Location is a hot topic right now. In my opinion, too hot. Right the climate resembles the dot-com boom of the late 90’s where anything with a GPS can get wads of cash because everyone wants a piece of the action. Check-in apps like Foursquare and Gowalla are just one class of larger category that look to tap into this market by offering user local or, get ready for a new buzzword, “hyper-local” interaction. But while the apps do have appeal, the are far from reaching the potential audience marketers think they are.
Location isn’t always a relevant piece of information. Take a look at Foursquare’s content. Think about the average person’s day. Unless you are currently unemployed there is generally a routine to your day. Wake up. Go to work. Come home. Do something (maybe nothing) for a few hours. Go to bed. Much of Foursquare’s appeal derives from a concept called “crowdsourcing” or the ability to gather information from a large group of people to provide content to a larger group of viewers. The idea itself is great. The numbers do not work out.
Much of the success of this model relies on the ability to generate quality content. Foursquare has a relatively small userbase to rely on – about 1.8 million users. Think about the logistics. Of those 1.8 million how many can contribute useful content? And how much of that content is localized in a very specific area outside the reach of most people? An article this past week in Ad Age, “The Consumer As Waldo: Foursquare, Twitter, and Facebook Care Where You Are; Do You (http://adage.com/mediaworks/article?article_id=144817) hits this point on the head. Not surprisingly most of the users of Foursquare and other location based tools are in urban or “near urban” locations. While tips about what’s hot in Manhattan or in Brooklyn might appeal to a small group of hipsters, there is a huge chuck of the population outside the reach of this data to really make it useful. The soccer mom, the 9-5 suburbanite, the workaholic dad, even a majority of the youth in this country who do not center around urban areas, have no need for this information.
“Hyper-local” information is too narrow to reach a broad audience. To many this does not sound like a problem. Theoretically Foursquare could continue to grow its userbase until everyone in the country used the platform and the problem would be solved. If not, its small “influencer” userbase (I hate buzzword) could post enough to move the whole country or even the world. This is optimistic but unlikely. There are many situations where location based information simply doesn’t apply. For example, in a small town. I grew up in a small town (Johnny Cougar shout out). There was one Dunkin’ Doughnuts, two pizza shops, and mall that was about 20 minutes away. Everyone hung out in pretty much the same places. Everyone knew each others’ business. In much of suburbia this is the case and for large part of the population, location is not a factor.
As a result the problem for Foursquare is how do you get people to use an app that is irrelevant to their lifestyle? This is not a rhetorical question. If Foursquare aims to become the Google of location, it needs a broader appeal than 1.8 million hipsters, it needs to make itself useful to people all over the country. Only then will it provide marketers with what they really want – a window into every consumers world. And only then will it be able to achieve the insane valuation the VC world seems to think it already has.