A brief analysis of the location based social networks (2011).

1. Location Based Social Networks
Digital Business Model
Evangelos Tselentis
about.me/evangelos.tselentis

2. Evolution of Location Technologies
many 1000s BC 3200 BC 1000 BC 1100 AD 1960 1990s 2000s Today
Smoke Celestial Homing Magnetic Satellite Automotive GPS Location
Signals Navigation Pigeons Compass GPS GPS Smartphones Based Social
were used Navigators were bred allowed 30 Navigation The debut of Networks
not only were using to be able navigators to satellites became the iPhone brought
to locate mathematics to find finally determine orbited first dedicated the most notable
places, but to determine their their heading, the earth GPS device to changed to the
also to their homes latitude and and were target industry, allowing
exchange coordinates by from longitude. used to consumers. the developers
messages. measuring the extremely triangulate to create apps
angle of sun long the that use the GPS
or stars. distances position of technology.
away. a receiver.
Source: mashable.com (http://mashable.com/2010/04/06/location-history-infographic/)

3. 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)

4. The Business Model Canvas
Location-Based Social Networks
Strategic Key Activities Value Proposition Customer Customer
Partners - Platform - Social Networking Relationships Segment
- Digital Maps Development & Platforms - Communities - Smartphone
providers (e.g. maintenance - User-generated & - Co-Creation users
Google) - Acquiring partners Geo-tagged content - Businesses
- Other Social - Reward (vouchers) & - Developers
Networks Feedback (ratings) Channels
- Marketers
- Ambassadors Key Resources system - Websites
- User & Venue - Mobile Apps
databases - App Store
- Community - Blogs
- Brand - Social Media
Cost Structure Revenue Streams
- Employer (e.g. engineers) salaries - Partnerships with companies
- IT Maintenance (e.g. servers) - Sponsors & In-App Features
- Venture Capital
The canvas is based on the model by Alexander Osterwalder.

5. Value Proposition
Location-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 Segment
smartphone users
businesses & venue owners
that will potentially introduce new vouchers into the platforms
developers
they will create new related software using the APIs
marketers
there are many marketing opportunities using Location-Based Social Networks

6. Channels
Websites Social Media Blogs App Stores Mobile Apps
Awareness
Evaluation
Purchase
Delivery
After Sales
Customer Relationships
The 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.

7. Key Resources
The 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.
Key Activities
The 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/)

8. 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/)

9. Revenue Streams
Right 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:
Partnerships: In 2011, Foursquare Sponsoring: In-App Features: Path
partnered with American Express, Foursquare sells badge began to sell ‘Lenses’, which
rewarding the members of the two designs (in-app rewards) take the photos and videos
businesses with hundreds of deals. for some tens of you shoot through your
Foursquare is not drawing any revenue thousands each for big phone and run them
from the deals, but a partnership with a brands (e.g. RIM). This is through the equivalent of
big-name partner will helps to draw the advertising model advanced Photoshop filters
other, more lucrative deals in the future. that the platform offers. in real time.
Merchandising: The big players in the industry have Venture Capital: Foursquare is
began selling branded goods such as clothing and gadgets. mainly funded by investors.
Cost Structure
The 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.

10. SWOT Analysis
S W
Geo-Tagged Data
Their databases contain valuable information.
Customer Behavior Data
Revenue Model
T O
Sell Databases to Advertisers
Group Buying Sites
Advertising Model
Loyalty Programmes
Be Acquired
Governments e.g. Gowalla was acquired by Facebook
e.g. Foursquare was shut down in China in 2010
New Partnerships

11. Customer Impact
Users Businesses Developers
Location-Based The right use The business model has
Social Networks as of Location- created new opportunities to
a business model Based Social the developers so they can
has an impact on Networks by use the technology of geo-
users’ venue and businesses tagging in their software.
place preferences. with physical
In other words locations, can Marketers
these platforms are attract more Campaigns can now tag their
influencing people’s customers audience easier, according to
behaviours, and increase their location. Also,
because of the their presence gamification opportunities
rewards, the on the digital are born thanks to the
vouchers and the maps and business models of Location-
reviews that they search Based Social Networks (e.g.
promote. engines. Foursquare).

12. Conclusion
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.