August 2010

By Susan Etlinger and Charlene Li

(Note: Susan Etlinger is my colleague at Altimeter Group. She wrote this post, I edited, and it’s cross posted on her site as well as on Altimeter’s blog).

Today, Facebook confirmed that it is adding location awareness to the Facebook experience. Facebook Places enables members to share where they are and who they are with, find people near them and discover new places of interest.  So if you travel to Chicago and are craving deep-dish pizza, you can see where your friends have “checked in” and what they thought about the experience.

Facebook Places launches with an iPhone app, the addition of a location feature to posts, a mobile site, an API for third-party developers and, most intriguing, the addition of “Place Pages,” which will appear once the first Facebook member has checked in to that location. Initial integration partners include Gowalla, Foursquare, Yelp and MyTown by Booyah.

Until now, Facebook knew who you were, what you are doing and when you did it. Now they add an even richer dimension–where you are–that completes the picture.

In our opinion, the three game-changing elements of “Places” are:

1. A new dimension to the online experience. By introducing location awareness to Facebook, the company has added a critical layer to the online experience–who, what, when, and now where you and your friends are. In doing so, it has brought the online experience one step closer to the way people interact in the real world.
2. Scale. By adding location to its massive user base (500 million strong and counting), Facebook has thrust location awareness squarely into the mainstream.
3. A user-curated “Place Page.” Once a user has checked in to a particular venue, Facebook will populate a Place Page that includes the activity stream of everyone who’s visited. This is a window not only into user opinion, but actual behavior. It’s similar to walking by a busy restaurant; visitors immediately see which locations are popular, and which are not.

Given the massive number of Facebook members, privacy is clearly a tremendous issue, and Facebook needed to be extremely careful to approach this challenge with their members in mind.

In our opinion, they did their homework this time; Places is a completely opt-in service, with context-aware alerts embedded into the iPhone app to help users understand the privacy implications of checking into locations. There are added protections for minors (who, for example, can only make their location available to friends).

As with any feature of this magnitude, problems will inevitably surface–but we see this as a solid first step.

How the Facebook Experience Will Change

For Consumers

• Value: connecting friends to places. Location awareness adds a new dimension of value to the Facebook experience.  For the first time, users will be able to see who among their friends has checked into or commented on a business or a place. Someone looking for a new dishwasher, a great bar or the best shoe repair shop in Chelsea may be skeptical of the opinions of 40 strangers, but they will care deeply what their friends have to say.   This makes Facebook far more useful to its members.
• Discovery and decision-making. Given the trust that people invest in their friends’ opinions, it’s incredibly valuable to know what they think about a new restaurant, store or salon. In the real world, it’s not always practical or possible to reach them, but Places provides a new activity stream that includes friends’ history and helps members make decisions. Which restaurants do my friends go to? What’s popular? This element of personal history has been missing from other location-based services like Foursquare, Gowalla and Yelp.

For Businesses

• Context and targeting. The golden ticket is the ability for businesses to see the local context of consumer behavior, which enables them to build far more relevant offers and services. Facebook has built on the early success of services like Foursquare with its Place Pages. While they are not focused on monetizing this immediately with ads, we anticipate that this will happen soon.
• Patterns and trends. When businesses are able to aggregate location data, patterns and trends will appear—what do people tend to do in one location versus another?  This is a treasure-trove of potential insights for business.
• CRM potential. The implication for CRM–not to mention social CRM–is enormous; location awareness enables business to understand exactly how their community interacts with them, not simply whether they “like” them.  The emphasis is on action rather than attitude. Overnight, this enables businesses to build relationships with people they could not reach before.
• Place Pages. Place Pages will includes an activity stream made up of everyone who’s visited. Businesses will need to learn how to use Place Pages and how to integrate them into their social strategies.

For Foursquare, Gowalla and other location-based services

By adding location to its massive user base (500 million strong and counting), Facebook has raised the bar for location-based companies like Gowalla, Foursquare, Yelp and others, and effectively disintermediated companies like Loopt who were not included in the initial launch list.  Location is now a feature—not a service, and these companies will need to differentiate quickly based on value to remain relevant.

Given this shift, consolidation is inevitable. A year from now, expect that many of these services will be acquired by the likes of MySpace and others. For more thoughts on the implications to location-based services, see my colleague Michael Gartenberg’s take here.

Recommendations

For Consumers

Expect it to take some time for Facebook members to understand the implications of location, and to decide how they will use it. Given the privacy concerns that location awareness naturally raises, Facebook has engineered their privacy settings to favor more, rather than less control.

Parents of teenagers should take the time to educate themselves about the privacy controls for minors, and talk to their children about the implications of sharing their location online.

At the same time, adults should think about their own disclosure strategy and preferences. When you’re traveling for business, do you really want to broadcast that you’re in town but don’t have time to see all your friends?

Ultimately, members will need to experience the process of checking in for themselves to fully understand how they want to use this service, and what benefits and drawbacks it raises for them.

For Businesses

First, businesses should claim their Place Pages immediately. Facebook has said they will have a way to claim their Place Page and integrate it with an existing Facebook business page.  Second, businesses should encourage their patrons, employees and others to check in and let their friends know they’re there. Whether you’re an electronics retailer, a supermarket or a hair salon, start to nurture your Place Page activity streams now.

Final Note

For Facebook, this is a bold move, but an inevitable one.  Its sheer size and scale guarantees widespread repercussions for some time to come. Businesses will work to incorporate location into their social web strategies, while consumers will take some time to acclimate to this new experience–as they have with other social media.

Additional relevant posts:

- Facebook Checks In to the World of Locations – All Things Digital
- ACLU of Northern California’s take on privacy implications
- How rival check-in services plan to use Facebook Places (from TechCrunch)
- Facebook Wants Advertisers To Help Build Out Its Directory of Places (from TechCrunch)