Apple hit’s “RESET” on the LBS market
By now you have probably read Dave Mcclure’s post positing that Foursquare will lose to Facebook in the Location Based Services race. He argues that applications like Foursquare and Gowalla are not capable of scaling fast and cost effectively enough to beat out larger platforms like Facebook and Google, and delivers a sobering message to some of the more hyped early stage companies in the venture/startup community. I agree with Dave’s assertion that Foursquare is going to have a hard time winning here, but for a completely different reason than any he suggests.
I’ll start with the assertion that the location space will not be won or lost at the consumer application level. I was talking with my partners at Lerer Ventures a few weeks ago about whether or not I’d invest in Foursquare at the meteoric valuations being thrown around in the press, and my answer was yes…but not because I thought it was such an amazing consumer experience that it would grow to 400 million users and become the next Facebook. My thesis was that the first company in the “check in” space to build a critical mass of users and check ins would expose it’s API to 3rd party developers and become the default platform on which all future applications wishing to leverage the all-valuable location data point would build. Location is such a clean and highly monetizable dataset that I believe many applications will wish to use it as input in their services, and I thought Foursquare stood a decent chance of being the provider of this data, very similar to how Facebook has become the default API on which every developer wishing to leverage the “social graph” will build. Fred Wilson recently wrote a post which in my opinion correctly stated that in order for a platform to truly dominate, it must be successful in attracting 3rd party application developers to build out the surrounding ecosystem. Foursquare had the potential to do this.
I use the past tense in light of a recent announcement made by Apple, which I believe was largely overlooked by Mcclure, and to be honest I haven’t really seen anyone talking about what I perceive to be an overnight and massive disruption to the entire “check in” market. Foursquare and other “check-in” based applications were working toward the most interesting location dataset I know of, but even it is still quite incomplete. In the absence of “persistent tracking”, which would be a continuous line of a given users movement through the physical world, “check in” companies began to collect multiple location data points per user. If you mapped those data points, it would look more like a constellation than a smooth and continuous line. Apple just announced that with their new operating system, applications will be able to engage in “persistent location tracking.” Basically, they opened the door for any application that successfully acquires a database of “smooth lines” to supplant Foursquare as the default API on which other application developers will build. If I am a 3rd party developer, I would much rather build atop the “smooth line” database than a few spotty check-ins per user, and the “check in” is not a mechanism that was designed to capture “smooth line” data. If the LBS market were a game of Contra, Apple basically just hit the “RESET” button when Foursquare was on Level 7, and now Foursquare, like Facebook and every other platform chasing this attractive dataset, is back to “up up, down down, left, right, left, right, B, A, B, A, Select, Start.” Game On.
P.S. If I have misunderstood the implications of Apple’s announcement, please feel free to bombard me with insults.
P.P.S. Now that I think about it, if I’m Foursquare, this development would be an awfully good reason to take the early exit offer from Microsoft…
Jordan Cooper's Blog: startups, venture capital, etc... 
Well I think pinning 4sq’s entire fate (or at least to the level of whether the stratospheric valuations make sense) on Apple is a strong statement, but regardless I do think you call out a relevant implication of Apple’s iPhone OS4 announcement.
Yep you understood it correctly, the only wrinkle is for now it seems that they won’t give background apps your exact location, only closest cell tower level (for privacy but also for battery-saving reasons, because the cell tower data is available for free vs. finer-grained location requiring constant network polling).
Roy Rodenstein
April 11, 2010
interesting…Apple is kind of positioning themselves as the broker of this data…they will sell (deliver exact location) just as soon as the price is right
jordancooper
April 11, 2010
But most users want to actively choose when to express location. Loopt had background tracking on feature phones for years. More recently Latitude and it hers offered this on bberry. The market has shown that users prefer not being tracked and instead choosing when to check in
Steinberg
April 11, 2010
true, but those are individual applications that did not deliver enough value around persistent tracking for users to participate. I’m not saying the app that makes it worth consumers while to “opt in” to persistent track as been built yet, but apple has opened the door for a bunch of folks to get creative with it…and it’s going to happen.
jordancooper
April 11, 2010
interesting post. my concern is passive persistent location tracking is harder for me to buy into as a consumer. I don’t care about checking in occasionally, but really have no desire to share 24/7. the other thing though is persistent tracking doesn’t as easily delineate your places (malls for instance). I can only imagine how fast the iphone battery will get wiped out using persistent gps.
so how do you think this affects SimpleGeo ? who are overtly selling their data, but using various startups to populate their already huge data set.
Brian Breslin
April 11, 2010
i agree with your platform argument. the way i look at it is that in the old days the carrier was the gatekeeper. now it’s apple. by being the layer through which apps obtain (background) location data, lbs apps will be at the mercy of apple. unless the app is only interested in location info when running in the foreground. but if you want the contiuous location data stream you are going thru apple. honestly, though, this is really the only efficient implementation. you don’t want multiple lbs apps running in the background on a single phone each tracking location data. i’d be surprised if apple tries to limit/broker the data.
Rishi
April 11, 2010
I think a big unresolved question is whether “check in” is only applicable to locations.
There is power in breadth. Twitter/FB let you put anything in your update. Google lets you search any vertical. Amazon has every product If FourSquare’s allows check in’s to anything you’re doing in real time (whether it’s a location, tv show, or event), then they’re not directly competing with Apple’s LBS api.
Phil Michaelson
April 12, 2010
interesting point Phil…that is a possible direction, and you see multiple vertical plays popping up around tv, event, etc… but that market is less interesting to me than pure location
jordancooper
April 12, 2010
i’m fascinated by TV & sports event check from a monetization standpoint. brands are already advertising on TV so an extension to the check-in device seems like an easy sell. particularly as the check-in device is what is used during the commercial break!
not sure exactly how to get the consumer to check in though. great product plus mcclure’s $5 might be spot on.
Phil Michaelson
April 12, 2010
check out MisoTV
jordancooper
April 12, 2010
I’m kind of surprised that I haven’t read one reaction to this development yet. My guess is that’s because conventional wisdom leans towards the check in model rather than persistent location tracking due to privacy issues. You also have to question the value of a continuous line, vs. specific data points. A continuous line might be less valuable to me, or my friends rather than discrete announcements of where I am because I can decide what points are important or not. Although in aggregate, users data is a probably a lot more valuable as a continuous line rather than discrete points.
Blake Johnson
April 12, 2010
you raise the point that Ben Lerer also raised, which is that there is something more valuable about the active indication that a location is important…it’s a valid counter for sure…
jordancooper
April 12, 2010
anyone have an idea when closest cell tower data will be able to identify someone that spends 5 minutes in starbucks?
Called the fsq as a lbs platform.
brett
April 20, 2010
Foursquare may indeed find itself in a bit of trouble, as scaling quickly will be difficult. Also, from a consumers perspective foursquare doesnt offer enough value as there is so much competition among “check-in” services. I use the application buzzd because it aggregates tweets, check-ins, and updates about venues in a users area. It is essentially one source to see the most popular places around based on happenings and check-ins from across multiple sources. They are also releasing a string of new updates for blackberry and IPhone this month! Definitely worth checking out.
Scott
May 3, 2010