August 19, 2010, 2:13 PM

Facebook enters geolocation services with new Places feature

Facebook hopes to crack the location market with its new offering called Places.

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A recent Forrester Research Inc. study said that the number of consumers using geolocation apps such as foursquare, which rewards shoppers with points or offers when they check in at a location, is still small—only a few million monthly—and it recommended marketers wait to advertise on such apps until more consumers use them.

Many more consumers may soon be using the technology. Social network behemoth Facebook is hoping to crack the location market with its new offering called Places, a geolocation feature that enables Facebook’s 150 million mobile users to broadcast their location through their Facebook status windows via a smartphone’s integrated GPS technology to friends as well as other Places users nearby. Not only is 150 million a big number, Facebook mobile users are twice more active on the social network than non-mobile users, Facebook says.

Facebook aims to protect the privacy of its members—and to head off more of the kind of criticism it’s faced over privacy questions in the past—by requiring members to opt in to participate in Places, thus agreeing to disclose where they are. Places users also are prompted with permission requests when other users seeks to utilize their location information. The location of Facebook members not using Places is not broadcast, nor can it be obtained without enrolling in Places.

The goal for users is to let friends know what they’re up to, such as shopping at a local store, and possibly meet up if a friend is nearby. The goal for Facebook is to sell mobile ads to merchants that would drive foot traffic into stores, which would be the goal for any retailer with bricks-and-mortar shops.

“The success or failure of these services depends on what the real benefit to users ultimately is,” says Brad Wolansky, CEO of multichannel retailer The Golf Warehouse, which is active in the mobile space with an iPhone app. “I’ve used foursquare and haven’t yet seen much benefit that’s meaningful to me. But with a larger group of friends using Places, that might change. And as far as advertising, we’ve dabbled in Facebook, but frankly, our experience hasn’t been real enticing for a retailer—yet. When their advertising model, overall, becomes more usable and productive, I’m sure more and more features like Places will help the productivity of such advertising.”

Other retailers with bricks-and-mortar locations see new opportunities based on services and events offered in their stores.

“We currently advertise on Facebook and will take a measured approach to how Places can benefit our customers,” says Larry Promisel, vice president of e-commerce at Barneys New York, which recently launched a mobile commerce site. “There are applications we envision with the services—such as our restaurants, personal shopping, makeup artists—and events—designer appearances, trunk shows—at our stores.”

Experts see these kinds of opportunities driving retailer participation, and more retailer participation making location-based social networks more meaningful, potentially boosting the number of members.

“Through Facebook, the increased exposure, user base and viral marketing via partnerships will get location-based social networks overall increased exposure. And this exposure will help grow the market,” says Josh Martin, senior analyst, wireless media services, at Strategy Analytics Inc.

But he says privacy will be a hurdle. Even though the program is opt-in and users knowingly give out their location, Martin insists privacy concerns will dog Places and other location-based services.

“Privacy is always a concern,” he says. “We’ve seen this time and again with Facebook. Even if they lock everything down, the perception is that data is not safe. At some point something will happen to violate privacy and then everyone will be up in arms and fearful. It’s all about perception, and the general consensus is that Facebook isn’t the stalwart of privacy.”

Tim Sherwin, executive vice president and co-founder of CardinalCommerce Corp., which has numerous clients in m-commerce and helps craft mobile marketing campaigns for retailers, also says privacy may be a stumbling block for Facebook and other location-based services. But he says there is growing success with mobile marketing in general, success that could help retailers and consumers jump the privacy hurdle.

“Many large retailers have been very effective in 2009 and 2010 at leveraging their customers’ mobile devices through text messaging by enticing them to opt in to various mobile marketing initiatives, from delivery of coupons to announcing sales and offers to driving adoption of loyalty programs,” Sherwin says. “To make the mobile channel even more successful, the ability to deliver value to these consumers based on location would take the success of mobile marketing to the next level. However, the challenge is around privacy issues and being too invasive to customers. But if merchants can leverage location-based mobile advertising through mobile social networking features like Places on Facebook and overcome this issue, then Places and similar services could provide the infrastructure for the next evolution of pertinent, mobile marketing.”

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