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Phillipe Petit was the first man to walk on a tight rope between the twin towers of the World Trade Center. His journey is documented in a wonderful film, Man on Wire. It’s the story of many different tensions: the one inside of him driving to attempt the feat, the one between him and his friends as he achieves his dream and rebellion against authority.

Like Petit, businesses need tension in order to succeed. There’s a tension in location based services, not as tangible as a high rope, but one equally important to the success of the endeavor. That tension lies between incentivizing a user to become a regular at a particular place or to explore new places.

Building usage in an LBS

Convincing a user to try a LBS (location based service) isn’t hard as most people are naturally curious. But, building habit is key to engender a vibrant community. From an economic point of view, the user must get some greater value than the cost of maintaining a presence on the service. An LBS can do this in three ways:

Gaming dynamics: Gaming dynamics tend to be the first implemented by LBS because they’re free and effective at the outset of a community. Over time, communities are filled with those incentivized by points who, if things work out, will bring others motivated by other reasons. These games are the very early adopters.

Deciding between building games for regulars or adventurers is key, particularly at the outset. Since the goal is to drive high frequency usage of these services, it’s a safe move to target regulars with some limited benefits for adventurers.

Social incentives: If the initial kindling of gaming dynamics work with regulars, then the campfire has started but it still small. By having a community, users not incentivized by points can benefit from one alternative: activity. Much like posting photos and waiting for comments and reactions, activity can be addictive. Additionally, it has huge economies of scale as most communities have 1% of the population creating the majority of the content, 9% participating in some way and 90% watching voyeuristically.

There are several approaches in the market place including becoming the mayor of a point of interest to receive discounts to quests and badges for the adventurous and serendipitous. But again, if the goal is to build activity, then incentives should focus on the regulars. 

Financial incentives: The fuel on the fire, financial incentives, if properly implemented can drive mass audiences the way sales and discounting has in the offline world with shoppers lining up at 5am on Black Friday at Walmart.

At the moment community has gained enough scale to command financial incentives from merchants, this is the right time to change focus and look to serve adventurers. Adventurers will begin to build in serendipity into the community and breadth into the activity highlighting new locations and undiscovered haunts. And this is when the right tension is set for the business

Once there is a community of regulars receiving exposure from adventurers, the fire is burning brightly. Compare this tension to Google search and paid results. Once Google had millions of users regularly querying for frequently visited sites, advertisers could bid to highlight other sites of potential interest. Leveraging this regular vs adventurer tension drives Google’s revenues. The same is true for an LBS.

As a result, I believe strongly that LBS should focus first on loyalty programs as monetization and usage building mechanisms. Eventually, there will be tension; and tension drives revenue.

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