Why Geofencing & Opt-in Notifications Could Save Foursquare

Source: Psiaki

Last week at CTIA, I moderated a panel on location-based advertising - it was a pleasure to have a conversation with Fred Boos of Rocketbux, Anne Bezancon of Placecast, Dan Gilmartin of Where, Rip Gerber of Loc-Aid and Lisa Petersen of Neustar.  

The panel got me thinking about the future of mobile advertising. For all the talk about location-based advertising and services (e.g. Foursquare, Facebook Places, Gowalla and the like), there are some core sustainability issues about these services.

Many mobile users, myself included, are still scratching their heads as to the utility of these apps, especially check-ins.  We are starting to see the developer community answer this criticism with some useful services, such as barcode scanning/price comparisons (e.g. from Zappli, eBay/Redlaser and Amazon), coupons (e.g. from Rocketbux and Cellfire), and local offers (e.g. from Where and xAd). 

From the perspective of advertisers, whether local or national, only a tiny percentage (my estimate is 2-3 5%) of mobile users' time is actually addressable with location-based advertising. Why?  Because when you multiple the 23% 30% that have smartphones by the 50% (my guesstimate) that have installed Facebook/Foursquare/Gowalla/etc by the 30% that open up these apps in specific locations to find information, you get a very small percentage.  

The solution, in my opinion:

• doesn't require users to open up specific apps all the time.  Perhaps it delivers information through notifications / text
• is opt-in / permission-based. Not only is spam an issue but privacy has to be maintained at all times
• knows the mobile users' location at anytime (even if they're not logged into an app) - I call this 'persistent locationing'
• intelligently understands the relevant area around the user from which to cull information/marketing messages. In other words, 'geofencing' around people, not locations. [Addendum: the key issue here is scale which I've been thinking a lot about especially as our portfolio companies INRIX, Where and Aha Mobile have all had to operate at large data scale.  When you have millions of location traces updating every few minutes or even every second, how do you multiplex this with millions of users and thousands of offers and create meaningful and accurate output streams. Not an easy computer science problem to solve.]
• is constantly running in the background (not on the phone but in the cloud) to search the users' surroundings for relevant information/marketing messages. In other words, 'persistent search'

For a location-based apps company like Foursquare, I think this is the only way they become truly universally usable, applicable across all 305M people in the US.  They also become appealing to brands/advertisers.  To achieve this, they need to do a big integration job across these APIs/web services. Here are the relevant vendors (not an exhaustive list):

• Notifications/text: SMS through aggregators such as Singlepoint, Sybase 365, etc. or smartphone notifications through Urban Airship, iLime etc.
• Persistent locationing: Location Labs, Loc-Aid - these vendors have integrated across multiple mobile operators and can expose any user's location, at all times
• Geofencing: Locomatix, Placecast, Location Labs, Simplegeo, [Adding: Xtify, based on Josh's comment]
• Persistent search: No one vendor here. Algorithms have to make sure not to ping database APIs (such as Yelp's API) too often or risk getting shut-off.

And finally, a couple of issues need to be addressed head-on for this solution to be successful: first, privacy, and second, business model.