenge for the LBS APP is to find one of the mobile operators willing to buy and offer the application through their network. Once the service is running, all the promotion, billing and collection is performed by the mobile operator. The LBS APP revenues can be smaller but the risks are reduced as the investment in infrastructure and operations are minimal. On the other hand, the ownership of the customer usually remains with the mobile operator, minimizing the LBS APP possibility to up-sale other products.

On the second scenario the customer pays a fee directly to the LBS APP and they take care of the costs of the wireless service fees. For example companies like ID Conex, Zoombak, Laipac, and other Personal Locator Devices have the customer pay directly to the company.

Location Based Services Value Chain 2

In this case the LBS APP carries most of the obligations, liabilities and risks. They need to develop, promote and market their products, maintain the logistics (delivery, billing, collection, customer support, etc), and create a communication infrastructure that allows them provide the service. If the LBS APP succeeds to establish a large and stable customer base, the business receives a recursive cash flow for the life of the product or the subscription and the company keeps the customers’ ownership.

The third scenario is based on web 2.0 paradigms. The customer pays the cellular carriers for the internet access. The LBS APP offers a free product/service with the vision of creating some collective user value. Most LBS social networks work under this business model.

Location Based Services Value Chain 3

The LBS APP enables a service through internet connection (fixed and or mobile) assuming the customers already have a data plan with their mobile operator. The service is usually mobile operator agnostic, and the LBS APP needs to invest in basic infrastructure and development/maintenance of the application. As the service is free of charge, the LBS APP is investing towards the future value of the network and the information generated by the users such as people’s locations, movement habits, etc. – just figure out what are they going to do with the information collected about your location.

The story doesn’t end here as there are many other factors to consider in the costs. These include among others M2M communication providers, maps providers, and interface to maps developers, who do care about their profits.

In part 2 and 3, I’ll elaborate on the extended Value Chain and Location Based Services models based on Web 2.0 strategies and their specific value chain.

As usual YOUR COMMENTS ARE WELCOMED.

Location based services are booming and as marketing professionals, we have real challenges on how to integrate these new technologies to our tool set together with Wikis, Blogs, Social Networks, Podcasts, etc. Are you ready for new ideas like Location Based Advertising?

From a business perspective, I would define 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 Location Based Service concept, like the marketing concept has 3 components

1- Get Geographical positioning information. This can be accomplished in many ways. The obvious way is a GPS device through cellular network, IP address mapping, user input, etc. (will address this in future posts)

2- Transform this data into valuable information. Your kids are calling for a pickup at midnight; would you consider the same situation knowing they are at a friend house or wandering

around downtown? Suddenly the geographic layer of information changed the urgency of the pickup completely. What if you try to locate your grandmother suffering from Alzheimer or if you want to know where is your task force at any given moment. What if instead having the pizza place telling you “…another 5 minutes…” you can go to the web and receive a service “Where is my pizza”!! (No doubt this is a nice application, particularly if your teen son came with friends from a soccer game and they are starving…)
The number of possible applications is limited to the extent of your imagination (and of course some technical limitations…), but the idea is to generate value for somebody and get paid for that service.

3- Make a profit. It’s amazing how many companies/developers forget that the ultimate reason of putting a business together is TO MAKE A PROFIT. Location Based Services is an expensive business. Usually your current location needs to be relayed to certain application server and most of the time this is accomplished through cellular networks; hence somebody must pay the bill. When you buy a personal locator device – PLD (like zoombak, Leipac, and others) they have a cellular device included, usually with a SIM Card, to communicate your location – and that service is expensive.

The number of LBS applications is growing exponentially. Just in the last few months I’ve seen dozens of free Location Based Social Networking sites come alive. The question is how many of those will be alive next year. For me the answer is simple, only those with a solid revenue model and clear value proposition will last. Some are betting on valid strategies based on collective user value, wikonomic “prosumers”, “fremium” services, etc. In that case, the keys to success are a) make sure somebody else pays the communication costs and b) be sure your customers generate real aggregated value you can capitalize.

First post! I will talk about those services and business models, including GeoTagging, WEB 2.0 applications, Location Based Social Networking, Location Based Advertising, Privacy Issues, and many other.

YOUR OPINIONS are welcomed and desired.

THANK YOU!