Monday, May 17, 2010

Find Me - Navigating Value in Location-Based Services

Any time I see rapid, mass adoption of a service, I immediately think of product/market fit. Take Mint. It filled a gaping hole in the personal finance market, a market virtually untapped by developers with a proper sense of UI design. It solved people's problems. Users suddenly couldn't live without it. It grew very quickly to a remarkable level and viola, big payday.

One key aspect of Mint's success was the retention of their users. Their core value proposition was clear, and it had lasting value. Think of it in reverse. If Mint was a fun diversion, a fad that went out of style, its user adoption curve would have flattened very early and then dropped off. This happens with Facebook games all the time. I should know. I saw it happen.

The past year we've witnessed the fast rise of Location-Based Services. Well, they're games right now, not much of a service because they don't provide much value in their current state. I'd like to focus on the complex value propositions that they are navigating, that of their customers and of their vendors.

Part 1: Value for the Customers

Go the destination sites of Gowalla, Foursquare, and My Town. Only Gowalla is advertising any payback for playing their game. And it's vague, in the guise of "Enjoy Rewards." These rewards are not yet monetary finally showing signs of real value. They're the bragging rights of enjoying mayorship in the game, or earning a badge as a regular. The concept, the promise, the aspiration is that one day you'll get a coupon, a free beer, or even earn velvet rope treatment. But we're not there yet. In fact, we're not even close. Unfortunately, as Dave McClure says, the games are bullshit. The games --- with the payoff currently emotional and not yet monetary --- don't have lasting value. Without lasting value, we may see the user adoption curve flatten and fall.

How do we get to a real payoff? Serious biz dev. They have to sign up companies incredibly fast to start giving out real payoffs incredibly fast. Why? Because the novelty of being the mayor of the Elbo Room wears off. Users will want actual value.

There's a critical difference between Gowalla and Mint. Mint developed a business model (commissions from financial offers) that worked. Had it failed, their users wouldn't have cared. The service itself is the value proposition. And it has lasting value. They would have stuck it out as Mint developed plan B. For Gowalla, like Dave said, the game is bullshit. The value is in the payoff. They have no payoff yet. They better find it soon.

Part 2: Value for the Vendors

Why would Philz, who serves the best coffee in the world, offer me a coupon for checking in via Gowalla? What's in it for them? Why, the impression in the user stream, that's what. When I check in to Philz in the Mission, my Facebook and/or Twitter streams show this check-in to my friends. It's an ad impression. But it's not an ordinary impression. It's of incredibly high value. It's a trusted source. It might as well be a personal recommendation. Clearly Philz has a reason to incentivize this check-ins with special deals.

But that impression is, in its current form, fairly useless. For one, it doesn't integrate with Philz's Facebook page or Twitter account. It bounces to a Gowalla page which no small business owner is interested in maintaining. (Most are only now coming around to Facebook and Twitter.) With nothing but the check-in, these companies are just features. They're not a product. This leaves Facebook (and Twitter) a gaping hole to step in and bring a location feature to their already deep product. Yelp is already off to the races.

It will be very interesting to see how this plays out over the next year. These LBS companies are highly capitalized, so they won't simply fade away if numbers begin to flatten. They are going to have build a deeper product around location, and I don't think this is a wise investment considering the competition.

Graduating Grandma: From Parallel Play to true Social Gaming

I've never understood where the phrase Social Gaming originated. It's a meaningless buzzword of a phrase that engulfs everything around it and hides meaning deep within, like a scrum. And yet it's here and pervasive and we have to deal with it. But what does it really mean? Supposedly games played on social networks. But are these games truly social? What exactly is social play?

In my own head, Social Gaming means interactive, i.e. playing directly with, or against, other players. (Perhaps competitive/cooperative is a better term.) For me Social Gaming also entails synchronous play, or playing with others in real-time. MMOs fall directly in this category. Does anything on Facebook? Surely. Poker fits neatly into this category. However, Poker is perhaps the only successful interactive synchronous game on Facebook (currently). Also, to be fair, real-time is a bit stringent. We could certainly just as well go with turn-based games. Which leads us to Scrabble-like games. (Remember Scrabulous, er, Lexulous?) Note, too, that Scrabble-like game games usually monetize on ad revenue --- not virtual goods, as is the current trend --- and teeter on the edge between turn-based and asynchronous play.

But how are most games played on social networks? Via Parallel Play, as opposed to interactive play. And asynchronous, as opposed to synchronous play. Then why are these games called "social"? You know, other than the social networking part? Many reasons, but mainly two: Because we share our progress with our friends, and because we invite our friends to play alongside us. And of course, via these actions, by sharing and inviting, we unwittingly (at first) and then willingly (when we leave the cave) become free advertising vectors for game developers.

Not all successful Facebook games are strictly non-interactive. Take My Empire. We ask for help from our friends to build things, making these games Parallel Play + Light Interaction. Other games take interaction a bit further, like Mafia Wars, where you are part of a clan that you build with your friends and fight against others. But you're stuck in an asynchronous universe with multiple instances. It doesn't feel truly interactive. In general, most Facebook games are very limited in their social aspects.

Is there room for an interactive, synchronous game on Facebook, one with more mature, satisfying social elements? I should hope so, because we're running out of themes in the God Game genre. Nearly every skin --- from farm to fish to city to medieval --- has been released. I feel, too, that for a very large portion of the Facebook gaming audience, FarmVille or a similar God Game was their first online game. Ever. (An overstatement, but it's certainly the first game many people played every day, the first game to which they were committed. ) It makes sense that these games were the earliest successful games on Facebook, because they're easy, addictive, and casual. They don't feel like gamer games, because they're not. This gave grandma permission to play. Now it's time to graduate grandma.

What genre of game will grandma play next? Probably not FIFA soccer (though this move by EA makes perfect sense considering 70% of the Facebook audience is non-USA). Graduating grandma will come in baby steps. So probably not City of Eternals either. I suspect it will come in the manner of a simple MMO in an accessible skin that requires group play to complete missions. I'm biased, but it feels like Puzzle Pirates could be a winner here.