An interesting discussion broke out in the comments to my last post about whether location based services like FourSquare are about sharing one’s location with friends or an evolution of the loyalty cards where users get deals for advertising a store to their friends. You can also see members of the tech press asking themselves this question with articles like Dear Foursquare, Gowalla: Please Let’s Stop Pretending This Is Fun appearing on TechCrunch. The following excerpt from that article strikes at the heart of the matter

Pew Research reported that, despite all the hype, the use of location-based services is actually declining in America, from 5% of the online population in May to 4% last month. Forget the fabled hockey stick; that’s more like a broken pencil.

Why? Because they’re not giving us any good reason to use them. Look at their web sites. Gowalla proclaims, “Discover the extraordinary in the world around you.” Foursquare says, “Unlock your city.” To which I say: “Oh, come on“ — and it seems I speak for approximately 96% (formerly 95%) of the population. I have no interest in enlisting in a virtual scavenger hunt, or unlocking merit badges — what is this, the Cub Scouts? — or becoming the narcissistic “Mayor” of my local coffee shop. Thanks for the offer, but I’m afraid I already have some semblance of a life.

I do want to keep up with my friends, and (sometimes) let them know where I am. But if you’re competing with Facebook in social networking and your name isn’t Twitter or Google, I’m sorry, but I don’t like your chances.

The challenge for FourSquare is that being the best service for getting local deals is a very different product from being the best service for keeping up to date with my friends are. FourSquare is trying to be both when either one faces significant challenges as a standalone product given the competitiveness of the marketplace.

The main innovation with location based services like FourSquare is that they are so easy for the consumer to get into that you could make it similar to frequent flier miles where the model is “if I’m already going to be doing something regularly anyway why not get perks for doing so?”. The problem that FourSquare faces is that they have to compete with GroupOn, JungleCents, Restaurant.com and various other services that have a more proven model for delivering customers to local businesses. The ideal place for FourSquare to be is where they can pitch to customers like me that every 10th check-in to my local health club gives me a perk even if it’s a free beverage or breakfast pastry instead of offering me a Gym Rate badge which I acquired after my first month using the service and now have no reason to check-in from there anymore. FourSquare has been primarily focused on getting discounts for "mayors" of local businesses which seems backwards given that they are basically saying only one person per store can get a discount (and in the case of Starbucks it was just a $1 discount). Can you imagine American Airways saying only the passenger who flies the most from Seattle<->San Francisco that year can use the frequent flier program? Sounds ridiculous doesn’t it?

If FourSquare wants to make a difference as a way for people to get local deals, they’ll need to refocus the company and not fall into the trap of paying too much attention to their game mechanics.

FourSquare faces a different set of challenges as a way to share location with friends and this isn’t just because of the social graph problem of competing with Facebook which I discussed in my previous post. I’m personally very bullish that location based services will be an integral part of our lives in the future. When I originally read Robert Scoble’s Location 2012 which aimed to predict where we’d be in 2 years given location trends today I couldn’t help but nod my head in agreement. However as I’ve started seeing some of these features show up in apps like Loopt and Facebook Places I’ve realized that some of these scenarios sound better in theory than in practice.

Constantly checking-in to share your location is a chore than you get nothing out of 99% of the time. This is why FourSquare uses game mechanics such as badges and mayorships to try to get people to regularly check-in. The problem is that game mechanics only get you so far and will not appeal to a significant chunk of the user population. On the other hand, automatically checking-in by sharing your location in real-time such as Loopt does brings with it a raft of privacy issues and can just come off as downright creepy. Although I’ve found real-time location sharing to be useful at times when I need to meet up with my wife at a crowded 5K race, it seemed a little creepy to have each other’s locations permanently shared even though it sounded convenient in theory. We no longer use Loopt and try as I might I couldn’t figure out how to pitch it to other people without it sounding creepy.

Striking the right balance between the tediousness of check-ins and the creepiness of constant location sharing will take a lot of trial and error as well as a careful sense of design. Again, I’d it would take refocusing the company to really cross the chasm here from the Silicon Valley early adopter to being the sort of mass market success that my non-technical friends who use Facebook and play Farmville but don’t read TechCrunch would be familiar with.

Right now FourSquare and other services that have cloned its model are between a rock and a hard place. It will be interesting to see how they transform themselves in the coming months to address these challenges.

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Two months ago Nelson Minar wrote a post entitled Stop making social networks, Facebook won where he argues that websites should just treat Facebook as the one true social graph instead of trying to build their own. I agree a lot with what Nelson wrote which some people tell me conflicts with my argument that There will be many social graphs. I thought that the best way to illustrate this seeming contradictory thinking is by comparing two sites that the media considers competitors to Facebook in different ways; Twitter and FourSquare.

How Twitter and FourSquare position themselves against Facebook

Recently, Twitter’s VP of business and corporate development spoke at Nokia World 2010 where he proclaimed that Twitter is NOT a social network. Below are some excerpts from ReadWriteWeb’s coverage of his talk.

says Thau: Twitter is for news. Twitter is for content. Twitter is for information.
…
So Twitter Is "News"?

Yes, says Thau. Twitter is changing the very nature of news today. Journalists are sending their stories to Twitter and some are even publishing directly to Twitter. It's also allowing everyday users to become journalists themselves by providing them with a simple mechanism to break news.

"The guy who saw a plane land on the Hudson River right in front of him didn't think to send an email," says Thau. "He tweeted it."

Thau also wanted to assure Twitter users it's OK if you think you're not interesting enough to have your own Twitter account. Don't apologize if you don't tweet - just come to Twitter and consume content instead. After all, plenty of people already do just that.

The key thing here is that Twitter is arguing that the primary relationships on the site are not “social”. They are producer<->consumer where the product is news and other information content.

Dennis Crowley of FourSquare made more direct comparisons between his service and Facebook in an interview with TechCrunch.

On why the world needs more than one social graph

Our social graph is more representative of the people that you meet in the real world. I am starting to believe, if you asked me a year ago, Why would you ever need more than one social graph? You need representation of a couple of them. Between the three, Facebook is literally everyone I’ve ever shaken hands with at a conference or kissed on the cheek at Easter. Twitter seems to be everyone I am entertained by or I wish to meet some day. Foursquare seems to be everyone I run into on a regular basis. All three of those social graphs are powerful in their own.

The FourSquare argument is that services that create new social graphs that are tied to a specific social context can continue to exist and grow in a world where social networking is dominated by Facebook’s website and Facebook Connect.

Facebook’s trajectory: Adding a social element to every online activity

Before analyzing the wisdom of the approaches that FourSquare and Twitter have taken to differentiate their offerings from Facebook, it is a good idea to have an idea of Facebook’s ultimate strategy. This isn’t hard since Zuckerberg and other Facebook regularly share this with TechCrunch. Below is an excerpt from an article titled Zuckerberg: Facebook Photos Used 5 Or 6 Times More Than Competitors — Combined which describes their long term strategy

He noted that when they launched the product, they didn’t have all of the features that their competitors did. For example, they didn’t have high-resolution photos and you couldn’t print them. But one thing they did have was the social element — and this changed everything.

“Those features by themselves were more important than anything else combined,” Zuckerberg said of the social elements of Facebook Photos. He then dropped the competitor bomb. “The photo product that we have is maybe five or six times more used than every other product on the web — combined,” Zuckerberg stated.
…
And it was clear from both Zuckerberg and CTO Bret Taylor’s talk at the event that photos to them was the harbinger of things that eventually came — and will still come.

Taylor noted that he had been “brainwashed by Silicon Valley” before he saw and understood the power of Facebook Photos (he was likely working at Google at the time). He had been thinking like an engineer about the best way to organize photos on the web. But he quickly realized that “the best possible organization of photos is around people,” Taylor said.

“There are ten other industries waiting to have this type of disruption,” Taylor said noting the travel industry, e-commerce, and music as a few of them. Earlier, Zuckerberg agreed. Because of the social element, “every single vertical will be transformed.“

Facebook’s social graph is a graph of people I know or have met. Facebook’s fundamental strategy is to build a product and platform where key online activities are improved by adding the social element of people you know. Where Facebook has been dominant is when the activity is one that already related to interacting with people you know. Facebook has beaten geek favorites like Gmail, Flickr and Delicious as the way regular people share private messages, photos and links online. This is both due to the powerful network effects of a social networking product and the fact that their graph maps 100% to the people one typically wants to indulge in those activities with.

Facebook has had less success with products where their graph doesn’t correspond well with the target activity. The best examples of this are Facebook Marketplace versus eBay/Craig's List or Facebook Questions versus Yahoo! Answers. In both of these comparisons, Facebook isn’t even on the radar of the market leader. This is because activities such as buying someone’s old junk really need a wider net than just your friends, family and coworkers.

This is where the positioning and focus of Twitter as a news service as opposed to a social network puts them in a good place in comparison to Facebook. Twitter is where I go to get entertainment and news about the topics I’m interested in from subject matter experts. These subject matter experts (in many cases bloggers, minor & major celebrities) are not people I know nor  have I met. This is distinct from my Facebook social graph but has some overlap depending on how much of a subject matter expert I am myself. On the other hand, FourSquare is a place where I go to share my location with people I know or have met. This set of people is almost always a subset of the people in my Facebook social graph. The only value additions you get from FourSquare are the game mechanics and deals (not anymore). FourSquare has unfortunately reached the point where the only practical difference between using it versus Facebook Places is that I get to be mayor of my local Gymboree and collect two dozen video game style achievements. Personally I’ve already grown bored with the game mechanics and suspect that targeting the console gaming demographic guarantees it will be a niche service at best.

The bottom line is that if the primary focus of your product is that it connects people with their friends, family and others they know around a particular activity then you need to be able to answer the question as to how your product can compete in a world where your service is a feature of Facebook or of an app on its platform.

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