The way venture capitalists see it, location-based Web service is one of the new-new things. Big name companies like Google, Shopkick and Facebook have been putting money into these services. And venture companies have invested at least $115 million into this type of business this year. The market potential is intriguing. Retailers hope to boost business by getting coupons or other specials into the hands of consumers who might be right outside the front door. But this market has been slow to develop.
According to the Pew Research Center’s Internet & American Life, about 4% of U.S. consumers use these services. On a daily basis, the number of users is even smaller, about 1%. And the user base has some distinctive demographic characteristics. For example, the use rate for men is double that for women. About 6% of men say they use a location-sharing service while only 3% of women do. Not surprisingly, younger consumers display the highest use rate at 8%. And Hispanics show the highest use rate (10%) of any ethnic group.
Industry operators understand that one limitation to the growth of this technology centers on privacy. Many consumers do not want to broadcast their exact location for safety or other reasons.
And while the market appears to be slow growing, some analysts expect that Facebook’s entry could be a game changer. According to Sam Altman, chief executive of Loopt, “Clearly location is not yet mainstream — it’s still a younger-demographic phenomenon — but if anyone can change it, Facebook will.”
For now, marketers continue to experiment with location-based marketing which is a subset of mobile marketing. ABI Research believes marketers will spend up to $1.8 billion in this sector by 2015. The challenge will be finding ways to get more consumers to buy into the concept that privacy is less important than accessing the next great deal at the store.[Sources: Miller, Claire and Wortham, Jenna. Technology Aside, Most People Still Decline to be Located. New York Times. 29 Aug. 2010. Web. 18 Nov. 2010; Zickuhr, Kathryn and Smith, Aaron. 4% of online American use location-based services. Pew Research Center’s Internet & American Life Project. 2010. Web. 18 Nov. 2010; Location-Based Advertising to Reach. Wirelessandmobilenews.com. 3 Sep. 2010. Web. 11 Nov. 2010]