
Google’s Trojan Horse (or Why Location Based Services are not a Business) - spif
http://www.mobileindustryreview.com/2009/02/latitude_the_trojan_horse_--_why_whos_nearby_is_not_a_business.html
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briansmith
I agree 100% with this article. Keeping track of your location will be a
commodity very soon.

In one or two years, there will be open standards for sending your location to
the person your talking to, sending it to a contact, and broadcasting it.
Handset vendors will implement those standards. If they are nice they will
provide API hooks to let application act on the sending/reception of location
information. The same thing will happen with status messages (Twitter and
Facebook) and other activity streaming stuff.

It could happen a lot faster if carriers built these protocols on top of text
messaging (probably using a special kind of service message) to drive further
adoption of unlimited messaging packages.

The business model is clear. The mobile phone operators will implement it so
you have an incentive to buy the next generation of phones. The carriers will
implement it because adding the feature to your phone bill is basically free
money for them. Users will pay for it because they are used to paying for
phones and phone services, and because it is more convenient than dealing with
all these social networking plays.

Independent social networks won't make any money because tiny classified ads
don't work in social networking, and besides location-based advertising will
be bundled into the user's mapping/searching software (Google Maps Mobile,
Nokia Maps, and similar). Users won't pay directly for social networking
because traditionally it has always been free.

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calambrac
Location-based services are a business, but the consumer holding the mobile
isn't who you should expect to pay. Instead, get off your lazy programmer ass
and start pounding the pavement, getting local businesses to sign up and pay
for access to your awesome location-aware ad network, and then give the
consumers the amazing value of being able to ask not just "Where can I go to
grab coffee?", but "What restaurant has open seats _right now_?", "Who's
offering discounts to get rid of their pastries instead of tossing them at the
end of the day?", "I need to buy a box of Cheerios, any local grocery stores
want to bid on my business?", etc.

Location-based is the future of business. I wonder if this guy sees it and is
trying to drive away the competition, or if he took his one flawed pass at a
business model and gave up. Either way, he's full of shit.

~~~
lhorie
>> Location-based is the future of business. I wonder if this guy sees it and
is trying to drive away the competition, or if he took his one flawed pass at
a business model and gave up. Either way, he's full of shit.

Are you doing this successfully? If not, I'll take the word of someone who's
been there over the word of someone predicting the future.

~~~
calambrac
He's been there with a model that failed. He talks in great length about why
that model sucks, and then draws the conclusion that the whole space is
doomed. Why is that more convincing?

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lhorie
I'm not saying I'm convinced either way. I have an idea of what it takes to
pull together a location based service with a business model similar to the
yellow pages (in my case, I'm referring to a local service in my city which is
not as big as the Yellow Pages, but is still a 30+ people operation).

If he has valid arguments about why his model doesn't work, I can combine that
info with what I already know about the amount of effort, time and money
needed to reach the critical mass needed for the yellow-pages-like model.

Then I can come to my own conclusions.

~~~
calambrac
I have no problems with what he said about his model. I have a problem with
the larger conclusion that he draws, that the whole space is poison as a
result.

~~~
lhorie
I thought the conclusion was this:

>> As a LBS start-up, you need to think about adding distinctive value for
users

which, afaik, is true of any type of business (especially start-ups). In that
aspect, I definitely agree with the author.

~~~
calambrac
You're exactly right, but that's my point. I mean, isn't it always obvious
that you need to be adding value? If you're not, how are you in business at
all?

And yet, he's saying this as if it's a great admission of defeat, that
location is dead as a business because you actually need to _do something_
with location information, not just provide it, and the only things he's
thought to do that could possibly make money are sex and security.

But he's wrong. "Who's nearby?" is still very valuable, just not to the guy
holding the handset. It's valuable to the businesses who want those people to
walk in their door and buy something.

The thing that he talks about being commoditized is your friends locations,
the social graphs that we define. But I'm not going to add grocery stores and
such to my personal network, so the how are businesses going to know I'm
nearby and want to spend money?

Well, what if I implicitly gave the companies around me permission to know I'm
nearby by pulling them up in search, mediated by my location? The company that
sets this up using realtime local search is going to be able to make a lot of
money, because businesses are going to pay to know who's around and what
they're looking for, and to be able to pitch to them directly (think, as a
consumer, how great it would be to have access to a reverse auction from the
six stores within walking distance anytime you wanted to go grocery shopping.
Then think, as a business, how great it would be to be able to broadcast any
price advantages you had over your competition in real time to the people who
wanted to buy what you were selling).

~~~
lhorie
That sounds like a great idea, but again, convincing businesses to join in and
participate enough to reach that critical mass needed for a service to allow
the reverse-auction-from-the-6-places-closest-to-me kind of deal can be
difficult.

I don't know how your experience talking to local business owners has been,
but mine is that a surprisingly high number of local businesses are small
shops who are not techie enough to even care to have a semi-decent brochure
website.

I suppose that idea would be a lot more feasible in a place like Tokyo,
though. These days, they have those 2D barcode scanners on cellphones and all.

~~~
calambrac
You bootstrap by ripping off yelp to get users.

While you're building this traffic, you're investing in systems that let
businesses advertise on your channel (handwavy here. Twitter clone? Something
to hook inventory records into? I don't think the reverse auction comes until
later).

Then you find locations that get a lot of search traffic, figure out the
businesses at that spot that would benefit most from it, and show them the
numbers. Get just one to sign up (FooCorp), and then add a demo to your
roadshow that shows the competitors exactly how many folks are being told that
FooCorp is selling that widget, and ask them why they think they aren't
selling as many of their own as they'd like. Wash, rinse, repeat.

You don't have to get every mom-and-pop to sign up, just target who and where
you think will pay.

~~~
lhorie
>> handwavy here

hehehe, I wish start-ups worked like that :)

I did have a client in the past with a similar business model (much more low
tech though), but when I really think about it, it basically boiled down to
how good the sales reps were.

While that model may work if you are an extrovert who loves chasing people
around town all day, it doesn't quite fit with my particular resource
allocation roadmap :/

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alabut
A big assumption underlying the article is that Google's Latitude will take
off - that's definitely not a given. Just because it's made by Google and free
isn't necessarily enough to overcome switching costs, a lot of people have
their location-based network built up in Brightkite, Loopt, etc.

~~~
spif
Google's sheer mass and "better" integration with their own products puts it
in a good position though.

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srn
Part of this guy's argument is bogus. It is basically "Someone big is going to
do this so why bother." That could be said of 99.99% of all businesses. "IBM
is so big, why bother with Microsoft?"

Part of the problem with any business with a localization aspect is that it
takes more people to get buyin. Yelp in the bay area? Fabulous. Yelp in
Louisiana? Not so great. Same goes for meetup.com, where I can find people in
my area, as compared to plazes, where there was maybe 1 other person near me.

Yes, people probably won't pay for services who tell them where their current
friends are, but there's still value. I personally would be interested in
knowing where my "facebook friends" are - for me that's people who I am
acquainted with but necessarily socialize with unless it's convenient, like if
I'm shopping and want to go see a movie in 10 minutes. Random people who might
be interesting are also a way to pass the time if I'm bored waiting for a
train.

~~~
martian
My impression of the article is that the author was saying it's difficult to
get into business selling only what or who is nearby, since both of those are
close to becoming (if they're not already) commodities. The trick with
location-based services is to provide novel interaction or functionality or
customization on top of these commodities. Quoting the OP: "As a LBS start-up,
you need to think about adding distinctive value for users; differentiating on
location is an oxymoron."

There are plenty of companies who will be hugely successful in the LBS space.
Maybe Google, maybe Loopt, maybe Brightkite or Yahoo or CloudMade... If you
think you can be the next company to track where everyone and everything is
(massive infrastructure requirements!) -- this article is suggesting you are
probably on the wrong track.

(side note: Yahoo's FireEagle is also something to watch in this space, as are
the recently launched developer products from CloudMade.)

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c00p3r
The maps is the matter. When you're riding a train between Gaya and Varanasi
and see you location it real-time on old Nokia phone - it is amazing.

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ajkirwin
I call bullshit. This entire article reads like someone being pissed because
they tried and failed.

~~~
ivey
I thought it was really even handed, and good advice. Lots of people have
tried and failed: few step back, figure out why, and offer advice to everyone
coming after them.

