Location Based Services: Business Model
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Location-based social networks allow users to share geo-tagged content and reviews. While these platforms have access to valuable user data, their business models are struggling to become profitable. Opportunities exist to generate revenue by selling anonymized user data or implementing an advertising model that features merchants based on user location, time of day, and other factors. Concluding, these networks should focus on monetizing their unique access to customer behavior data in order to solidify their business prospects.
Location Based Services: Business Model
- 1. Location Based Social Networks Digital Business Model Evangelos Tselentis about.me/evangelos.tselentis
- 2. Evolution of Location Technologies many 1000s BC 3200 BC 1000 BC 1100 AD 1960 1990s 2000s Today Smoke Celestial Homing Magnetic Satellite Automotive GPS Location Signals Navigation Pigeons Compass GPS GPS Smartphones Based Social were used Navigators were bred allowed 30 Navigation The debut of Networks not only were using to be able navigators to satellites became the iPhone brought to locate mathematics to find finally determine orbited first dedicated the most notable places, but to determine their their heading, the earth GPS device to changed to the also to their homes latitude and and were target industry, allowing exchange coordinates by from longitude. used to consumers. the developers messages. measuring the extremely triangulate to create apps angle of sun long the that use the GPS or stars. distances position of technology. away. a receiver. Source: mashable.com (http://mashable.com/2010/04/06/location-history-infographic/)
- 3. Market Overview Foursquare is the most popular Location-Based Social Network, with more than 15 million users worldwide. Over 750,000 businesses are using its Merchant Platform. Foursquare’s main competitor, Gowalla, was acquired by Facebook on December 2, 2011, and ceased operation 4 months later. Yelp is not a profitable company yet and lost $7.6 million through the first 9 months of 2011 on revenues of $59 million. Sources: foursquare.com (https://foursquare.com/about/) & Wikipedia (http://en.wikipedia.org/wiki/Gowalla)
- 4. The Business Model Canvas Location-Based Social Networks Strategic Key Activities Value Proposition Customer Customer Partners - Platform - Social Networking Relationships Segment - Digital Maps Development & Platforms - Communities - Smartphone providers (e.g. maintenance - User-generated & - Co-Creation users Google) - Acquiring partners Geo-tagged content - Businesses - Other Social - Reward (vouchers) & - Developers Networks Feedback (ratings) Channels - Marketers - Ambassadors Key Resources system - Websites - User & Venue - Mobile Apps databases - App Store - Community - Blogs - Brand - Social Media Cost Structure Revenue Streams - Employer (e.g. engineers) salaries - Partnerships with companies - IT Maintenance (e.g. servers) - Sponsors & In-App Features - Venture Capital The canvas is based on the model by Alexander Osterwalder.
- 5. Value Proposition Location-Based Social Networks are online communities that provide smartphone users with user-generated and geo-tagged (using digital maps) content, offering localised rewards (vouchers for discounts or gifts) and feedback (ratings) on the featured places and venues. Customer Segment smartphone users businesses & venue owners that will potentially introduce new vouchers into the platforms developers they will create new related software using the APIs marketers there are many marketing opportunities using Location-Based Social Networks
- 6. Channels Websites Social Media Blogs App Stores Mobile Apps Awareness Evaluation Purchase Delivery After Sales Customer Relationships The businesses use communities to build strong and as personal as possible relationships with the customers. They invite users to co-create value by asking to write recommendations that are valuable for the rest. Finally, businesses like Foursquare, help developers and marketers create relevant apps and campaigns, by providing free tutorials and online support.
- 7. Key Resources The businesses of Location-Based Social Networks are holding and managing databases, which are very valuable as they contain information, photographs and reviews for places. Key resources of these businesses are also their branding and the user communities. Key Activities The first key activity of a business like Path, is the development and the maintenance of the platform. It is crucial to listen to the feedback of the customers in order to keep improving the service. Acquiring partners is also part of the activities that the field’s businesses do. For instance, in February 2010, Foursquare entered into new commercial partnerships with Zagat, Bravo,The New York Times in order to offer tips, vouchers (specials), new in-app rewards (badges) to followers and eventually improve the service. (Wikipedia, 2012) Source:Wikipedia (http://en.wikipedia.org/wiki/Foursquare/)
- 8. Strategic Partners Location Based Social Networks make deals and use a digital mapping platform such as the Google Maps and integrate it into their app. In March of 2012, Foursquare announced they would no longer be using Google Maps, instead moving to OpenStreetMap, in order to support the startup. (Wikipedia, 2012) The businesses also partner with other social networks in order to use their API (Application Programming Interface). Finally they provide certain users with duties, enabling them to manage and monitor the data of the venues. Source:Wikipedia (http://en.wikipedia.org/wiki/Foursquare/)
- 9. Revenue Streams Right now, the Business Model does not have a certain long-term revenue stream. Having in mind that they are offered and used for free, Location Based Social Networks are struggling to be profitable. However, the models that have seemingly worked the best are: Partnerships: In 2011, Foursquare Sponsoring: In-App Features: Path partnered with American Express, Foursquare sells badge began to sell ‘Lenses’, which rewarding the members of the two designs (in-app rewards) take the photos and videos businesses with hundreds of deals. for some tens of you shoot through your Foursquare is not drawing any revenue thousands each for big phone and run them from the deals, but a partnership with a brands (e.g. RIM). This is through the equivalent of big-name partner will helps to draw the advertising model advanced Photoshop filters other, more lucrative deals in the future. that the platform offers. in real time. Merchandising: The big players in the industry have Venture Capital: Foursquare is began selling branded goods such as clothing and gadgets. mainly funded by investors. Cost Structure The costs of the businesses include the salaries of the employers (software engineers, designers, marketers etc.), the IT maintenance (servers) and the contracts (if any) with the strategic partners, such as the digital map providers.
- 10. SWOT Analysis S W Geo-Tagged Data Their databases contain valuable information. Customer Behavior Data Revenue Model T O Sell Databases to Advertisers Group Buying Sites Advertising Model Loyalty Programmes Be Acquired Governments e.g. Gowalla was acquired by Facebook e.g. Foursquare was shut down in China in 2010 New Partnerships
- 11. Customer Impact Users Businesses Developers Location-Based The right use The business model has Social Networks as of Location- created new opportunities to a business model Based Social the developers so they can has an impact on Networks by use the technology of geo- users’ venue and businesses tagging in their software. place preferences. with physical In other words locations, can Marketers these platforms are attract more Campaigns can now tag their influencing people’s customers audience easier, according to behaviours, and increase their location. Also, because of the their presence gamification opportunities rewards, the on the digital are born thanks to the vouchers and the maps and business models of Location- reviews that they search Based Social Networks (e.g. promote. engines. Foursquare).
- 12. Conclusion The Location Based Social Networks are in the early stages of existence so there are several aspects that can be improved and changed. The one and only, but very important weakness of their business model is the revenue model, which is unclear right now, when at the same time there are key players that are losing instead of making profit. Therefore, the opportunities of the business model mostly focus on getting a revenue model, that can include the selling of their valuable geo-tagged data and the design of a new advertising model that will attract brands. Concluding with a recommendation, the new advertising model can function in the same way as Google AdWords, where merchants will be able to have featured placement based on latitude and longitude, time and day.