I am regularly frustrated by the unwarranted hype and excitement around 'location' in mobile. The frustration comes from the fact that this issue has been studied ad nauseum and yet newcomers to mobile manage to reinvent the same tired ideas and peddle them as if they would shortly change the world. They won't. I have been writing the same article about why location is not the big opportunity in mobile for more than a decade now, and its time to do that again. Its not that location cannot give 'any' gains or benefits, there are some. But how to understand location's relevance, I think I now have the right metaphor. To use location in mobile services is similar to putting speedbumps for cars on the highway.
THE NUMBERS ARE NOT THERE
Location-based services (LBS) including LBS-based ads were
launched in year 2000, so they are about 13 years of age. First LBS services included the apartment-hunter from Finland, the shopping mall LBS push ads from the USA and the LBS maps from Japan. The mobile data
based media industry was invented only two years earlier, in 1998 when the
first downloadable paid content for mobile was introduced. That was the ringing
tone in Finland by Saunalahti (later Jippii, now part of Elisa). By year 2009
(12 years from launch), basic ringing tones were worth 5 Billion dollars
according to Juniper Research. For context, the very basic ringing tones
outsold global iTunes music by approximiately 2 to 1 that year.
Now lets look at location-based services. LBS based advertising was launched in year 2000. By 2012 total global LBS advertising services were worth 685 million dollars worldwide (ie 526 million Euros according to Berg Insight). So over a similar 12 year period, one service became 5 Billion dollars in value, the other only under 700 million in value. Basic, monophonic 'ploink-ploink' ringing tones managed to grow 7 times bigger than location-based advertisements.
So, lets be clear. Location-based advertising CAN grow. It HAS grown. But the average growth rate of non-messaging based mobile data (mobile media) is about 50% at an annual growth rate for the past five years. LBS is growing at perhaps 10% or 20% per year. It is THE worst-performing sector in all of mobile. If you do ringback tones. If you do MMS. If you do social networking. If you do music downloads. If you do coupons. If you do alerts. If you do augmented reality. Anything else in mobile grows more strongly than location-based services.
RISING TIDE RAISES ALL BOATS
Mobile has set the world record for fastest-ever growth from zero income to 1 Trillion dollars in annual value, achieved in only 29 years from the first commercial cellular mobile (car-phone) call in Tokyo Japan on NTT's network in 1979 (four years before the more famous Motorola phone was sold in Chicago by Ameritech). And 29 years later, the mobile industry breached 1 Trillion dollars in annual revenues (currently 1.4 Trillion). Note first, that many big industries we know well, like music, movies, gaming, radio, television, computers and the internet - have never grown this big. So yeah, mobile is far bigger than those industries. And that no Trillion-dollar sized industry has achieved it this fast, in only 29 years. So mobile has set the record, and is currently still, the strongest-growing giant industry on the planet.
Anything you do in mobile should grow. The point is, if you are not growing at the rate of the industry, you are underperforming! And LBS is consistently, chronically, dramatically underperforming. So yes, you can give me a stat of growth or of revenues. It may seem impressive by itself. But immediately when we compare it to any other forms of mobile data services, location-based services are exposed as pathetically bad.
Take advertising. The first mobile ad was served in 2000. It was an ad running on SMS text messaging, to fund the free headline news service on SMS (launched in Finland by MTV3 the television broadcaster). How did SMS text messaging based advertising do? eMarketer reported in 2009 that SMS text messaging based mobile advertising was worth 6.4 Billion dollars. Yes, you can do ads with LBS, in 12 years reaching a paltry 685 million, or you could do 9 times better in one quarter less the time, using SMS advertising. You see what I mean. A rising tide raises every boat. Even the worst, leaking, barely afloat boat will be raised by a rising tide. But you should not aim for the worst part of this industry, aim for strongest-growing parts.
LBS SPEED BUMP
So I think I have come up with a good analogy. LBS is like a speed bump in road-construction. Most of the time if you build a highway (to allow cars to drive fast from one town to another) you don't want speed bumps on it. Like cars, with mobile, most users will want the speed, they don't want to be slowed down. That doesn't mean there is 'no use' for speed bumps. We use speed bumps for example to slow cars down near schools, or other ways to slow down traffic, if for example there is road construction on our highway. In specialized cases, like race cars, some racing circuits insert 'slow-down zones' in terms of chicanes and hairpin turns, so that the race car drivers have more challenges, more opportunities to make mistakes and for good drivers to be able to pass lesser drivers, like they often do at Formula 1 race circuits, when the organizers notice that the cars are getting too fast for that circuit.
Yes, we can find specialized uses of speed bumps, but in most cases, most cases, they are a nuisance. Similarly LBS. If you give me a case example of any mass-market success of LBS, the success can be attributed to some other aspect, not the location. So LBS coupons? Yes. The gimmick here is coupon. You'll find that mobile coupons of almost any variety are growing at break-neck speed. You don't need 'location' to do successful coupons. Or the gamification of becoming the Mayor of Starbucks, via FourSquare. This is a game. Games are huge growth - just look at Angry Birds. Games are big, even location-based games can succeed (but at lesser rates than most popular mobile games that do not use the speed bumps of location). Or take Augmented Reality. Yes, plenty of AR is done with location information, but its by no means the only way to do AR. The powerful agent here is AR, not location.
So, lets take a perfect example. Parcel delivery. UPS has already launched the service that smartphone users can re-direct their package deliveries to where they are physically, at the time of delivery. So if you are not at home, because you are stuck at the office working late, or there was an emergency and you had to take one of your children to the hospital, etc, you can have the parcel delivered to where you are, not the original delivery address that was entered when the package was sent a few days ago. Brilliant, consumer-oriented service. And I think I saw a TV ad of FedEx doing something similar when I was in Toronto just now (only caught the end of the ad). This is a 'perfect' case of LBS. Obviously, parcels are physical items, and are delivered to a physical location. Isn't this a perfect location-based service?
No! No no no no no. Location is the speed bump again. Yes, its possible that I am at the intended location when the 'querie' is made as to where to deliver the parcel. Yes, its possible to use the GPS positioning on my smartphone to tell UPS or FedEx please deliver the parcel 'here' (wherever that may be, my home, my office, any other place). But its equally possible, that I am NOT where I want the parcel delivered!!! The power of mobile is to go beyond location! I could redirect that UPS package to where I am not now - I am now at home, but heading to the hospital, so 30 minutes later, I'd prefer the parcel delivered to the lobby at the hospital, not to my home. Or better yet, mobile can transcend location. I could re-direct the parcel to my sister's house on the same street, knowing she is at home. My smartphone cannot pinpoint my sister's location based on my phone's GPS sensor. But I can easily give the direction via an SMS or map, or simple mobile web address box, and type in my sister's house number on the same street. Why would you want to limit your 'service' to an explicit location, when mobile goes beyond location, to 'movement'. I can be freed from location, with mobile. Location is an artificial fence, an artificial jail for consumers. Mobile has the power to free us from borders and limits and locations!
And again, this may seem radically 'new' and bizarre to you,
if you are relatively new to mobile, such as you discovered the mobile industry
only in the iPhone era (year 2007 or after that). We have known. J-Navi, the
location-based mapping and guidance service of J Phone in Japan (now Softbank)
reported in 2001 that 30% of their map request by mobile phone users came for
map information about some other location than where the phone was physically
at !!! Guys, I am not inventing some new radical thought here! We've known this
for more than a decade (those of us who bother to study this industry, not just
spew some baseless drivel)
USE THE 9 UNIQUE ABILITIES
This is so frustrating to me. I know exactly where it comes from. It comes from the technology-geeks who look at the GPS sensor, see the personal location on a map, here is where I am. And next they think, hey, I could serve coupons and offers to the person near the store. This is so stupid. Mobile has 9 unique abilities that offer us the chance to deliver magical experiences, something never before possible on any tech including laptops and the legacy internet. Location is not one of the 9 unique abilities of mobile. Location existed in the third mass media - cinema. We can do location-based ads shown at the cinema 'after the movie if you want to have a nice dinner, come to Tony's Italian Restaurant two blocks from this cinema'. - these kinds of ads used to be very common back in the earlier days of movie advertising. And how supremely successful are they? Yeah. As trivial to cinema advertising as any LBS ad examples are to the overall mobile ad market. If Location-based ads were so hot and successful, we'd today see massive LBS ad market powering cinema and dwarfing television ads.
So what are the 9 unique aspects of mobile? The listing is:
1 - Mobile is the first (genuinely, and measurably) personal mass media
2 - Mobile is always carried
3 - Mobile is permanently connected
(these two are not the same, you can permanently carry a device that is not always connected - your wristwatch for example, and you can have a permanently connected device that is not always carried - like your home broadband internet connection)
4 - Mobile has a built-in payment system (note this includes both making payments and mobile can be a terminal for receiving payments)
5 - Mobile measures the audience most accurately
6 - Mobile is available at the point of inspiration
7 - Mobile captures the social context of consumption (ie our viral forwarding, our likes and follows, recommendations, which does not require purchase - I can recommend something even if I didn't buy it)
8 - Mobile enables Augmented Reality
9 - Mobile offers a digital interface to the real world
These nine abilities are the way to build successful mobile services. Location is not one of the unique abilities. Location is not even a 'useful' addition for most services. In many cases where location is used, the service could be better if location was abandoned, and in most cases where location is collected, the service would not suffer in any meaningful or measurable way, if location-collection was abandoned.
Yes, there are niche uses where location is very important. The Blackberry Pocket Cop app, for example, allowing policemen to use Blackberries at work. It has all kinds of secure police uses including obviously secret messaging if the policeman is in a dangerous situation and cannot talk but needs to communicate. But yes, it also has the location-positioning of the police officer. This is very important if the police officer needs help, because he will not necessarily know the exact name of the street or cross-street or street number etc. But a location pin-pointing of his position can truly be life-saving feature, in a highly dangerous city like say Baltimore (one of the first where Pocket Cop was launched).
If you find yourself lost, then location-based accurate positioning is very useful. Yes, if you are driving your car in unfamiliar places, and find yourself lost - yes, an accurate positioning of your map is very useful. So specialized drivers - taxi drivers for example, who always drive to different places - will benefit from LBS based guidance on their car navigation systems. What about you and me? Did your office secretly shift to a new address last night? Did your children's school suddenly escape to another town? Did your home re-position to another suburb today while you were at work? No. Most of us do not find ourselves in unfamiliar places daily, weekly or even monthly. Once or twice per year we might go on vacation to an unfamiliar location. A few times we might venture to a strange part of town to some visit etc. But unless you are a jetsetting global James Bond, mostly we do not need the daily guidance in strange cities every day.
And if you set up a treasure-hunt type of game, like the
rapper Jay Z's autobiography (released as a traditional printed book) where
there were clues on every page for 300 treasure-hunt type of missions for fans
to discover out of New York City, then yes. Locatino can make a difference. But
thats about it.
SO LO NONSENSE
So we get SoLoMo, Social is great. Mobile is treat. But Location is sheer rubbish idea. If location was so powerful as a driver of commerce for example, why would retail worry about mobile. Traditional bricks-and-mortar stores are ultimately location-based. They say its all about 'location, location, location' in retail. Why would they worry about shoppers with mobile? Because mobile releases us from the binds of location! Because mobile frees us from location. Because mobile liberates us from the chains of location. Imagine being superman, able to fly, and then being chained to the earth. Thats what you get, if you force location to something that is mobile. You shackle it down like a prisoner.
Location only limits your business opportunity, it does not expand it. Take your location-based promotions. Say you are a florist and find yourself with sudden overstock of inventory of flowers. Flowers that don't last long. Someone had a wedding, but cancelled. You now have tons of flowers to sell. So you could blast the neighborhood with flower offers, get 12 roses for the price of 6, that kind of thing. And if you did use location-based ads, for example blasted to all within walking distance, no doubt you'll get some business out of it.
Here's the point. If you did the same ad - without the location-limitation - you'd get more sales. So why only limit sales to those who happen to be near you (but are not necessarily needing flowers). You annoy lots of people, to get some business. But why not rather have opt-in database for clients who shop with you? Now you can send the offer to all who already like your store, who have shopped with you before - and some happy Romeo can take his car, drive to your store, from quite far away, to buy say two dozen roses for the price of one dozen, to surprise his Juliet.
Location limits your reach. So its not just those within driving distance to your store. What about the James Bondian world traveller. He who has a nice secretary, his 'Moneypenny' back at the office. If he gets the alert while on a business trip to Germany, he could buy a bunch of roses, pay by credit card, and have them delivered as a spontaneous gift to the hard-working secretary back at the office. Location only limits your opportunity. Its like a speed bump on the highway. For most mobile services, location reduces your opportunity.
ORCA VS NARWHAL
I wrote at length about how the Romney vs Obama campaigns used data-mining. Romney did it the old-fashioned way, by zip codes, voting districts. His method was akin to location-based marketing. This voting district has a high proportion of Republican supporters, lets direct 'get-out-the-vote' type of activities like phone calls and reminders to that area.
Then there was Obama's campaign which yes, did of course know what district you were in, but its targeting was based not on location, but rather, on two scores of actual human behavior - the voter's preference ie supporter of Obama or supporter of Romney (individual voters identified and targeted this way) and get this - also each voter's likelihood to vote. So if you are a strong supporter of Obama (and have not voted yet on election day), you won't need the encouragement to vote. If you are very likely to vote that day (but have not yet voted) its no cause for concern at Obama headquarters, because they know you will (and any get-out-the-vote efforts would be wasted, because you would vote for Obama anyway). But the targets were the lukewarm supporters of Obama who were not sure if they would vote that day. Those types of voters would get calls and SMS reminders, even other Obama supporters would call them directly (as volunteers) with a nurse calling a nurse, a teacher calling a teacher, a military vet calling a military vet etc. This is the far FAR more powerful way to use (mobile) technology to achieve your ends.
Yes, Romney's campaign with location, could do something that was better than nothing. But what Obama did, with targeting, actual voter insights, and focused efforts (all to an opt-in database where voters had given permission to send messages from the campaign etc) gave Obama at least 3.5 million more votes than what he would have gotten if Team Obama had used traditional zip code/postal code/voting district type of - location-based - voter activation methods.
Mobile allows our service to be freed from tethering. Freed from the cable. Freed from the socket. Freed from proximity. Freed from short-range wireless even. Freed totally from location. Location-positioning is the very antithesis of what mobile can do. Its like building an airplane, then cutting off its wings. I am reminded of Gary Schwartz's excellent observation in his new book about use of mobile tech in retail: Fast Shopper, Slow Store. Gary explains why tablets are only ultra-portable digital devices, not as powerful as mobile phones and smartphones. Because mobile phones and smartphones can be operated single-handedly,.while doing other tasks. Tablets, on the other hand, in Gary's words 'immobilize consumers'. The tablet is very portable yes. But the moment you pull it out of your bag, and start to use the tablet, it will immobilize you. You want to be seated, you need to use both hands. Its very difficult to use a tablet while walking, and almost impossible to use it single handed. Most of the time with tablets, once we start to use them, we stop. We stop moving. We become immobilized. A tablet to mobility is like Kryptonite to Superman. The superpowers were there, but are now gone.
So, when you see millions (and even Billions) headed to some new start-ups and ventures that seek to revolutionize mobile through location, be warned. Tomi told you so, Tomi said years ago, that is not going to be big business. Be very careful and monitor the space.
If you see forecasts of huge growth projected for location, don't fall for the same trick! We had the exact same forecasts years and years ago. It never came. Don't be fooled by some clueless analyst promising a massive future. Look at his starting point data. What does the analyst say location is worth today. How many users today. How much revenue today. It is pitifully little. Then wait and see. If I am wrong, and suddenly after more than a decade of failure, location somehow does break free, then we must see real user and revenue numbers that are big. Revenues in the many Billions. Else, be smart. If the numbers are not there, learn the lesson, and put your money, your time, your project resources into any other part of mobile, where it will give you better returns than it would in location.
And please please please do not write that 'now' is somehow different. No, GPS on iPhones today in America is no different from GPS on early KDDI phones in Japan in 2002. Yes, Japan had GPS based location services a decade ago. Don't say maps make a difference or 3D rendering of cities. Japan had all that by the middle of the last decade, yet KDDI itself - who essentially invented and launched almost all modern LBS concepts from LBS-based ads to LBS-based treasure hunts to LBS-based maps - say that of their whole service portfolio, LBS is the worst-performing part.
Context is good. Context is useful. Context can include elements like time, and the users 'status' of being at work or at home. Context can have dozens of elements that can help us identify and target services to help our consumers. And within the area of Context, location can be used as one element (distinct from say, proximity). Location can be used as an input to derive other benefits such as movement. We can measure speeds of traffic based on the measured positions of individual phones on a highway, and measured over a few minutes of time. Across many phones (as those inside cars moving on that road) we can calculate very accurately the average speeds sustained on that road, to determine for example if there is road congestion this morning, etc. Context-based services I can see becoming big over time. And location may be one of dozens of inputs. But don't plan on launching location-based services for the masses. They never turn out big.