View Full Version : Tag-Along Marketing By JOSHUA BRUSTEIN


din
11-07-2010, 03:49 PM
November 6, 2010
Tag-Along Marketing

By JOSHUA BRUSTEIN

Everything is in place for location-based social networking to be the next big thing. Tech companies are building the platforms, venture capitalists are providing the cash and marketers are eager to develop advertising.
All that is missing are the people.
As of August, only 4 percent of American adults who used the Internet also used location-based services, which allow people to “check in” to physical locations via their cellphones to earn coupons or keep up with friends, the Pew Research Center (http://topics.nytimes.com/top/reference/timestopics/organizations/p/pew_research_center/index.html?inline=nyt-org)’s Internet and American Life Project reported last week (http://pewinternet.org/Reports/2010/Location-based-services/Overview.aspx). And only 1 percent of Internet users are on such services on any given day, an indication that those who do use the services still have not integrated them into their daily lives.
Still, companies like Foursquare (http://foursquare.com/) and Gowalla (http://gowalla.com/), two of the leaders in the location-based services market, have had no trouble raising money from investors. Advertisers are on track to spend $1.8 billion on location-based marketing in 2015, according to ABI Research, a technology market research firm.
And last week, Facebook (http://topics.nytimes.com/top/news/business/companies/facebook_inc/index.html?inline=nyt-org) announced that it would allow retailers to offer coupons and special deals through its own location-based service, Places, which it introduced in August.
How did businesses get so far ahead of consumers on this idea? And will consumers ever catch up?
In order to answer this question, it helps to understand how technology companies make money by providing free services. When a customer buys a toothbrush from a drugstore, she pays with cash; when the same customer creates a social-networking profile on Facebook, the currency she uses is her personal data.
Specific user data is valuable to advertisers because it allows them to target their marketing efforts more effectively. With social networking, hundreds of millions of people are willing to provide access to that data in exchange for a service they find useful, even while many express concerns about their privacy.
“Many people are in a more ‘transactional’ frame of mind” when it comes to their personal information, said Lee Rainie, the director of the Internet and American Life Project. “They will share information if they think they can get something of value for it.”
Data about a person’s physical location would be immensely valuable to marketers and retailers, say analysts. But sharing information about where you are can seem creepy or, worse, dangerous, as the Web site Please Rob Me (http://pleaserobme.com/) showed earlier this year when it demonstrated how easy it would be for potential thieves to use social networks to find homes whose occupants were away.
Meanwhile, the upside of the transaction is unclear to many people, said Melissa Parrish, an analyst at Forrester Research (http://topics.nytimes.com/top/news/business/companies/forrester-research-inc/index.html?inline=nyt-org). None of the efforts so far have reached the “sweet spot of coolness and utility” that will get people to share their data, she said.
Josh Williams, a founder of Gowalla, agreed, describing the way that location-based services are pitched as “nerdy and often off-putting.”
Mr. Williams said Facebook’s efforts would show people an upside to location via special offers on shopping through its Deals program. His company and others are working on less tangible benefits, like providing an opportunity to connect with friends in the physical world. He acknowledged that the companies still had to show people the point of all this.
“As an industry, it behooves ourselves to look for more human ways to explain what we’re doing,” he said.