Though I like what their doing from the perspective of trying to find a filter for which friends you're most often physically around, you point to what I think might be a big flaw.
Not only are people in the immediate vicinity less likely to need/want to view a copy of your photo, but will they take out their phone and launch the app to do that?
I can see wanting to see the photos you took when we were together, but I don't think I want to see them at the time the photo was taken, rather I'd want to see them at a later time.
I'm sure the photo aspect was just a foot-in-the-door thing to get them known and work out some of the more impressive tech on the back-end.
I fully expect an api to your elastic network in the near future.