Feeding Frenzy

We are lucky enough to be able to peek into two tech worlds. One, is a well established, revenue producing, tactile-based yet well understood world of telecommunications, i.e. how you watch TV (set top boxes, TVs, electronic program guides, Video on Demand, PVR, etc.). The other one is the topsy-turvy exciting world of web 2.0 technology that you can’t really get a grip on but you know its there and your friend Trixie uses it, so it must be ok. These are the people that bring you Facebook, the cloud, Twitter, social networks and the like.

The telco world lives pretty much in a fact-based (although somewhat altered) world of actual subscribers, content rights and a general understanding of how to move their industry forward. Now I said “general”. They don’t succumb to hype and when they get a feature that they think will make the vertical trade press wake up and listen, they go for it with gusto – currently the red hot chili in this world is “3D”, multi-screen delivery and social TV (also the cloud). Suffice it to say, they never really cave into hype.

However, in the other world – they live in a bubble that thrives off of hype and works on the premise of “if a few are doing it, we all must be doing it”. This brings me to location based social networks.

Recently there was a great article via CNN about why location apps haven’t gone mainstream yet. When CNN writes the story, it takes on a different perspective because by the time the “hype” of the start-up technology or craze (location based social networks) comes their way, they actually decide to look into it and see what in reality is going on. The article goes on to say that only 7% of all Americans actually are AWARE of location based social networks. This would have to be 7% of all Americans (around 21 million people) But if you tune into any start up technology news source, it would read as if the whole planet is using it and its growing by leaps and bounds. So many issues affect normal users that don’t affect early adopters. Most early adopters (those with smart phones like iPhones, etc. rather than feature phones) tend to care less about privacy than those outside of that market.

VCs still are funding location based start ups and they are putting more pressure on them to monetize and gain traction with users, but how many location based social networks can NON-early adopters handle? And how many of those care more about privacy than the early adopters. If early adopters don’t care about privacy nor the fact that their sign up and usage is just paving the way for targeted advertising, what happens when it hits mainstream and they do care? How will the model be adjusted then? It could be just an issue of usage = complacency, which is normally how technology gets assimilated into our lives, we just get used to it and then we can’t part with it. Or rather, its like a drug, we crave it even though we are forfeiting some of our privacy rights. After all, no one is making you sign up for these services.

Here is our take: Location as it relates to your life where you are in the moment will be relevant to the mainstream user (not early adopter). For example, I am shopping on this street, let’s see what else is around me. Not WHO is around me, but WHAT is around me. If I see that there is something near to me, I want to get there easily, and if there is a money saving voucher or coupon, I am more incented to go there.

According to UK-based Juniper Research, mobile coupons are redeemed at a 5% to 20% rate, compared with about 1% for print coupons. They recently forecast that 1 out of every 10 mobile subscribers in developed regions around the world will use mobile coupons by 2014, generating nearly $6 billion in redemption value. The fact of the matter is that consumers like coupons/vouchers. In the fourth quarter of 2008, coupon redemption was up 7.5% in the US alone. And, according to Hitwise, internet searches for discount vouchers in the UK grew by 47.5% in 2009.

We aren’t the experts, but this sort of feels a bit like maybe how the Gold Rush felt — lots of people rushing in to get their claim, but most of the claims just pinch out. Where LB social networks go from here is up to the user, and they are a fickle lot. – JLH

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Tags: Advertising, CNN, Facebook, Social network, Telecommunication, Television, Twitter