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Is 'Where RU' a Business Model?

CNET today has a story about location-based services -- those cool mobile-phone applications that allow you to find local stores and services according to your location, and that allow your friends, your parents, or your boss to track your whereabouts.

Today in New York City's Times Square, a Sprint Nextel-owned "mobile virtual-network operator" (a branded provider that offers specialized services over a carrier's network) called Boost Mobile is demonstrating a "buddy-tracking technology" from Loopt, a startup founded, wouldn't you know it, by a couple of Stanford grads. The Loopt service enables cell-phone users to share their real-time whereabouts with selected friends and family, along with messages, photos, and so on. This is one of those "Yeah, but …" stories: its thesis -- that such services are the next best thing for the big carriers like Verizon and Sprint -- is amply contradicted by evidence in the story itself.

For instance, the CNET reporter cites research from IDC claiming that half the mobile users in the U.S. will be using location-based services by 2010, generating some $3.1 billion in revenue for the carriers and for niche players like Loopt. This year, the revenue from such services is estimated at about $150 million, coming from the less than 2 percent of subscribers who have even tried these services.

So, from about 3 million users today who have maybe tried location-based services once, $150 million in revenue will be generated this year alone. That's about 50 bucks per subscriber, which sounds like a made-up number to me, but never mind. In a little over three years, the user number will jump by some 150 million (half of the 300 million or so expected total subscribers in 2010), or 50 times, and the revenue will multiply by 20.

Uh-huh. A few other tidbits from the supposedly exploding world of location apps:

  • These types of services have been around, or at least been talked about, "for nearly a decade." Yet adoption remains under 2 percent.

  • At least two carriers -- Verizon Wireless and Sprint Corp. (NYSE: S) -- plus MVNO Disney Mobile already offer kid-tracking applications over cell phones. Again, adoption is minimal.

  • The main target audience is teenagers, tracking their pals at the mall or other relatively bounded spaces. That's not an insubstantial market -- but is it enough to base a business with "a multimillion-dollar advertising campaign" on, which is what Boost Mobile is doing?

  • Because of privacy concerns, all of the services are necessarily opt-in: only those to whom you want to divulge your current whereabouts can find you.


There's a gee-whiz factor here that will certainly induce some kids to sign up. But here's the "All I'm saying..." part: No. 1, These services will ultimately be a minuscule part of the mobile-applications landscape (I'm going to go out on a limb and say that $1 billion in revenue by 2010 is optimistic, and $3 billion is wildly inflated), and No. 2, they have much more relevance in enterprise environments, where the real-time tracking of people and assets has tangible, revenue-boosting applications. (See Wireless Beyond the Warehouse.)

Ultimately, this is one of those technologies that will be developed for teen consumers, but will find its real niche in businesses -- where the tangible benefits are calculable and where the privacy factor is negated or at least diminished as a condition of employment.

If you're driving the company truck, your boss has a right to know where you are. If you're driving your parents' car, well, that's between you and your parents.

— Richard Martin, Senior Editor, Unstrung

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