Over the weekend, Silicon Valley investor / advisor Dave McClure wrote a thought provoking post about why check-in services like Foursquare and Gowalla are doomed to stay in the tech ghetto until they find a way to offer meaningful financial rewards in exchange for people sharing their location. As evidence, he points to Foursquare’s relatively anemic growth compared to home run services like Facebook and Twitter. McClure goes on to say that in order to reach scale, LBS services are going to have to buy users – he estimates it will take $100M+ to do so.
Dave McClure is a smart dude. Through his connections with Facebook Fund, Founder’s Fund, Startup2Startup, and his own rep, he sees a lot of deals, a lot of companies, a lot of entrepreneurs. Plus, he was one of the guys who helped Paypal get to scale, pulling off the amazing task of getting Normals to enter their bank account info into a website.
He knows a bit about getting consumers to adopt new behaviors.
But he’s dead wrong about this. Here’s why.
It’s Not about the Freaking Money
People don’t share stuff on the Internet because they want to get paid. Facebook doesn’t pay me to share my photos. Twitter doesn’t pay me to share my status updates. Yelp doesn’t pay me to share my reviews.
People share stuff because they want to express themselves. Because they want to be recognized. Because their friends are doing it.
Tell me exactly, why should location be any different? Why should LBS suddenly be won by the “Make $$ FROM HOME!!!!” guys taking their show mobile?
I’m not buying it.
Checking In is the Easiest Thing to do in the History of UGC
Here’s another we know about User Generated Content. The easier it is, the more people will do it.
More people blog than write books.
More people comment than blog.
More people vote / like than comment.
And way more people read, than write.
Zynga was founded in July, 2007. Today, they are estimated to be worth more than $3B. So game mechanics only work on Facebook, and not on the phone? Or is it that people don’t like to play games in real life? Which part of Zynga’s game mechanics are “bullshit?”
Do you really think that all those people who are blowing up casual gaming on Facebook won’t be doing it on their phones in two years? Or is that you don’t think Location works as a game element?
A Rising Tide Lifts all Boats
Location aware smartphones are surging. Today’s young kids who don’t give a crap about their privacy are getting older and buying smartphones. And they are being replaced by even younger kids who could care even less about their privacy. Old people are getting on Facebook and / or becoming social media gurus on Twitter. And pretty soon, Facebook is going to help Normals get comfortable with Location.
Mobile connectivity will get faster and faster. The phones will get smarter and more powerful. The geo data will get cleaner and more standard. And at the top of the stack, the location apps themselves will get more and more fun.
Foursquare’s growth to date has slow because of platform availability. Android launched five months ago. Blackberry launched two months ago. Same with Palm. I expect these guys to be doing 1M+ new users a month by the end of the year, and more if they continue to hit the BizDev side.
I’m not saying that location based coupons won’t thrive. They will, because they make sense as a new form of advertising.
But buying users is not the only way to hit a homerun in LBS.