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    The Bungee Line was an audio podcast for web developers, covering web API's, software development, and the creation of richly interactive web applications.

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Foursquare & Gowalla: Heralding The Age of Ubiquitous Loyalty?

Two habit-forming, game-like mobile apps are competing to gain user base. Their names are Foursquare and Gowalla. Each has fairly similar “game play” involving GPS-related check-ins at points-of-interest–bars, restaurants, parks, plazas and so forth, most of which were originally entered by the users. By checking into a site, friends with whom you have connected can see where you have checked in and come join you.

So, big deal, you might say, yet another “social” application. Yes, at first blush, these apps may seem trivial, even pointless. I assure you, they are not. These apps reveal a lucrative future, and one or both may strike start-up gold.

Welcome to Carmel, Mr. Eastwood
Both apps involve jacking into the brain’s psychological payout hooks: rewards, achievements, status–the very same hooks so expertly employed by computer game creators to make gameplay as addictive as possible. Level up, baby. You’re getting somewhere.

But of the two apps, Foursquare was first to establish special status for being the most frequent visitor to a site. That person becomes established as the “Mayor” for that site. The name is dumb, but the concept is golden.

A few savvy restaurants and bars picked up on this status and started offering discounts to whomever currently holds the mayorship. In other words, Foursquare has stumbled into a simple loyalty program that pits customer against customer.

Prediction: Very soon, Gowalla will introduce something similar to Foursquare’s “Mayor” status recognition (maybe with a better name).

Hey, Make Me Feel Special
Over ten years ago, savant marketer Seth Godin delivered a manifesto. Permission Marketing explained how the Internet was permanently changing how businesses market to their constituents. Highlighting the intersection of frequent flyer-style points programs, video game achievement levels, and quid pro quo relationships between customers and companies, Godin declared the imminent diminish or demise of “interruption marketing.” The future of marketing was about membership, exclusivity, recognition, and personal connection between companies and their constituents.

Huge, specialized companies like airlines can establish rewards programs or communities and recognize their MVP’s. But many businesses struggle to create similar programs that are adequate. It’s an old saw that regulars are the mainstay of restaurants and many retail business types. But how do you acquire them? How do you keep them? Points programs are tough to create, manage and run. Their implementation is out of reach. The costs are too high. The nuances require too much attention. And for consumers, how many bar-coded loyalty cards do you really want to carry?

That means that there is opportunity for innovation. Bigtime.

Prediction: Either Gowalla or Foursquare will introduce an “Owner’s Circle” concept, allowing businesses to claim their sites, and then to recognize not simply “the mayor,” but top tens or hundreds of customers with special favors for their loyalty. This will be how Foursquare/Gowalla suddenly become economically relevant.

The Last Foot
The term “last foot” comes from NAVTEQ’s Marc Naddel, who I met during my time at Alcatel-Lucent. GPS solves what NAVTEQ calls the “last mile” problem. You know someone was close. But GPS is imprecise. How do you know that someone who checked into a location didn’t simply claim they were there, when they merely walked by? Especially since GPS is pretty much useless indoors.

This is where Foursquare or Gowalla will need to go beyond GPS. Bar codes may be a solid way to get the job done. A phone can display a bar code, and many businesses have bar code readers. But Near-field Communication (NFC),  a passive RFID technology currently available in a very limited number of mobile phones, would be much  better. NFC works at a range from 4 to 10 centimeters, so it can be used to verify not just that you were close, but that you were really there.

Prediction: Loyalty programs will drive adoption of NFC technology in the United States. First in the form of too many NFC loyalty cards, but soon after, they will converge one ID card, which will swiftly get replaced by NFC in mobile phones.

Bridging the Interim Gap

USB NFC Reader

Low cost NFC readers like this one work with NFC phones and passive RFID tags.

If a company like Gowalla or Foursquare made a play into loyalty programs, they could consolidate the proliferation of numerous bar-code loyalty cards into a single Foursquare or Gowalla NFC card.  This would accommodate the interim from multiple loyalty cards to using your NFC-equipped mobile phones (which are too few today). With USB readers available for under $40, NFC is low-enough cost for even the smallest companies to adopt if they want to run a simple loyalty program. The only shortcoming right now is that no one is considering the tiniest businesses as a prime target.

Prediction: Even if it’s not NFC, it will be among the small business space–retailers and restaurants–that a democratization of loyalty programs will come about–because small companies want a solution, and won’t care so much that they don’t “own” the identities.

Conclusion
Gowalla and Foursquare are not piddly little social apps. They’re seeming simplicity belies a sophisticated understanding of software psychology, which will reveal itself rapidly–quite possibly faster than most observers can follow. At least one of these companies will prevail through loyalty–helping location-based businesses better connect to their customers. When that happens, demand will rapidly push sophistication beyond the constraints of GPS. Finally, the businesses who jump into this will prevail over those that don’t, or those that do but use it poorly (such as for spamming).

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