'Pataphysical science in the home

I'm the mayor of this blog. So? Now what?

Location, location, location

If you haven’t heard about Foursquare, Gowalla, Latitude, Scvngr, MyTown, Loopt, Geodelic, Brightkite, Where, Check.in, and could care less about other location based services, just enjoy the Pongo illustration and don’t bother reading any further! (I want to mention Layar here, even if it is not strictly in this category of applications. If you haven’t seen this yet, you really should check it out. It’s described as an augmented reality browser. Using the geo-location, compass and camera functions of your mobile device, it displays information about the stuff around you as you aim your camera from place to place.)

This guy with the crown has checked in here lots of times, using an application on his mobile phone. In order to keep him coming back here, I let him earn a crown and the title of mayor. That may be enough for the honeymoon period, but I’ll probably need to start offering him free drinks as long as he keeps coming back and keeps on broadcasting his presence to his friends.

What is the business model that will emerge from this scenario? I’m just going to wait and see, quite a few come to mind…

Hyperlocal, not hype-local

But there are three startups that are coming at the issue from a different perspective and I wanted to mention them here, Lasso, PaperG and BlockChalk. They all are focusing on the hyperlocal experience, the places where we spend most of our time and, not incidentally, most of our money.

Lasso and PaperG are quite interesting from a business point of view because they are sitting at the crossroads of a very real problem — local newspaper advertising revenues are shrinking, yet local media still have a sales force to sell advertising (and other promotional services) to small local businesses that a digital pure-play would have a hard time reaching due to the high overhead of selling to small advertisers.

First up, Lasso, who are building a kind of self-help hyperlocal ad server with a dash of Google AdWords:

Lasso is a platform positioned to enable local media companies to reach small and medium-sized businesses with attractive new offerings: integration with social networks like Facebook and Twitter, and distribution through customizable widgets throughout a media company’s website…

“We [Lasso] have combined internet marketing expertise plus newspaper DNA. An effective product has to have the right metrics, and in terms of landing it appropriately, it has to be done in terms that newspaper ad sales people understand,” Treadaway said. “If people don’t feel like they’re getting value, the churn will be very high. The product demos very well, looks very slick by newspaper standards. Most of the response has been: ‘when will you come train our people.’ (from LostRemote)

PaperG takes a different approach:

PaperG is testing a software system called PlaceLocal that automatically generates ads for local businesses by crawling the Web. The system scrapes the Web for basic information about a business such as its address, phone number, and opening hours. Even if the business doesn’t have its own Web page, data can often be pulled from third-party services such as Yelp or Google Maps. The system then uses semantic analysis to find and extract photos and positive reviews, and it builds an ad automatically using Adobe’s Flash software. The business owner or newspaper ad sales representative can customize the ad, so if PlaceLocal didn’t choose the best photo or review, it’s easy to select another.

Lee expects PlaceLocal to help representatives sell ads in the first place. “The sales rep can have a beautiful ad designed for every lead sheet,” Lee says, “which makes a real difference in the conversation.” (from MIT’s Technology Review) (The NYT writes about it here.)

BlockChalk is taking a much different approach, the social media classic — build traffic and figure out how to make money once they get traction. The only reason I’m putting them in this post is because of their unique usage model. You don’t have to sign up to the service to use it, and you remain anonymous until such time as you decide to share your identity on a case-by-case basis with other users of the service.

Since anonymity opens the service up to spam and all sorts of abuses, and denies the service a registered user base and profiled social graph, I am really interested to see what kinds of checks and balances they build into the system. But the really cool part to watch will be to see what kind of behavior users will adapt on their own in this wild west of a service. What will be the equivalent of the Twitter hashtag, what cultural norms will people develop and adopt?

That is if it lasts long enough for a culture to develop…

The Cool Tool, aka hammerhead

Is it a good strategy to base your web business idea on a cool tool? Well, if you’re the talented Loren Brichter, the answer is probably YEAH. He created and distributed the premier Twitter client for the iPhone, an application that cost me €2.39 on iTunes. His 1-man shop made a good income from sales and then was acquired by Twitter and he was hired on, in a presumably pretty sweet deal.

Yet the percentage of developers who are able to make a living from the sales of client applications is rather small and once a few big applications gain traction, it’s going to be very difficult to compete. And let’s not forget that in most segments there are a plethora of good enough clients being distributed for free.

It makes a lot more sense to think of your cool tool as facilitator, one that does not call attention to itself, but that enables, simplifies or reveals an experience in a way that is better than what currently exists. The business opportunity will be found in the value that you can create in the experience, not necessarily in the tool itself.

As an example, this is what Foursquare, Facebook and the other slew of mobile location-centric applications are all about. The holy grail here is to help connect local businesses with existing customers and for them to be introduced to potential new customers. Putting it together correctly, businesses will be happy to pay for more, and more frequent, customers while users of your cool tool enjoy the benefits of social discovery, special deals and the nearly magical power to know the best nearby places even if you’ve never been there before.

I was reading this article Your Morning Commute is Unique: On the Anonymity of Home/Work Location Pairs, by Arvind Narayanan, and it got me thinking. (Thanks to @jamespage for pointing to this article.)

He starts out by citing this study by two PARC researchers and concluding that “for the average person, knowing their approximate home and work locations — to a block level — identifies them uniquely.” Isn’t it amazing how fast anonymity breaks down?

Now just having those two data points alone would leave your anonymity intact, but the potential danger comes in if this information is able to be shared by or among mobile connectivity providers, credit card companies, government agencies, advertisers and social networking services.

It could be that my paranoia level was increased after having seen this article in New York Times describing the amount of data mining and interpretation currently being used by the credit card industry.

The exploration into cardholders’ minds hit a breakthrough in 2002, when J. P. Martin, a math-loving executive at Canadian Tire, decided to analyze almost every piece of information his company had collected from credit-card transactions the previous year… Martin’s measurements were so precise that he could tell you the “riskiest” drinking establishment in Canada — Sharx Pool Bar in Montreal, where 47 percent of the patrons who used their Canadian Tire card missed four payments over 12 months. He could also tell you the “safest” products — premium birdseed and a device called a “snow roof rake” that homeowners use to remove high-up snowdrifts so they don’t fall on pedestrians.

By the time he publicized his findings, a small industry of math fanatics — many of them former credit-card executives — had started consulting for the major banks that issued cards, and they began using Martin’s findings and other research to build psychological profiles.

So when people start to use their cell phones to pay for merchandise, location information will be added to the database, too. Conspiracy theorists, novelists and filmmakers, rejoice! There are some great storylines to be made from this stuff. But, seriously, should we be worried about these developments?

Late breaking: With respect to U.S. constitutional law, the New York State Supreme Court ruled that tracking a suspect via the global positioning system without a warrant violated his right to privacy. A stalker could be uniquely linked to the victim by GPS tracking, for instance. Hat tip to @stoweboyd for the lead. [Added 15 May 12:30 CET]