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A brief analysis of the location based social networks (2011).
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Location Based Social NetworksDigital Business Model
Evangelos Tselentisabout.me/evangelos.tselentis
Smoke Signals
were used not only to locate
places, but also to
exchange messages.
Celestial Navigation
Navigators were using
mathematics to determine
their coordinates by measuring the angle of sun
or stars.
Homing Pigeonswere bred to be able
to find their
homes from
extremely long
distances away.
Magnetic Compass
allowed navigators to
finally determine their heading, latitude and longitude.
Satellite GPS30
satellites orbited
the earth and were used to
triangulate the
position of a receiver.
Automotive GPS
Navigationbecame the
first dedicated GPS device to
target consumers.
GPS Smartphones
The debut of iPhone brought
the most notable changed to the
industry, allowing the developers to create apps
that use the GPS technology.
Location Based Social
Networks
Evolution of Location Technologies
many 1000s BC 3200 BC 1000 BC 1100 AD 1960 1990s 2000s Today
Source: mashable.com (http://mashable.com/2010/04/06/location-history-infographic/)
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)
The Business Model Canvas
Strategic Partners- Digital Maps providers (e.g. Google)- Other Social Networks- Ambassadors
Key Activities- Platform Development & maintenance- Acquiring partners
Key Resources- User & Venue databases- Community- Brand
Value Proposition- Social Networking Platforms - User-generated & Geo-tagged content - Reward (vouchers) & Feedback (ratings) system
Customer Relationships- Communities- Co-Creation
Channels- Websites- Mobile Apps- App Store- Blogs- Social Media
Customer Segment- Smartphone users- Businesses- Developers- Marketers
Cost Structure- Employer (e.g. engineers) salaries- IT Maintenance (e.g. servers)
Revenue Streams- Partnerships with companies- Sponsors & In-App Features- Venture Capital
The canvas is based on the model by Alexander Osterwalder.
Location-Based Social Networks
Value PropositionLocation-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 Segmentsmartphone users
businesses & venue owners that will potentially introduce new vouchers into the platforms
developersthey will create new related software using the APIs
marketersthere are many marketing opportunities using Location-Based Social Networks
Channels
Customer RelationshipsThe 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.
Websites Social Media Blogs App Stores Mobile Apps
Awareness
Evaluation
Purchase
Delivery
After Sales
Key ActivitiesThe 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/)
Key ResourcesThe 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.
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/)
Revenue StreamsRight 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:
Cost StructureThe 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.
Partnerships: In 2011, Foursquare partnered with American Express, rewarding the members of the two businesses with hundreds of deals. Foursquare is not drawing any revenue from the deals, but a partnership with a big-name partner will helps to draw other, more lucrative deals in the future.
Sponsoring: Foursquare sells badge designs (in-app rewards) for some tens of thousands each for big brands (e.g. RIM). This is the advertising model that the platform offers.
In-App Features: Path began to sell ‘Lenses’, which take the photos and videos you shoot through your phone and run them through the equivalent of advanced Photoshop filters in real time.
Merchandising: The big players in the industry have began selling branded goods such as clothing and gadgets.
Venture Capital: Foursquare is mainly funded by investors.
Revenue Model
Group Buying Sites
Loyalty Programmes
Governmentse.g. Foursquare was shut down in China in 2010
Sell Databases to Advertisers
Advertising Model
Be Acquired e.g. Gowalla was acquired by Facebook
New Partnerships
Geo-Tagged DataTheir databases contain valuable information.
Customer Behavior Data
SWOT Analysis
S WOT
Customer Impact
UsersLocation-Based Social Networks as a business model has an impact on users’ venue and place preferences. In other words these platforms are influencing people’s behaviours, because of the rewards, the vouchers and the reviews that they promote.
BusinessesThe right use of Location-Based Social Networks by businesses with physical locations, can attract more customers and increase their presence on the digital maps and search engines.
DevelopersThe business model has created new opportunities to the developers so they can use the technology of geo-tagging in their software.
MarketersCampaigns can now tag their audience easier, according to their location. Also, gamification opportunities are born thanks to the business models of Location-Based Social Networks (e.g. Foursquare).
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.
Conclusion
Recommended