geosocial networking and mobile devices - april 2009

Alan Belniak, Katrina Gosek, Jon Lucas, Allan Vainstock MTIE Seminar, MBA 7570

Babson College ‐ Spring 2009 Professors Marty Anderson and Anirudh Dhebar

2009.04.27

MTIE Managing the Technology Intensive Enterprise: Geosocial Networking and Mobile Devices

Alan Belniak, Katrina Gosek, Jon Lucas, Allan Vainstock Page i MTIE Seminar, MBA 7570: Geosocial Networking and Mobile Devices Spring 2009

Table of Contents

Introduction: We’re Only Two Blocks Away, so Let’s Meet at the Coffee Shop ..................................................................... 1 Case Study Framework: The Geosocial Network Ecosystem .................................................................................................. 2

Figure 1: A Typical Digital Social Networking Site’s Ecosystem ...................................................................................... 2 Social Network and Social Networking Service Examples .................................................................................................. 3 Case Studies ........................................................................................................................................................................ 3

Case Study #1: Loopt – Overview............................................................................................................................................ 4 Table 1: Loopt Key Success Factors ................................................................................................................................. 5 Table 2: Loopt Potential Drawbacks ............................................................................................................................... 5

Loopt Evaluation ................................................................................................................................................................. 5 Case Study #2: uLocate – Overview ........................................................................................................................................ 6

Table 3: uLocate Key Success Factors ............................................................................................................................. 8 Table 4: uLocate Potential Drawbacks ............................................................................................................................ 8

uLocate Evaluation .............................................................................................................................................................. 8 Case Study #3 – Google Latitude Overview ............................................................................................................................ 9

Table 5: Latitude Key Success Factors ........................................................................................................................... 11 Table 6: Latitude Potential Drawbacks ......................................................................................................................... 11

Latitude Evaluation ........................................................................................................................................................... 11 Case Study #4 – Helio Overview ........................................................................................................................................... 12

Table 7: Helio Key Success Factors ............................................................................................................................... 13 Table 8: Helio Potential Drawbacks .............................................................................................................................. 14

Helio Evaluation ................................................................................................................................................................ 14 Common Management Challenges: We’re in This Together ................................................................................................ 15 Establishing the Correct Alliances within the Value Network ........................................................................................... 15 Creating and Sustaining Network Effects .......................................................................................................................... 16 Developing a Viable Monetization Strategy ...................................................................................................................... 16

Conclusions ........................................................................................................................................................................... 17 Sources .................................................................................................................................................................................. 18 End Notes .............................................................................................................................................................................. 19

Alan Belniak, Katrina Gosek, Jon Lucas, Allan Vainstock Page 1 MTIE Seminar, MBA 7570: Geosocial Networking and Mobile Devices Spring 2009

Introduction: We’re Only Two Blocks Away, so Let’s Meet at the Coffee Shop The proliferation of mobile handset telephone devices has led many people in the world to become almost tethered to them, despite the fact that they permit people to connect without wires.1 With this increased dependence on mobile telephony, people are more often not ‘home’, ‘at the office’, or in previously defined static locations. The evolution of other digital technologies has permitted data transmission signals to locate mobile devices to within three feet of their actual location. Since these devices typically accompany the user, this digital technology permits the location of the user as well. This analysis evaluates a current trend of online social networking2 and its convergence to mobile devices and mobile telephones into what is being defined as geosocial networking.3 Geosocial networking, in the context of this analysis, is social networking combined with the ability to associate and link content in that social network to a map or common location mechanism.4 Common tagging features are geo‐coding and geo‐tagging. Some of this content can be created and/or tagged by people using location‐based sensing devices, allowing social networks to form, connect, and coordinate users with local people or events that match their interests. Mobile devices and mobile telephones, in the context of this analysis, relate to hand‐held devices that are typically battery powered, use digital screens (usually color), exhibit a microphone and/or speaker for audio transmissions, as well as other features. If the devices are mobile telephones, then a telephony feature is assumed as well. The convergence of geosocial networking and mobile telephones presents companies playing in this space with a series of two‐fold challenges, relating to the two different technologies involved. To identify these challenges, this analysis uses a case‐study method of four real companies (three applications, one hardware/device) in this arena. The applications and devices (companies) are Loopt (Loopt), WHERE (uLocate), Latitude (Google), and Helio mobile telephone handsets (Virgin Mobile). The four case studies that follow are comprised of a brief overview of the geosocial networking service, as well as an analysis framework of success factors and potential drawbacks from three different vantage points. In each of the matrices, noteworthy elements that comprise essential characteristics are presented, and the participants in the ecosystem that are most affected (end user, individual enterprise, larger value network) are indicated. From this, an evaluation section is presented. After each of the four enterprises is reviewed, common management themes, challenges, and strategies for addressing them are presented and discussed.

Executive Summary

The proliferation of mobile device usage, in combination with the tremendous growth in web‐based social networking, has opened business opportunities for companies like Loopt, uLocate, Google, and Helio. These four companies are front‐runners in a new geosocial networking arena, building business models tying together the mobile web, location‐based software, and online social networking. In analyzing these companies, the following guidelines were uncovered for other companies interested in building businesses in geosocial networking services: 1) establish and participate in a strong value network; 2) create a framework to promote rapid development of positive network effects; and 3) create a monetization strategy that is sustainable and flexible.


Case Study Framework: The Geosocial Network Ecosystem The framework used to evaluate each company in the case studies that follow is comprised of the key components of the geosocial network. The framework is built around the interests of the three key constituents of the geosocial network ecosystem: the user of the service, the business itself and its direct customers (i.e., advertisers, marketers, e‐commerce sites), and the extended value network (i.e., partners, manufacturers, content providers). Figure 1 below illustrates the full framework used in each analysis and the various critical business decisions each company made in the development of its service.5

Figure 1: A Typical Digital Social Networking Site’s Ecosystem6 At the heart of geosocial networking is the social network itself. Why? Because the greater number of members in the network, the more valuable the application holds for the user. This also applies to a business seeking to monetize a geosocial service using advertising revenue, since it leads to more value it can offer to its customers (both users and advertisers). Fewer members in the network equal less value to the user of the application, as well as potential review opportunities. Success or failure of the geosocial network service provider depends on the quality of the social network, so it is worth defining in closer detail.


Wikipedia.org (a social network in and of itself) defines a social network7 as social structure made of nodes (which are generally individuals or organizations) that are tied by one or more specific types of interdependency, such as values, visions, ideas, financial exchange, friendship, sexual relationships, kinship, dislike, conflict or trade.8 Note how there is no required ‘computer’, ‘device’, or ‘Internet’ component listed in this definition. Essentially, a social network is people sharing ideas and information around a similar theme. Social Networking Services or Social Networking Site (SNSs) can be described as web‐based services that allow individuals to (1) construct a public or semi‐public profile within a bounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system. The nature and nomenclature of these connections may vary from site to site. The difference should now be clear to the reader: the second definition (of social networking service) helps enable the first definition (a social network); the first can exist (and has before and will continue to do so) without the second. Belonging to a social network entails finding other people with a shared interest (or interests) and discussing those interests and trading or sharing information. Belonging to a SNS typically requires some sort of registration, profile creation, and other link to a communication form (such as an e‐mail address or telephone or mailing address). Clearly it can be seen that social networking service can permit the rapid growth, ubiquity, utility, and popularity of a social network.

Social Network and Social Networking Service Examples Social Networks

o church, volunteer organization, neighborhood association, parent/teacher association, cycling club, wine appreciation group, poker group, quilting circle

Common9 Social Networking Site/Social Networking Service10

o Facebook, MySpace, Bebo, Friendster, Xing, LinkedIn

The remaining building blocks of the geosocial network ecosystem – all of which the geosocial network business must engage with or at the very least consider – are part of the extended value network: the mobile handset manufacturers,11 the mobile operating systems,12 mobile application developers,13 location‐aware technologies,14 mobile service providers,15 and digital map providers.16

Case Studies Four key companies in the geosocial network arena are profiled, and their business decisions and trajectories are examined on a granular level. From there, the key choices made by managers of technology‐intensive enterprises can be identified at moments of technological convergence on a more macro level. That is to say, the geosocial arena in specific is used to evaluate and discuss the management choices for technology‐intensive enterprises in general.

Case Study #1 – Loopt: offers a mobile‐based GPS sharing system that allows users to visualize one another using their cell phones and share information; partnered with all major carriers

Case Study #2 – uLocate: leading publisher of mobile location services

Case Study #3 – Latitude: location‐aware mobile application developed by Google

Case Study #4 – Helio: one of the earliest geosocial mobile solution providers; recently acquired by Virgin Mobile


Case Study #1: Loopt – Overview Loopt provides a geosocial mapping application of the same name that can be downloaded to a variety of mobile devices including cell phones, smart phones, and PDAs. It displays the location of a user’s friends along with their presence status visually on a digital map. Based on GPS, users can request alerts when friends are within a certain distance, send messages to friends in particular areas, and tag pictures in a way that’s accessible to friends through Loopt. Loopt was conceived in 2005 by Sam Altman, a Stanford University student, who decided that it would be helpful to see where his friends were located via his mobile phone. With an initial $6K in seed funding from YCombinator, Altman built a prototype. In September 2006, along with $5M in Series A funding from NEA and Sequoia, Altman struck a deal to launch Loopt on Boost Mobile. Loopt received another $8.25M in Series B funding in July 2007 and in August of the same year Loopt expanded to Sprint phones. In June 2008 Loopt expanded to all major U.S. carriers including Verizon and AT&T. The application runs on many different handsets including iPhone, Blackberry, LG, Motorola, Samsung, Sanyo, Pantech, Sony Ericsson, Nokia, Casio, Kyocera, UT Starcom, ZTE, and HTC. Since it is available on a number of carriers and handsets, Loopt is considered to be an interoperable application. For example, a user that downloads Loopt to their iPhone on an AT&T network can easily add a friend using a Blackberry on the Verizon network. Furthermore, with the use of “Loopt Link” or “Facebook Connect”, users can not only integrate their address book and profiles at other social communities such as Facebook and Twitter, but they can also automatically update their status messages. Although revenue is not disclosed specifically, Loopt was not profitable as of December 2008. The company generated revenue through four main streams including (1) a monthly service charge with the carriers; (2) a licensing fee when included into data bundles; (3) sale of its location platform to certain carriers; and in the near future (4) location‐based advertising. Loopt used strategic partnerships to considerably expand its reach and appeal. They partnered with CBS Mobile for advertising and to help in developing location‐based advertising and with Qualcomm to access GPS location data for a monthly fee. By paying a flat fee, rather than a per‐transaction charge, Loopt now has a realistic vision of location‐based advertising. Prior to this partnership, location queries were too costly for a service provider, since targeted location‐based advertising generated less cash per query than the licensing fee. The money saved with the Qualcomm partnership allows Loopt to invest more into the potentially lucrative advertising revenue stream. The Loopt application is free to download on all phones but some plans require a monthly subscription fee. Consisting of four main tabs, it is also simple to use.

Map – shows the geographic location of a user and his or her friends

List – gives the user the option to list friends, chose a friend, comment, call, SMS, and remove friends

Share – allows the user to update status messages, manually set location and attach pictures

Settings – allows the user to configure their profile, attach to other social networks, set preferences and security

Location updating is automatic by default but can be changed to manual or approximate by the user. Traditionally, Loopt users could only invite friends if they knew the mobile phone number of the intended recipient. “Loopt Mix” is a


new feature that allows a user to configure a public profile in order to connect to other Loopt Mix users if they have common interests. Table 1: Loopt Key Success Factors

Elements that Directly Affect…

Factor Detail Users Enterprise Larger

Network integration with existing social networking platforms

yes, Facebook, Twitter

diverse revenue streams yes, four revenue streams

development of a very simple user interface

yes, four main tabs

ability to suppress inherent privacy issues

yes, privacy is at the core of the business model

available on a multitude of hw vendors and carriers

every major carrier and handset maker

concentration on strategic partnerships yes, CBS Mobile, Qualcomm

targeting the correct market demographic

yes, initially attracted younger market when launched on Boost

GPS for location sensing yes

various methods of updating location and status messages

manual, automatic, links into Facebook and Twitter

application is free to download yes

ability to create both private and public profiles

private by default, Loopt Mix allows for public profiles

Table 2: Loopt Potential Drawbacks Elements that Directly Affect…


Network global presence, markets exist in EMEA, APJK

no

desktop computer interface to supplement the mobile

no

use of forced advertising yes, can be a hindrance to some users

cost to user for of status updates and location queries

yes, standard date and SMS text rates apply

Loopt Evaluation Perhaps the most common issue surrounding geosocial networking is concerns about user privacy. Loopt has been successful in mitigating these concerns by establishing a 100 percent permission‐based service. Users share location information only with their selected friends, networks, and services. Loopt users can easily turn location‐sharing on or off at any time on a friend‐by‐friend basis or for all friends simultaneously. To ease parental concerns regarding child


predators, the site is only open to users who are 14 years of age or over. Furthermore, Loopt works regularly with select organizations that focus on increasing privacy and security. The geosocial networking application is Loopt’s core business and because the organization has no other means of generating revenue, Loopt has been clever enough to diversify their revenue strategy through service charges, licensing fees, and advertising. Diversification is especially important to Loopt because it only has one product. In the future, it will be important for management to continue developing innovative revenue generating schemes that help drive Loopt’s core business. Furthermore, since Loopt currently only exists in the U.S., it would be wise for Loopt to work on developing a global strategy to reach the markets of Europe, Africa and Asia. Mobile advertising presents a significant challenge mainly due to the size of the handheld devices. At the same time, however, advertising is a key piece of the revenue puzzle for location‐aware networks. Marketers dream of the day when a user can be walking down the street, pass a store front, and get a message on their phone promoting a sale. This technology does not currently exist in any valuable fashion and so through their partnership with CBS Mobile, Loopt is currently using forced advertising. There is no way for a user to opt out of receiving banner ads on their mobile phone. Although they are working diligently to make the application and the advertising seamless, it can certainly be a hindrance to many users. Although their partnership with CBS Mobile has location‐based advertising in mind, they are still in the development stage. Quick and efficient development will be important for Loopt’s future organizational growth because it will significantly enhance the advertising revenue stream. Networks are social if the number of members adds real value to a single user’s experience. Building a network is a considerable challenge for any startup organization, let alone a geosocial startup, and Loopt is no stranger to this experience. Instead of trying to build their brand from the ground up, however, Loopt has integrated with existing social networking platforms such as Facebook and Twitter. By leveraging these platforms Loopt has amplified their brand, which has permitted Loopt to reach a larger audience. As an example, take Jim and Sally’s social networking experience. Jim is a Facebook user that has never heard of Loopt. Sally is a member of both Loopt and Facebook. Sally uses Loopt to update her Facebook status through “Facebook Connect”. Jim sees Sally’s update from Facebook and notices it came from Loopt. Because Jim is curious, he decides to download Loopt to his mobile phone. This same scenario can also occur with Twitter and has the potential to become a ‘viral’ marketing campaign for Loopt, without any real investment into advertising. Finding strategic partnerships that seamlessly fit into a particular business model is a significant hurdle to clear for an organization. Loopt has done just this however, and have used them as building blocks to their success. They have partnered with a number of mobile handset manufacturers and service providers that has allowed for interoperability across carriers, in turn letting Loopt reach a broader market. Furthermore, partnering with Qualcomm has allowed Loopt to begin realistically concentrating on location‐based advertising, which may turn out to be a very rewarding piece of their business model.

Case Study #2: uLocate – Overview uLocate is a U.S.‐based company that was incorporated in 2003. In the first years of operations, uLocate was a software development firm that collaborated with third‐parties to provide location‐based mobile solutions. Several of the early accomplishments included a pet tracking application sold to Pfizer, enterprise fleet tracking software, a mobile GPS enabled version of MapQuest, and a friend finder application (Buddy Beacon) developed for Helio, a mobile virtual network operator (see case study four).


In 2007, uLocate changed its business model entirely by focusing solely on a direct‐to‐consumer application. The shift in strategy was financially supported by $11M in funding (total $16M) and executed by stimulating ecosystem growth centered on their new consumer product, WHERE. uLocate’s core offering (WHERE) is an open platform that enables third‐party developers to create and distribute location‐aware, mobile widgets to end users. A platform focused solely on location‐based widgets is unique in the U.S. Widgets are easy to use, simple to install, and customizable applications that meet a targeted set of consumer needs. These applications are especially effective on mobile devices because they are able to run on small displays and devices that are limited in computational power. Applications on the WHERE platform are optimized for mobile devices because they are built directly on operating systems, and thus interact directly with hardware. Compared to thin‐architecture applications (browser‐based), native applications (not entirely dependent on network connectivity) are typically faster and, if necessary, can be computationally‐intensive. uLocate has partnered with the key wireless carriers and manufacturers in the U.S. to grow its platform and thus expand its consumer reach. The WHERE platform consists of a wide‐range of software development kits (SDKs) – each is customized to be compatible for a particular operating system and/or carrier in the U.S. uLocate manages the location‐aware back‐end programming integration with other social media environments (Facebook and Twitter), and SMS text messaging. The third‐party developer focuses on the front‐end functionality of the widget. The end‐user is able to use a selection tool to drag and drop desired widgets onto one’s mobile device. The WHERE development community has grown to over 2000 members and includes software programmers, mash‐up artists, enterprise content providers, carriers, and handset manufacturers. High‐profile content providers (Zipcar, Zillow.com, Weather.com, and Starbucks) have created popular applications. The other members of the WHERE ecosystem continue to deliver value to the end‐user by developing relevant and useful widgets. The breadth and popularity of the WHERE platform has grown tremendously since it first launched. For example, 40,000 iPhone users downloaded WHERE the first day it was released on iTunes. And, WHERE attracts approximately one million unique visitors per month. uLocate has a three stream revenue model: mobile search content, advertising and branding campaigns, and carrier subscription fees. The company employees 25 people and expects to reach break‐even by July 2009.


Table 3: uLocate Key Success Factors Elements that Directly Affect…


Network unique platform first mobile GPS widget platform in U.S.

open development platform wide‐range of SDKs (over 2000 developers)

widgets optimized for the native environment

yes, OS‐based

accessible to all major U.S.‐based networks and mobile devices

yes

linkages with SNS yes, Facebook and Twitter

user interface simple, fast

business model diverse (three revenue streams)

ecosystem development content providers, handset, carrier, independent, end‐user

network effects one million unique visits per month

Table 4: uLocate Potential Drawbacks Elements that Directly Affect…


Network platform transferability abroad WHERE is tailored for the U.S. market

platform architecture limits ecosystem growth

OS‐based creates problems for third‐party developers

sustainability of the platform as it grows difficult to internally support technology and deliver user value

partial integration with Facebook, Twitter

evolution of partnerships is unknown

scalability of the business model unproven

manual location updating user requirements may change

uLocate Evaluation In less than two years, uLocate has carved out a substantial position in the U.S. geosocial mobile marketplace. uLocate’s CEO stated that his firm’s short‐term objectives are to solidify its business model in the U.S. and then expand its platform internationally. Management has to overcome significant challenges to achieve these goals and turn uLocate into a sustainable global enterprise. A key challenge is growing the WHERE platform without negatively impacting the user, enterprise, and the larger ecosystem. Currently, widgets within the WHERE platform are built on top of mobile operating systems, presenting a challenge for third‐party developers. To reach the largest audience, developers have to create and support a series of applications to be compatible across a series of carrier/device platforms, which is resource‐intensive. Similarly, uLocate would have to consistently update the technology in the WHERE platform and develop new SDKs to support changes in


the mobile ecosystem. As the selection of widgets increases, confusion could seep into the user experience. uLocate needs to pay special attention to the quality of the user experience as its platform grows. Another challenge for uLocate is proving its business model as its platform expands. uLocate has three revenue streams, and it is unclear which ones, if any, are scalable as the WHERE network grows in size and complexity. As of May 2009, AT&T is the only carrier partner that pre‐loads WHERE onto its devices and charges its customers a subscription fee. In the future, AT&T may terminate the agreement and it is doubtful other U.S. carriers will charge their customers to use WHERE. Also, as the number of advertisers grows, it will become increasingly difficult for uLocate to satisfy the demand of customized‐branded widgets and targeted ad campaigns. uLocate has to fine‐tune its business model and prove it can be profitable on a larger scale. uLocate has to make difficult decision regarding its current partners and selecting future alliances. Facebook and Twitter own their respective pieces of the social media value network and partnering with these organizations is critical to accelerate network effects. Currently, uLocate has a loose partnership with these companies, but a higher level of integration would likely enhance the user experience. It is possible that a company, like Facebook, could attempt to move into the location‐aware mobile space and dilute uLocate’s value proposition. uLocate must leverage network effects, but at the same time, control its strategic position in the value network. Expanding to foreign markets is going to be a difficult obstacle to overcome. The mobile device/carrier/user relationship is dramatically different outside and the majority of widgets in the WHERE system are tailored specifically for the U.S. user. uLocate’s U.S. value proposition and business model simply may not be applicable in foreign markets. Local competitors, different consumer behaviors, and different market dynamics are major obstacles blocking entrance in international markets. Management has difficult decisions to make in the process of growing uLocate’s U.S. operations and becoming profitable. The prospect of expanding internationally is equally, if not more, challenging. uLocate has a long road ahead, but its unique approach, large consumer base, and experience in the geosocial mobile space gives the company a strong foundation for success.

Case Study #3 – Google Latitude Overview Latitude is a free geosocial mapping application developed by Google that can be downloaded to a variety of mobile devices including cell phones, smart phones and PDAs. Like many Google offerings, Latitude is easy, useful, functional, content‐rich, interoperable, and, most importantly, free to the user. A Google Latitude user must have a mobile web data service and first install Google Maps Mobile onto their mobile device. The Latitude application, when downloaded, then appears in the Google Maps menu. The social network is built from the user’s Gmail contact list that allows the application to automatically locate other users using Cell‐ID,17 cellular signal positioning, and GPS. The location of other users is visually represented on a Google Maps Mobile with a single key click. Latitude users can control their privacy by updating their location manually or by controlling the accuracy and details of what other users can see. Although installing Latitude on a mobile device is the ideal use case, users who do not have mobile smart phones can also use the web‐application on their desktops as a widget on their iGoogle homepages to transmit their location and see the location of other users in their network. Latitude was initially released by Google on February 5th 2009, replacing Dodgeball, Google’s first experiment with geosocial networking software that offered similar capabilities through SM as Latitude. A little‐used application – save for a handful of new media enthusiasts in New York City – that did not generate revenue as hoped for Google, Dodgeball


was sold back to its original owners in January of 2009. In comparison, upon its release, Google Latitude witnessed one million user registrations within two weeks, displaying the latent dominance the location‐aware mobile application could have in the geosocial arena. Unlike Dodgeball, Latitude came built‐in with the larger Google ecosystem: to use Latitude, a Gmail account is required – the only way for users to share profiles and locations with one another – and Latitude application provided the added bonus of the content‐rich Google Maps environment. Latitude is compatible with devices running Google Android, the BlackBerry OS, Windows Mobile, or Symbian s60. Compatibility with iPhone and iPod Touch devices is expected soon and support for the Palm OS and web OS has not been announced. Latitude’s compatibility with most mobile handsets makes it available on any U.S. wireless carrier that supports the mobile web, so users do not need to be on the same mobile network to partake in the service. The potential user base for Latitude is nearly immeasurable because the application does not depend on the users’ mobile carrier or device. It is unclear how much Google has invested in the Latitude web‐application. Presumably, Google will leverage the Latitude location‐based awareness to enhance it advertising portfolio by offering companies the ability to advertise to users in a context‐aware fashion. Full integration with Google Maps allows Latitude to take advantage of Google’s existing map content, which includes all business, municipal and government locations in addition to user‐tagged photos, ratings and reviews. Google can also leverage its large developer community to fully integrate Latitude into its current applications. Google hasn’t moved toward monetizing Latitude yet by offering it as an advertising platform to its customers; but the company’s business model signals that the next step for Latitude will be a product Google will sell to its established base of loyal Google advertisers. Latitude is the newest addition to a comprehensive portfolio of Google offerings intended to prime its user‐base for contextual advertising. Latitude is just another free application that, now along with a user’s location, Google can offer to its advertisers so that they can pass along contextually‐aware digital coupons, information, and advice about nearby products and services. Soon, along with Google searches, Gmail, GTalk, Google Reader, Google Docs, and the plethora of other Google applications, Google will be able to provide its customers (i.e., advertisers) with a 360‐degree view of users in its ecosystem. As one offering in many, Latitude is a fairly low‐risk venture for Google; if it doesn’t succeed, abandoning Latitude will likely not substantially disrupt Google’s revenue stream.


Table 5: Latitude Key Success Factors Elements that Directly Affect…


Network

integration with existing social network yes, Gmail and Orkut;

no, Facebook and Twitter

target market all mobile web users, specifically 18‐34

year olds

global reach yes, international mobile service or

desktop application

cost of application free

integration with Google maps yes

user interface simple

privacy users can control privacy settings

vendors and carriers all

location updating and status messages yes

chat yes

private and public profiles yes

Table 6: Latitude Potential Drawbacks Elements that Directly Affect…


Network lack of Integration with other social networks

no web‐hooks to Facebook or Twitter in U.S. market

privacy concerns with forced advertising

Latitude Evaluation The big trade‐off for Google Latitude users is a large one – their privacy. As such, privacy issues also are a huge management challenge for Google. Although users can control their privacy settings to other Latitude users, cellular signals keep transmitting the users’ position regardless of whether the user has turned Latitude on or off, allowing Google to still capture data about the users’ locations. Presumably, by having already enrolled in Gmail and potentially other free Google applications, the Latitude user has already been initiated to trading their personal information for other free Google services and moved from ‘alarm’ to ‘tolerance’. But adding the location‐aware component to its collection of services that gather information for its customers – advertisers – a new set of privacy concerns have emerged. Google executives have addressed these concerns to the press and to privacy groups, but as Google’s knowledge of its users becomes more intimate with each new application, privacy will continue to be a hurdle for wider adoption. Seemingly in competition with the privacy concerns outline above, a barrier to adoption and active usage for Latitude will be its lack of integration with the two predominant social networks in the U.S. market – Facebook and Twitter. In the international market, however, Google is experimenting with integrating Latitude with its existing social network, Orkut, most heavily trafficked in Brazil and India. Orkut comes with Latitude natively available and allows users to


integrate Latitude into their social networking habits. It is unclear how Google intends to pursue web hooks for Latitude into Facebook and Twitter, but it seems imperative to seek buy‐in from the largest consumer market in the world. Facebook and Twitter users have already invested time and energy into developing their social networks in these spaces and are unlikely to want to re‐create the effort in a third arena. In summary, Google Latitude is well‐positioned in the geosocial networking playing field. Providing the application for free to any user, regardless of device or carrier, Latitude has removed one of the largest barriers to adoption for its users. The easier the application is to use, the more likely it will be actively adopted and used, a boon to Google’s advertising community.

Case Study #4 – Helio Overview Helio was launched in May 2006 as a mobile virtual network operator (MVNO) wireless carrier. It was founded by EarthLink founder Sky Dayton. Originally, it was a joint venture between SK Telecom (a South Korean CDMA mobile telecom) and EarthLink. It was acquired by Virgin Mobile USA in 2008. At that time, it had just 170,000 subscribers. The Helio service (pre‐Virgin acquisition) leased network capacity from Sprint. The intention of this merger was to grow SK Telecom's customer base from its home market of Korea into the U.S. wireless market (SK Telecom’s growth in its home market had recently been flat). The Helio brand attempted to market itself to a younger demographic, trying to hype itself using the most current in trend‐setting mobile telephone handset technology. It planned to not compete directly with the major U.S. wireless carriers, and instead it intended to carve out a niche for themselves with technology‐savvy consumers. The initial round of funding, put forth equally by EarthLink and SK Telecom, totaled $440 million U.S. In June, 2008, Virgin Mobile announced that it would pay $39 million in stock for Helio after SK Telecom agreed to invest $25 million in cash immediately in Virgin. In September, 2008 Virgin Mobile USA released "Helio by Virgin Mobile." Its initial service plan was titled "Plan To Have It All", as well as changing the structure and format of its other monthly plans. Helio announced its first integrated phone, the PCD "Shuttle". Seemingly this was a strategic acquisition for Virgin. Helio’s brand and image were well‐aligned with the Virgin brand; the affected Helio enterprise would remain relatively consistent with core message and competencies of the Virgin parent company. Virgin strived to maintain that the Helio handset and user‐interface features were aligned to what the demographic would want, rather than just handsets sporting mobile maps. In addition, the handsets supported interdependencies on other third‐party service providers. Startup costs for Helio were more than expected, quickly requiring additional financing. After a second round of financing was depleted, EarthLink declined to provide further money to support Helio. In September 2007, EarthLink announced that SK Telecom would increase their investment in Helio by $270 million and they would be adjusting ownership positions in the company accordingly. This gave operational control to SK Telecom. At the time of this writing, there was no advertising pushed to the Helio handsets (thus no advertising revenue, and no potentially negative user experience). Happier end users could loosely correlate to longer contracts. However lack of advertisements results in increasing other fees – potentially user contract fees ‐ to generate revenue. The handsets and user interface software permit many options for contact synchronization. This primarily affects the ease of use for multiple end users, but it also is a subtle manner in which Virgin can attempt to more firmly attach an end‐user to its device for a longer time (that is, provide a lower adoption hurdle). Also, end‐users now have more


choices than ‘just a Blackberry’ for ‘corporate’ e‐mail support. This permits Virgin to still cater to its target demographic, but make subtle nods toward another market segment. Table 7: Helio Key Success Factors

Elements that Directly Affect…


Network catering to “correct” demographic yes, consistent with overall Virgin

branding

rich multimedia capabilities of handsets combine well with location‐based sensing

yes, more than “just a map”

linkages with other SNSs yes, permits faster network effect spreading

uses GPS for location sensing yes

simple user interface intuitive; also uses Google Maps for map‐based content

rich GPS‐related content car share, pub, ATM, etc.

integration with Google maps third party responsible for content, freeing Virgin to focus on core value

delivery

many options for contact syncing broader adoption rate

integration with MS Exchange (for ‘corporate e‐mail’)

potentially reach more market segments

no advertisement‐support business model

better user experience

aggregates status messages of other sites, like Facebook and MySpace

yes, permits faster network effect spreading

‘Buddy Beacon’ works with other handsets that support the uLocate service

yes, permits faster network effect spreading


Table 8: Helio Potential Drawbacks Elements that Directly Affect…


Network limited to Samsung and Pantech handsets

less overall choice to end‐users

based on CDMA technology handsets will only function in the U.S.; limits ecosystem participation

based on an MVNO if no leases available, users could be without service

mobile telephony market is challenging and highly competitive

Helio’s early track record indicates that this may be a difficult market, even

post‐Virgin acquisition

manual location updating reduced user experience

Helio Evaluation Helio and Virgin were targeting a demographic that historically does not have a high disposable income, yet the handsets were not inexpensive. It took a risk by hoping that as users grew to like and depend on the LBS‐services of their Helio handsets, they would soon become tethered to the network. The proliferation of competitive LBS‐applications across multiple handsets, devices, carriers, networks, and technologies essentially nullified this point (as described previously in the other three case studies). Shifting gears, Helio attempted to capitalize on the rapid rise of other social networking sites and aggregate ‘status updates’, thus turning the Helio handsets into social networking site aggregators, as well as a conduit into its own social network. Its alliances and partnerships with third‐party content permitted pre‐seeding and helped to rapidly establish value among its consumers. The less frequently a user needs to switch devices, the more reliant upon the device (and the network) they become. It was (and still is) in Virgin’s and Helio’s best interest to make the handsets and service as interoperable as possible to increase its direct and indirect network effects. Virgin seemingly learned this from Helio’s initial launch (pre‐Virgin acquisition), since the Helio handsets featured limited connectivity outside of the Helio network. Limiting its handsets to only two manufacturers is likely a drawback for Helio customers, but a competitive edge for Helio. Similar to Southwest and its airplanes, Helio and Virgin’s research and development groups need only focus on the design knowledge and constraints of two brands of handsets, versus a myriad of handsets. However, its choice (by virtue of its MVNO lease) of CDMA technology is severely limiting its growth beyond North America. Virgin subscription growth is initially at mercy of excess capacity of other services, since it operates as an MVNO. However, this low‐/no‐fixed‐cost model permits rapid entry/exit into the challenging mobile telephone market. The eco‐system participants are also limited, since CDMA is a mature technology, with many speculating that it will be retired in the next decade. Had it the choice again, though, Helio and Virgin should have considered a more ‘global‐friendly’ option. This is a surprising move, since Virgin brands are typically global brands, in terms of its marketing and positioning. The manual location updating may be positioned as “one simple command“, but without automation, this feature could essentially go unused. Using GPS for location sensing, versus mobile signal tower triangulation, results in a more accurate location. This results in a better user experience, and also presents a ‘win’ situation to the extended enterprise through the ability for better segmented advertising (based on precise location, rather than approximated). In addition, it reduces load on leased


mobile service networks’ signals. And linking the GPS location‐sensing to rich GPS‐related content creates value for end‐user. As an example (from the Virgin website): “Find cheap gas. The closest car share car. A nearby pub or driving range. The weather if you don’t have a window nearby. And a whole lot more.” This frees Virgin from maintaining its own library of location information, as well as its own map service (it uses Google Maps as an underlying technology). Many people are already familiar with the Google Map interface, increasing adoption rates. In summary, Virgin’s choice to continue operating Helios as an MVNO makes exiting the mobile market a much more palatable option, should it decide to do that. In addition, upgrades to the technology are performed by its lessor, but on its lessor’s schedule as well. Limiting to two handset manufacturers permits a refined focus on the release models. The underlying technology of Buddy Beacon (uLocate) will serendipitously play out well for Helio and Virgin, since it will permit location‐awareness with non‐Helio handsets. However, an early bet to try to tether a user to one (or few) handset/s, and a decision to select CDMA technology has hampered and will continue to hamper Helio’s growth.

Common Management Challenges: We’re in This Together Geosocial networking is an emergent space that is collectively immature, fragmented, and quickly transforming. As evident by the four case studies, enterprises within the geosocial networking space are facing a diverse range of significant management issues and obstacles. Although the four analyzed organizations differ on a variety of dimensions, they are confronted with a common set of enterprise challenges inherent to all companies playing in geosocial networking space. The most difficult obstacles to overcome are listed and described below:

1. Establishing the correct alliances within the value network 2. Creating and sustaining network effects 3. Developing a viable monetization strategy

Establishing the Correct Alliances within the Value Network It is very important for a geosocial application to build strategic alliances with a number of key players, including content providers, handset manufacturers, operating‐system vendors, service providers, carriers, and other software vendors that complement a geosocial application’s value. Handset manufacturers and operating system vendors are a key part of the value network because they allow an end‐user to interact with the application. As a manager, it is important to develop alliances with the handset manufacturers and operating systems that will work well with the application. For instance, if the application is heavily dependent on a digital map, a manager should be wary of how various devices display maps. Sheer size of the mobile device screen could be a significant factor in management’s choice. Furthermore, most handsets come with varying operating systems that present significant challenges to the application developer. A manager may have to choose between a proprietary operating system (such as Blackberry), or an open operating system (such as Android). Application portability is not simple and can create financial headaches if management decides to target too many handsets and consequently too many operating systems. As an alternative, enterprises can bypass operating systems altogether, and build ‘thin’ applications that operate on the mobile browser. Whether a startup or an existing organization, one of the most important partnerships an organization can create is with the carrier. Without this member, the application will cease to exist. Furthermore, in a startup organization managers should realize that attracting the bigger players, such as Verizon or AT&T may not be the smartest decision. The geosocial networking application innately provides more value to the younger, hipper market segments; segments not


afraid to take a chance on a new technology. Finding that match in a carrier is very important because it will allow the geosocial application to flourish. Furthermore, with larger networks it can be very difficult to create that “killer” application, one that everyone will want. On smaller networks, it may be possible to get the application built right into operating system and available upon purchase. As its popularity spreads, so, too, will its value to the other larger networks. Finally, geosocial networking organizations should partner with other organizations that complement their service. For instance, one reason why location‐based advertising is not succeeding as expected is because the cost of a location query is more expensive than the advertising licensing fee. To reduce this cost, an organization should strike a deal so that the GPS queries are handled with a monthly or yearly fixed cost instead of a per‐query basis. This in turn increases margins and can make location‐based advertising profitable.

Creating and Sustaining Network Effects Regardless of the industry, creating and sustaining network effects is vital to the success of an organization. This especially holds true in the geosocial networking space because without a large member network, an individual user will not realize the value the service is trying to provide. There are a number of ways that network effects can be established in the geosocial networking space including word of mouth, concentrated advertising strategies, and leveraging other social networking platforms. The word of mouth strategy, although simple, can be very effective. Take for instance the growth trajectory of the online social networking platform, Facebook.18 Facebook began as a website at Harvard University; within one month, half the student population were members, with the message spreading largely through student conversations. This same phenomenon can occur in the geosocial space, provided that the organization builds this into their marketing strategy and acts on it effectively. The word of mouth strategy can only go so far, though. Before long, other means of promotion such as concentrated advertising are necessary. Some applications will promote their services through email campaigns. This can be especially effective as long as the service has the ability to tap into the mobile phone’s address book. For example, if a user signs up for a geosocial networking service, the registration phase will ask to send invitations to the user’s friends. If the user chooses to do this, the application could potentially add many more users to the network; the only limiting factor being the number of people in the first user’s mobile phone address book. A geosocial networking organization should leverage existing social networking platforms to further enhance their own network. Two major social networking platforms, Facebook and Twitter, provide SDKs so third party applications can reach their mass quantity of users. Although the actual geosocial networking application is not necessarily available for download at these sites, current members of Facebook and Twitter will see their friends’ updates coming from the geosocial applications. This presents a significant advantage to smaller geosocial networks because instead of building their networks solely from the ground up, through word of mouth, or concentrated advertising, they can also leverage the power of an already existing platform.

Developing a Viable Monetization Strategy Currently, the majority of geosocial networking services are free to end‐users. The goal of businesses in this space generally is to grow the size of the community and activity levels of its participants. The more friends one has using a


service, the more likely he or she is to use the service. Pricing out potential users limits network growth, and therefore decreases the overall value of the service. Mobile advertising is the central component to most geosocial networking enterprises’ business models. However, no company – including powerhouses like Google – has been able to develop a profitable and sustainable business model in the geosocial networking space. Mobile advertising platforms are new and untested on a large scale. Users vary in their levels of exposure and comfort towards advertisement on the mobile device. Businesses vary in their knowledge and experience advertising on the mobile device. The key challenge to any organization in the geosocial networking sector is successfully capturing user value without disrupting the user experience.

Conclusions The proceeding analysis takes a snapshot of the current state of geosocial networking arena. As mobile device and mobile web adoption continue to increase and converge with the desire for online social network, this emergent space will become more mainstream. Companies seeking to enter this arena would do well to apply the lessons learned from the study of the four companies analyzed above and use them as a baseline for their business strategies. All front‐runners in a new geosocial networking arena, each company – Loopt, uLocate, Google Latitude, and Helio – built different business models to tie together the mobile web, location‐based software, and online social networking. In entering the emerging geosocial networking space, other companies would be wise to at the very least: 1) establish and participate in a strong value network; 2) create a framework to promote rapid development of positive network effects; and 3) create a monetization strategy that is sustainable and flexible. Geosocial networking will be an interesting and rapidly evolving market to watch over the next few years.


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End Notes 1 Mobile technologies that allow faster and more reliable access to the mobile Internet are also increasing in use. As the graph below indicates demand for access to the mobile Internet is increasing, especially among high‐end phone owners in Gen X (29‐42) and Gen Y (18‐28) users.

Figure from the Growth of Social Technology Adoption, 10.20.2008, Forrester Research.

Additionally, the same Forrester study indicates that

"Four out of five households have a cell phone, and most have more than one. Cell phone penetration hit 80% of households in 2008 — and a whopping 91% of Gen Y homes. The average North American household has 1.7 mobile phones today; among households with at least one phone, the mean number is 2.1 — fueled by cheap family plans. These low‐cost shared plans mean that there are 2.4 phones on average in Younger Boomer households with a phone, but homes led by Gen Xers are those least likely to make do with just one phone."

2 Social networking has always been around. It is a fundamental behavior and a capability of survival for humanity. It is the way people everywhere establish and manage complex relationships in large groups, rather than compete as individuals. The evolution of this social area has taken a new form in the modern digital world of the Internet, through online communities and the social sites.

According to a recent report by Forrester Research, nearly three‐quarters of U.S. online adults use digital social technologies, often fueled by the Internet:

"Use of social technology by online consumers increased in all aspects from 2007 to 2008. Inactives — i.e., those who are untouched by social technologies — have decreased from 44% to 25% of the online population. Spectators — i.e., those who read, watch, or consume social content — have grown from 48% to 69%." (Growth of Social Technology Adoption, 10.20.2008, Forrester Research)


The trend indicates a continued growth rate in the coming five years. 3 http://en.wikipedia.org/wiki/Geosocial_network 4 Maps have been used as far back as 7000 B.C. as a way to communicate information in the context of spatial relations. With the advent of location‐based technologies, the millennial desire for knowing one's position in real time and space is being enabled. TechCrunch projects that

"Mobile location‐based services (LBS) are generating renewed interest as both the market and technology mature to support the growing set of innovative services being released and in development today. This is being driven by new Location APIs and new location technologies, which are making it easier for mobile location developers to gain access to location information and develop innovative new LBS apps." (Forrester Research, Benchmark 2008: Mobile Is Everywhere, 7.21.2008) 5 The Geosocial Network Evaluation Framework is described in detail below:

Elements that directly affect the Enterprise include the following: the overall product strategy – is this the only product of the company or does the application or platform fit into a larger strategy?; the target market– what audience is the technology trying to serve?; the product specialty – is the technology serving a special interest for the company or for its audience?; funding– is the venture funded through outside capital or is it an initiative within a larger enterprise?; business model– what is the revenue generation plan of this technology?

Elements that directly affect the technology end‐user include the following: the product / service cost– is the application or platform free or do users have to subscribe to it for a fee?; SNS Web Hooks– does the application or platform plug into an existing SNS (Facebook / Twitter / LinkedIn) or is the enterprise attempting to create its own SNS?; # of Users (% growth) – will there be other users to connect with?; privacy settings– how much control does the user have over the dissemination of his or her identity?; OpenID– is the user able to seamlessly connect his or her identity on this application or platform to other applications or platforms?; UI ease‐of‐use– how intuitive or easy to use is the technology?; messaging capabilities– what are the different messaging capabilities of the technology?; location updating (automatic or manual) – is the user required to manually update his or her location or does the device technology allow for automatic updating?; other users?

Elements that directly affect the larger user network include the following: the underlying technology– is the underlying technology web‐based or does it work of an OS?; the partners– what partners does the enterprise rely on for success?; supported devices– is


the technology device agnostic or does it rely on a specific device?; supported carriers– is this technology carrier agnostic or does it rely on a specific carrier / network?; advertisements – can advertisers push context‐aware ads to users’ devices networks?

6 Gartner, The Emerging Market of Mobile Social Networks Offers New Business Opportunities, page 3. 7 http://en.wikipedia.org/wiki/Social_network 8 http://jcmc.indiana.edu/vol13/issue1/boyd.ellison.html 9 “common” here means SNSs, as most people understand them to be 10 http://en.wikipedia.org/wiki/List_of_social_networking_websites 11The major players in the smart phone market include RIM, LG, Nokia, HTC, Samsung, Motorola and Apple. 12 There are two types of operating systems in the market today; proprietary and open source. Proprietary operating systems potentially stifle innovation because the operating system vendor controls what applications will be made available to the public. Open‐source operating systems foster innovative application advancement mainly because they allow for a myriad of free reign application deployment. It is currently unclear which operating system type holds more promise for geosocial networking applications. 13 Application developers can (1) write custom applications for a specific operating system or (2) write web‐based applications. Web‐based applications are customized for a specific web browser technology on a specific mobile phone but do not use nearly the amount of internal phone resources the native applications do. It is much easier to “port” a web‐based application to another operating system than to completely rewrite the code of a native application. Historically web‐based development was limited due to the speed of the networks. Today, the faster networks are allowing web‐based applications to become increasingly relevant. 14 Some mobile devices combine Wi‐Fi and GPS; some combine Wi‐Fi and UWB; and most mobile phones combine A‐GPS with cell ID. In many situations, either the device or the networked application must maintain a continuous approximation to location using the best information available. 15 Service providers in the U.S. and across the globe will play an integral role in the advancement of geosocial networking. Their services provide the backbone network and communication protocols that enable the existence of location aware technologies. 16 The principle use by which digital mapping has grown in the past decade has been its connection to GPS technology. Any application that uses location‐sensing technology at its core will be dependent on the data provided by digital maps. The ubiquity of location aware technologies on mobile phones will entice companies with proprietary operating systems to either develop or significantly enhance their own mapping services. 17 A CellID is the unique number of a GSM cell for a given operator. A mobile phone is always connected to a cell, and by knowing this number, a network can know the position of the cell, and therefore the end‐user. There is some accuracy issue, as the cell can cover from several hundreds of meters to several kilometers, but this could be a very good starting point for location. 18 http://www.nytimes.com/imagepages/2009/03/29/business/29face.graf01.ready.html

geosocial networking and mobile devices - april 2009

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