The Second Coming Of Location Based Services #stats

by Ruud Hein November 19th, 2010 

downtherabbithole Most smartphones are location aware; they know the coordinates of where they are on the planet, either through GPS satellites, triangulation, or both.

Applications and services can then be allowed by the user to be location aware. In return the the user can then be provided with location based services (LBS).

Most location based services work on the premise that the user checks in at the place he wants the service to be aware of. Say, a restaurant where you’re dining tonight. Knowing the location the application or service can then take various actions such as matching your location with a business so it will be easy for you to rate the service (e.g., Yelp). Or you can check in to earn virtual bragging rights in what amounts to a game (e.g., foursquare).

Likewise, an LBS can give information on stores around you, restaurants in the area, or virtual coupons and discounts available right here.

While the potential for location based services is there, the market has yet to provide a killer feature making it really useful for the mass consumer market.

2010-location-based-services-familiarity

Most people don’t know about the concept or existence of location awareness and location aware services or applications.

2010-location-based-services-usage-growth Despite the fact that currently not a lot of people know of location awareness and of location based services, the number of users has been steadily climbing from 12.3 million in 2009 to 33.2 million in 2010.

2010-use-location-based-services

While the number of user climbs and has more than doubled in one year, users of location based services form a small segment of online users.

Of all US American adults, only 4% use location services; only 1% use them on a daily basis.

2010-location-based-services-market-growth

Predictions of the estimated size of the location based services market differ strongly. That is because the main axis along which these predictions run are penetration and revenue-per-user. If both are set to a very positive maximum the LBS market could be huge but if just one of the two is low(er) the market could be much, much smaller than expected.

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Conservative estimates put the market at $6.3 billion by 2012. Estimates above $10 billion before 2015 are, as one analyst puts it, “of the Pangloss school of forecasting; assuming the best of all possible outcomes in the best of all possible worlds."

What This Means To You

“A host of wireless Internet start-ups hopes to capitalize on the ability to pinpoint subscribers by sending location-specific information such as maps, restaurant reviews, electronic coupons and targeted ads directly to mobile phones, pagers or handheld computers.”

That’s not me talking but CNET. In April 2000.

Location-based has been around before and has been hyped before. When stepping into business projects centered around it, be sure you have a clear path to value; that you have clear metrics to measure your goals and the means to measure them.

At a pop-and-a-dime it’s a good time to get in. Developing a location app isn’t too expensive; utilizing existing location based services even less.

Test the water, don’t drink the Kool Aid.

Ruud Hein

My paid passion at Search Engine People sees me applying my passions and knowledge to a wide array of problems, ones I usually experience as challenges. People who know me know I love coffee.

Ruud Hein

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6 Responses to “The Second Coming Of Location Based Services #stats”

  1. roy morejon says:

    Ruud,

    You mention that "the market has yet to provide a killer feature making it really useful for the mass consumer market" – I believe we are getting closer to this with incentive-based offers by companies like Shopkick and WeReward. Offering cold hard cash to check-in is incentive enough for me.
    .-= roy morejon recently posted: Top 10 Social Networking Websites – A Year Later =-.

    • Ruud Hein says:

      I see what you mean and that's a good point to make, Roy. But that idea itself has been around before so I don't know if it would be the *killer* feature. Also, I guess online coupons such as those would appeal to a small segment of the population the way offline coupons aren't mainstream killer features of newspapers and magazines?

  2. Great article! LBS has lots of potential, but I agree that people have a tendency to get carried away with the buzz. Remember in the 90's when everyone had to have a website because … well, just because. As soon as it went live they expected a huge increase in business.

    The same is true for social media today with companies "doing" social media by having a Facebook page – that no one maintains. There are no easy answers and new technology doesn't absolve people from evaluating opportunities through the lens of business fundamentals (nice references, but I might be biased ;) ).

    I like LBS, but taking another stroll down memory lane leads us to companies like Dodgeball from 2000 which disappeared under Google's ownership. However, Dodgeball wasn't able to get traction like the founders' successor FourSquare – I actually know people that use FourSquare.

    I think there's a lot of potential in LBS and people now seem ready (a subset of people), but it's early in the game of user adoption and it's going to be a tumultuous slug-fest. Good times!

    • Ruud Hein says:

      Good points Marcel.

      It seems we're stuck at "well … uh…. let's offer location based deals"; we're approaching this new opportunity technology with old technology ideas.

      Maybe we should be thinking instead: what would be cool? useful? fun? I love NikePlus, for example. That's a smart use of location information. But how about people tracking (for Alzheimer patients)? Car location (by figuring out speed & distance the app can know when you get out of the car … and thus where your car is). A virtual speedlane checkout: offer deals/info and get people to order/pay via their device too. All the shop has to do is prepare and hand over.

  3. [...] great article was posted by Ruud Hein about the second coming of LBS (Foursquare, Gowalla, Yelp, ScoutMob, etc.). [...]

  4. I think you're right. The logic seems to be that a lot of the Internet is fueled by advertising dollars and smart phones connect to the Internet, therefore, smart phones should be used for advertising. That's the obvious path that has been drilled into our heads for 15 years. People need to take a step back, look at all of the tools on the table, and remember what imagination and creativity are.

    That being said, I love my ScoutMob Deals!