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Facebook Places: It’s All About the Advertising

August 19, 2010 3 comments

I originally wrote this post for Interpret LLC’s blog.  Please check it out and read the other interesting articles by my colleagues.

Everyone in the social media space has predicted 2010 to be the beginning of the ‘location war.’  Smartphone applications that let you ‘check-in’ to places you visit in real life finally began bridging the digi-social experience with the real world.  Foursquare took the early lead in the location war, but Facebook has stolen its thunder with the roll-out of its own location-based service called ‘Places.’  While many are calling Places a direct competitor for Foursquare, Facebook’s strategy is markedly different and surprisingly compatible with Foursquare’s services.

The biggest difference between Places and Foursquare is that Facebook has not gamified their service.  The points, mayorships and badges built into the Foursquare experience have been very popular with early adopters, and Facebook’s decision to not incentivize check-ins with anything beyond the satisfaction of self-expression has been seen as the only chink in Places’ armor.  This decision against gamifying their location-based service seems more indicative of Facebook’s overall strategy in regards to Foursquare and other similar services like GowallaLoopt and MyTown than an oversight in the development of their own services.  Instead of trying to compete with them and push them out of the space, Facebook has left its Places API open for Foursquare and other services to compete within their platform because they don’t care about the actual act of checking into locations as much as they care about the user-data those check-ins can add to their website’s advertising value.

Facebook knows it’s on the top of the social media mountain looking down at the rest of the networks trying to climb their way up, and with the lead they’ve surmounted in active users, it would seem paranoid and borderline vindictive for them to try to squash smaller platforms – they simply aren’t a legitimate threat to Facebook.  They’ve recognized that they can let the other companies do all the leg work developing unique and engaging user-experiences while they gather the increasingly valuable data each of these services generate.  Location-based check-ins are a gold mine of tangible profiling data that Facebook can use to develop more targeted advertising, leading to higher premiums and more specific opportunities for building relationships with location-centric advertisers.

One of the most important ancillary effects Places will have is the spur in creation of Pages for local businesses.  When someone creates a place to check into on Facebook, businesses have the opportunity to ‘claim’ that Place, given they provide proof that they are the actual owners, and once a Place has been claimed, Facebook automatically creates a Page for that Place.  Integrating Places into their Pages platform will give local businesses a strong incentive to build or increase their social media presence.  Once more local businesses have created their own Facebook Page, they can then be sold advertising targeted to people who have checked-in to their business.  The Pages will also likely become destinations for promotions, coupons and other deals which will increase their value to users, lead to stronger engagement, more time spent on Facebook, and again, higher premiums for their advertising content.

In the end, Facebook isn’t betting against companies like Foursquare, they’re betting on them.  They’re betting they will continue developing apps that deliver highly engaging user-experiences that integrate seamlessly with and add value to Facebook.  Facebook is very comfortable letting Foursquare play with their point system, badges and mayorships, as long as those check-ins are posted to Facebook walls and integrated into their ever-growing stream of user-profiling data.

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