Here in San Francisco at BIA/Kelsey’s Mobile Local Media conference, a panel of three young companies offered a glimpse into the leading edge of mobile shopping and loyalty marketing.

Moderator Peter Krasilovsky walked each panelist through an examination of his business model, framing a conversation about the evolution of the hyper-competitive mobile payments and transaction marketing space.

Some common features include using loyalty points to drive behavior — store visits, meal purchases and so on — and a seamless experience, where no phone or coupon or loyalty card needs to be presented at the point of sale by consumers. For merchants, the incentives range from higher customer intake, more frequent in-store visits to higher average purchase value.

Josh Capilouto, director of sales operations at SCVNGR/LevelUp

LevelUp is an alternative payment system. The model is users download the app, link a credit card and pay at the point of sale using that card. The LevelUp business model is pay for performance via onboarding and loyalty campaigns. For example, a new customer might be offered two free dollars as an inducement to come into the store. If that money is spent, LevelUp gets a piece of that offer redemption. The same works with loyalty offers. If an offer is to spend $50 for a $5 credit, LevelUp gets a taste of that $5.

LevelUp is in 25 cities via the remove sales channel and is live with direct sales in eight cities, with three more expected by the end of summer or early fall.

Doug Galen, Chief Revenue Officer, Shopkick

Shopkick is a loyalty platform that works with partners to offer points of “kicks” to reward in-store visits. CRO Galen offered his view on the key trends driving mobile shopping.

He cited two key trends:

1. “There will be more change in retail in the next five years than there were in the last 100.”

2. “The mobile impact on shopping is happening faster than expected.”

Two minor supporting trends:

1. Retail is losing walk-ins and needs a solution to drive in-store traffic. Retailers want walk-ins and will pay for them. They have 25 percent to 50 percent conversion rates.

2. Consumers have too many loyalty cards — fragmentation hurts everyone.

Galen was asked about the restaurant chain Denny’s, which built own app. Why should a company work with Shopkick rather than build its own app? What did they miss out on? Galen said they missed 85 percent to 90 percent of their customer base. Most consumers will not use 40 different apps, Galen said. At best, 10 percent of a company’s most loyal users will.

Jon Carder, CEO, Mogl
The name dropper of the day was Mogl CEO Carder, who talked about a recent invitation to Richard Branson’s private island for dinner.

The Mogl model is to use game mechanics to build a network of restaurants, sign up consumer who synch a credit card, earning the chance to win cash back (10 percent for each visit), accumulate points that are redeemed as meals for charity or win a large jackpot.

Carder said the beauty is that different users are there for different reasons. Some people like to give to charity, others like cash, others like points.

One notable feature of Mogl is the cost to restaurants. The company charges restaurants 15 percent of sale. Carder said this isn’t a challenge. “As long as restaurants see ROI, they don’t care.”

he said the average restaurant pays $400 a month and experiences little attrition. “They will pay for value,” he said. “They are tired of cheap but valueless services.”

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SCVNGR “chief ninja” Seth Priebatsch and Gowalla CEO Josh Williams both employ game mechanics to elevate their location-based services, and both believe that gaming’s inherent fun factor can motivate more important behaviors, including social good. But that’s where the similarities stop.

The duo delivered keynote addresses at SxSW Interactive, Priebatsch in front of 4,000, Williams in front of a smaller crowd is his company’s backyard (figuratively — Gowalla is Austin-based).

Priebatsch’s thesis essentially reads like this: The construction of the social ecosystem is largely complete; “the framework has been decided.” It’s called Facebook. The next decade will not be about building digital plumbing or social connections, but gaming the established architecture to “traffic social influence.” SCVNGR uses this game dynamic to drive its users to complete location-centric challenges.

The 22-year-old, a proud Princeton dropout donning PU-orange shades, proceeded to offer examples of powerful game mechanics in action, as well as broken processes that gamification can remedy.

Take Groupon, for instance, as a potent example of the game layer driving customer acquisition. The deal-a-day monster has essentially fused three powerful game mechanics into a $15 billion enterprise equation: “free lunch” + communal gameplay (sharing across decentralized networks) + countdown = the deal is on!

Then there’s customer loyalty, where American Express has ingeniously leveraged “level up” game psychology to create status through card colors (gold, platinum, black). SCVNGR clearly drew motivation from this concept with its new LevelUp pilot that combines LBS with Groupon-esque discounts.

SCVNGR's Seth Priebatsch

For Priebatsch, there are no boundaries to the influence that games can wield in the social realm. For Williams, however, “gamification” (a dirty word in his book) is a means to an end. What’s that end? That’s what LBS must figure out to escape its current “purgatory.”

That purgatory, Williams noted, is the potential not only for check-in overload, but for check-ins and virtual rewards (badges, et al) to be misconstrued as endpoints rather than context wrappers for driving greater utility.

Williams’ future for LBS includes narrating personal histories, building and solidifying communities and fostering social good, though he admits that “social validation” will always be a driver (see what enabling photo posting did to mainstream Facebook).

Foursquare is the biggest pure-play LBS, with 7.5 million users. SCVNGR and Gowalla each count about 1 million. That’s an intriguing start, but far from a mainstream experience. Neither Priebatsch nor Williams had concrete ideas for how to push forward (at least none that they let on), but this much they certainly agree on: Building bolder value requires delighting users, and that must transcend temporal check-ins.

Though no cure-all solutions were put forward, these entrepreneurs’ contrasting outlooks on the future of the converged mobile-social-local universe offered a refreshing reminder that not all location services are created equal…that the space isn’t confined to just Foursquare and a flock of rewards-based followers.

Gowalla's Josh Williams

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One of the principal questions in the local marketplace heading into 2011 is how location-based services (check-ins, barcode scanning) and deals will continue to synergize to create an integrated user experience? Just as important, what role will Google play?

An early clue may have turned up with SCVNGR nabbing a third round of funding, this one for $15 million. Google Ventures is a chief investor in the Boston start-up, having poured in $4 million in earlier rounds.

SCVNGR launched its geosocial rewards platform in July and expects total users to top 1 million by month’s end. LBS brands, Foursquare the highest profile among them, sell serendipity by using game mechanics to drive local discovery through check-ins. The concept generated buzz aplenty in 2010, but not as much evidence of mainstream popularity. In November, PEW reported that only 4 percent of online U.S. adults actually use these location-based tools.

SCVNGR has tried to separate itself from the Foursquare/Gowalla/Loopt crowd on a couple of fronts. It pursued paying clients first, rather than starting with simply building the user base. And its focus on challenges over virtual check-ins allows clients to elicit certain interactive behaviors from their patrons, then reward their loyalty with tangible prizes. Users of the service’s mobile apps accumulate points for completing tasks, then can redeem those points for prizes when a certain threshold (determined by the merchant) is met.

This is potentially important in two ways — steering the LBS experience away from check-in fatigue (badges and mayorships only go so far) and empowering local businesses to engage their customer base by incenting desired actions. Some have called this a basis of the modern loyalty platform.

The fact that Google is backing SCVNGR is, if nothing else, eyebrow-raising. The big G has put a heavy emphasis on local AND location. It unveiled Places, built Place Search around it, then added Tags so small businesses could use their Places pages for tailored promotions. Now there’s Product Search, which we assume Google will attempt to scale across Places to show display real-time inventory, price comparisons and more. All of these have big connections to mobile enterprise.

It also deployed its search chief, Marissa Mayer, to head up local. In a recent interview with Mediabistro, Mayer noted that deals and offers are areas that Google can increasingly leverage, positioning it to compete with Groupon (and other deals sites) after a failed acquisition bid. SCVNGR is an early mover in melding location and deals together for the mobile consumer.

Google has long been on a scavenger hunt for viable social platforms. Could SCVNGR be one of them (literally)?

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