To the surprise of no one, Facebook is about to launch location-aware status updates.The conventional wisdom is that this is very bad news for location-based social networks like Foursquare, Loopt, and Gowalla. Facebook is entering their space with its 400 million users; what chance do they have?
We’re not convinced.
Details about Facebook’s location strategy are lacking, but we would be astonished if location didn’t end up as part of Facebook’s new Open Graph API. Meanwhile, Foursquare and Loopt already work on open APIs (though Gowalla does not).
We think Facebook won’t try to set itself up as an alternative to these services, but rather as an integral part of them; location data from all of them will end up on Facebook, making it the primary owner of where you are. But Facebook won’t compete directly with all of the value that these services add to that data.
Here’s why we think this:
- Everything we’ve seen about the Open Graph initiative suggests that Facebook’s strategy is to try to put its brand on absolutely everything, to be in the background everywhere it can. Making the Foursquares and Loopts go through Facebook would be more in line with this strategy than would competing with them.
- Zynga and its competitors in social games are making boatloads of cash on Facebook’s website. Facebook takes its slice and reaps in the ad revenue, but it hasn’t made any move to compete directly with its own games. The situations are not too dissimilar.
- Game play features — like Foursquares badges and leaderboards — are not something Facebook has any experience doing. And, as these services focus more on revenue, they will increasingly be striking deals with local businesses. That’s also something Facebook doesn’t do, and something for which it would have to hire a massive sales force to do to scale, because Facebook is big everywhere.
- New and different services that leverage location will keep popping up, but users’ tolerance for checking-in with multiple applications will remain non-existent. It’s inevitable that the transmission of this information will become centralized, or at least standardized, and Facebook is the natural winner there.
- A source at one of the startups in this space told us Facebook has privately hinted at a strategy like this. Obviously, it’s in these companies’ interest to spin this as positively as possible, but if Facebook is pursuing this strategy, it would make sense for them to keep in touch with these startups to encourage them to integrate with Facebook.
- Another source at a different location startup said he didn’t know Facebook was up to, but suggested that looking Google represented a good comparison. “If you look at what Google is doing with location, it’s incredibly basic. You are here.” Google has been experimenting with some location driven search and advertising products, but they don’t do anything fancy or alarming with the information, this source says, because they need it to make sense to everyone. “We’re starting with zero users and working our way up. We can afford to do things that appeal to a niche. They’re starting with hundreds of millions of users.” Facebook’s position is much more like Google’s than Foursquare’s.
None of which is to say that these startups have nothing to worry about. For one thing, Facebook will ultimately want in on whatever money there is to be had in this space; news of Facebook’s initiative came with the announcement that the social network was partnering with McDonald’s, just the sort of deal that will make Foursquare and Loopt money.
Facebook’s entry into the space will also lower the barrier to entry for further competitors. There will still be a lot of value to be had from owning a proprietary check-in system, especially for monetized check-ins, but now Facebook developers will be able to launch light-weight location services without doing any of that technical work themselves.
On the other hand, 400 million people are about to have the check-in concept thrown in their face. If we’re right about how Facebook will approach it, that could be a very good thing for check-in services.
Business Insider Emails & Alerts
Site highlights each day to your inbox.