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