Tuesday, July 5, 2011

Location Based Revenue to Reach $10 Billion by 2016

Strategy Analytics, a research firm that I've referenced on a few occasions, is saying that location-based services, like Foursquare, will likely reach $10 billion by 2016 - with half of that coming from advertising.  In addition to that, GigaOM mentioned that privacy issues regarding location tracking will remain a big concern.  I think it's a valid point but I also think $10 billion is a small pond given the number of players that are involved.

I've already mentioned Foursquare, but others like Facebook and Google are also angling for a piece of this market.  And there are probably half a dozen other services that I can think of right of the top of my head that will vie for some of the mobile consumers' attention.  

My concern is the privacy of consumers like myself.  As a Foursquare user, I have yet to see any returns and yet, I've been offering Foursquare information regarding some of my habits.  I am sure with other users, they likely have more to gain from their check-in experiences than I do.  Having said that, storing of GPS information on mobile devices as well as the ease with which these companies can track users can be quite daunting and I reckon most users have not really thought things through.

It will be the comfortable level, as the post mentioned, that will ultimately decide if this market takes off.  And a lot is at stake.  Revenues from coupons and advertising is only the beginning.  And there are probably other innovative means to accrue profit that we have not yet seen.  And consumer and privacy issues aside, the market would need to be much bigger than just $10 billion five years from now.  Why is that?  Interests from the above mentioned companies are going to be needed.  Research and innovative energy must also be brought to focus on this market.  

With a sizable pie, the location based market could just something a few hard-core users dwell in.  

I have a few predictions I like to share.  In a few years, we will see a few of these companies consolidate or snatched off the market.  While I am not sure that Google and Facebook, with a larger user base would be interested but companies like Yahoo, Microsoft, or even wireless carriers could see value in a large installed base.  I have seen some level of loyalty among the location-based market.  Such loyalty could be of some value.  

Not to be outdone, Pyramid Research, via Marketing Mag, reckons the $10 billion target will be reached a year earlier, 2015.  PR mentioned Yelp as a candidate to benefit from this.  

Only time will tell if either of these researches are accurate.  Personally, I hope the privacy issue will be resolved first before the market takes off.  There is pending legislation in Congress that will limit the use of location based data.  The Center for Democracy and Technology has a very good article on this issue pending.  Honestly, would you really trust Facebook to know your every step and selling that information to the highest bidder?

Source:  GigaOM, Marketing Mag.

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