Location: Designing a Business Model

Business models for Location-based services and advertising have been discussed for the last decade and the “standard” example is: someone walking in the city and getting messages, ads, promotions from shops, bars or restaurants or information about friends close by. Most likely in most cases this will be annoying, e.g. when being late for a date or in a hurry to catch a bus.

Now here comes along a new set of location-based social services like foursquare, gowalla, brightkite, etc. Instead of using any automatic location update mechanism they use “check-in” for the user to actively trigger the change of her location information, e.g. when entering a bar, restaurant or home. Additionally they have concepts for social networks, friends and bonus, loyalty programs for partners like bars, restaurants, shops.

The essential part of the service, however, is the “magic” moment of the “check-in” at which the user actively engages with the service. At this point she is ready to receive updates about friends as well as messages and information about interesting points at this location. For example leaving the plane in an unknown city I would be ready to get recommendations for cool restaurants or bar. This is the point where advertising could be added without being annoying and ignored. The same approach that makes ads so efficient in Google search.

So the key for the business model for location-based services is not knowing the location of the user, it is getting the user in a state where she is willing to accept messages.