Geo-Loco 2010: Monetizing LBS — The Big Question

I moderated a panel at the Geo-Loco conference in San Francisco yesterday on the subject of monetizing LBS. At the session titled “How to Make Money From Location Based Services,” the panel riffed on evolving user behavior for mobile local products, and the trailing (but likewise evolving) advertiser interest.

The former point is clear to everyone, and most of the day’s content focused on how geolocal and geosocial apps are exploding in usage and engagement levels. The check-in is becoming a form of currency in local. Not only does it ground itself in physical places (hence contextual relevance), but it’s also an opt-in from mobile, intent-driven users.

But the other side of the equation isn’t so clear: How are advertisers adopting, or at least thinking about, these products? When it comes to apps like Foursquare, there have been branding dollars thrown at it, but the longer term opportunity carries the misguided assumption that millions of SMBs will show up and manage self-serve campaigns.

I’ve been grinding this axe lately, but we examined it further on the panel. The rough math dictates about 23 million SMBs in the U.S. The YP industry has gone further than anyone in penetrating between 2 million and 3 million. But that’s credited to an army of sales reps knocking on every door in town; the fact is that SMBs need their hands held.

As a proxy for the self-service opportunity, Google has gone further than anyone else and has only gotten about 1 million SMBs to sign up for AdWords … and it’s Google. But going against the argument I keep making, perhaps it’s not a function of SMBs’ time, inclinations and tech savvy; maybe the wrong product has been offered.

In other words, maybe the relatively low sign-up rates (and high churn) for search marketing has more to do with the fact that buying “clicks” is an opaque concept to a lot SMBs, which instead want the phone to ring, or traffic (of the footstep variety). This is an interesting concept that is supportive of the efforts of Foursquare and others.

I’m not ruling out Foursquare’s chances yet, partly on the basis of Fred Wilson’s comments yesterday, the first realistic mention I’ve heard for tactically penetrating the fragmented SMB segment. I also have faith in Dennis Crowley’s vision and comments about the constant need to innovate and evolve from game mechanics to a more monetary “value exchange.”

I’m an avid Foursquare guy but I still think it gets way too much ink for a company with 2 million users (compared with Facebook’s 500 million, Twitter’s 190 million and Yelp’s 30 million). But its rate of growth and prospects certainly make it worth watching.

Also worth watching: the individual who secured the mayorship of the Geo-Loco Conference. 😉