Location-based services are becoming big business

Facebook’s recent launch of location-based services in the UK highlights the potential growth of consumers using GPS-enabled mobile devices to ‘check-in’ in everyday life in return for rewards and discounts.

  • Foursquare, a pioneer in location-based social networking, has seen tremendous growth in recent times, signing an additional 1 million users in less than 20 days in early 2011.
  • Facebook leverages existing user base and enters location-based services in the UK earlier this year.
  • Increased use of location-based services by consumers expected as more people use smartphones.

Tremendous growth of Foursquare

Foursquare was one of the first location-based services that has attracted success globally. Using GPS-enabled mobile devices, users can ‘check-in’ at a variety of locations, such as hotels, pubs, and restaurants. In return for ‘check-ins,’ users accumulate points and badges as rewards, as well as discovering new places, local tips, recommendations from friends, and discounts for local venues.

Foursquare launched in March 2009, and it took just over one year to reach 1 million users. Growth continues to accelerate, and the company has recently registered its 7 millionth user in February 2011.

Figure 1: Reported number of registered users on Foursquare since launch, March 2009 – February 2011

Source: Press reports/Mintel

Facebook enters ‘Location War’ in UK

At the end of January this year, Facebook launched Facebook Places in the UK to compete in the location-based social networking business. Facebook enticed its existing users to ‘check-in’ in exchange for promotional offers from companies such as Starbucks, Debenhams and Mazda. While the service offering by Facebook is basic compared with more established players such as Foursquare and Gowalla, Facebook is leveraging its existing user base, estimated at 30 million active users in the UK alone (as at March 2011), to encourage the adoption of location-based services.

Device and service integration

In February 2011, Facebook announced partnerships with handset makers INQ and HTC to produce mobile phones with built-in Facebook functions, such as a dedicated Facebook button on the handset. Meanwhile, Nokia has added Foursquare Check-Ins on Ovi Maps, the free mapping and navigation product available to all Nokia smartphone users.

These examples illustrate how partnerships and integration will allow consumers to quickly access location-based services through devices and platforms they are already familiar with.

Growing opportunity

Mintel’s recent report Mobile Phones and Network Providers – January 2011 found that less than 5% of consumers access GPS functionality on their mobile phone every day, suggesting a low adoption level in location-based services currently. However, the emergence of multi-functional smartphones at affordable prices through monthly contracts or bundled packages will give wider access to devices capable of location-based services to more consumers, especially younger users who are more likely to adopt this technology.

Figure 2: Ownership and usage of mobile phone GPS, 2008-2010

Source: GB TGI, Kantar Media UK Ltd Q1 2009-11 (Oct-Sep)/Mintel

Ownership of mobile phones with GPS capability has more than doubled since 2008, and we expect this trend to continue. Usage of GPS functionality on a mobile phone has also grown at a marginally faster rate, indicating consumers are becoming more aware of and taking advantage of this feature on their devices. There is, however, a widening gap between mobile phone users who own a GPS-enabled device and those who actually utilise this capability, which points to an opportunity by location-based service providers to educate and incentivise users in adopting this new technology. With further integration of location-based social networking into existing products and devices that consumers are already familiar with, we anticipate location-based services in the UK to thrive.

What it means

  • Use of location-based social networking will grow as more consumers have access to GPS-enabled mobile devices and appreciate the benefits of ‘check-ins.’
  • Established players in location-based services like Foursquare have seen tremendous growth recently but will face challenges from established social media companies in the ‘Location War’.
  • Consumers can be incentivised to learn about and adopt location-based services with enticements such as targeted promotional offers based on demographics and recent search activities in addition to offering location-sensitive deals.

Source – Mintel, April 2011

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