One of the more interesting pieces of research that came out last week was a report that examined usage of location-based services and applications such as Foursquare, Gowalla and Loopt. This particular market has been red hot over the past year, thanks in large part to the phenomenal growth of Foursquare, which recently closed a major financing round that values the company at close to $100-million. The service has also been the subject of acquisition rumors involving Facebook and web giants like Yahoo. According to the report, however, only a small proportion of Internet users have even heard of location-based services, let alone used them.
The report found that less than five percent of those surveyed had ever used a service or an app on a mobile device that involved location; almost 85 percent of surveyed said they were unfamiliar with location-based services. Almost 10 percent said they were familiar with the category but had never used such a service, and three percent said that while they didn’t use such applications, their friends did. Just one percent said they used location-based apps more than once a week. To some observers, that didn’t sound much like the kind of market that would make a single player such as Foursquare worth $100 million.
Does the survey, then, mean that location-based services are a fad? The best answer is probably “yes and no.” It’s true the number of people who use location-based services regularly — or are even familiar with the fact that they exist — is relatively small compared with the Internet population as a whole. And it’s possible location-based services may never become as widespread as other forms of social networking, such as instant messaging, Twitter or Facebook. But it’s also worth remembering that most social networking services were once seen as something that would appeal only to a small group of online geeks; eventually, they managed to hit the right combination of factors that gave them broad appeal.
What that combination of factors might be is the subject of ongoing debate. Facebook at first seemed to appeal only to university students, but the desire to connect with old friends turned out to be a much more universal concept; the social network also successfully added other social features, such as the ability to share photos and play social games. Twitter, meanwhile, seemed to appeal only to a small subset of Internet users, but it’s become obvious over the past two years that the service fills a need in terms of real-time information distribution that goes beyond that core group. Each of these services was able to tap into something much broader than its initial goal and has grown as a result.
Whether sharing your location falls into this kind of category remains to be seen. In some cases, a user might want to share their location because they are looking for connections within a certain context, such as an event like South by Southwest, where Foursquare got a big boost in terms of awareness. But will people want to share their location all the time? In terms of location services as a business, there is some reason to believe that location may actually be something that makes more sense as a feature of some other social network — such as Facebook — rather than a standalone offering. This is partially due to the ongoing question of how such services drive revenue on their own.
Despite this, some venture capitalists have placed rather large bets that location-based services like Foursquare and its ilk can become a central part of the landscape as social networking goes mobile. But the bottom line is that determining whether these services are actually a fad is something that can only be done in hindsight.