Facebook + Apple: Masters of the Location Universe?

November 4th, 2010 by Asif Leave a reply »

Yesterday, Facebook along with more than 20 retail partners, including Gap, H&M, Lululemon, McDonalds’s, Starbucks and the San Francisco 49ers, announced a Facebook Deals component to augment their Places location-based service.

The move could bring a slew of new local and small business advertisers to the social network.  With more than 500 million users already, Deals could be the driver that brings location-based services to the masses.  And it’s needed – a study, also released yesterday by Pew Research indicates that only 4% of online adults use a location service like Foursquare or Gowalla.

The Deals service lets merchants push deals to their existing customers and attract new ones, according to Tim Kendall, Facebook’s director of monetization.

When users launch Facebook Places, they will see a listing of nearby venues, some which will have special icons indicating deals. They can pull up the deal, and with two clicks, they can claim it. When they go to the store or restaurant later, they can show the staff their Facebook app to redeem the deal.

The most interesting part of this announcement is that Facebook isn’t taking a cut of revenue for these discounts, posing a challenge to smaller competitors that use deal revenue as part of their business model. On a business’ Places page, they can set up an offer. There are four kinds:

  • Individual deals, which reward a customer if they check-in once.
  • Loyalty deals, which reward customers for a certain number of purchases or check-ins.
  • Friend deals, which reward customers if they bring in extra friends.
  • Charity deals, which allow businesses to donate to charity for every check-in they attract.

The Deals announcement is not however without speculation towards the future.

When Facebook called this press conference, much of the speculation was that they were going to announce their own phone – as referenced by TechCrunch in September.   That didn’t happen.  Instead, it appears that Apple and Facebook are getting closer and closer.

Could Apple be looking to buy Facebook?

Imagine if Facebook users suddenly all had iTunes and FaceTime accounts, giving Apple unquestioned dominance in online music and video chat. Apple and Facebook aren’t currently competing in any realm, but both are competing with Google, and there’s no love lost between Apple and Google.

Additionally, there’s significant synergy. The Facebook app for iPhone has been estimated to be one of the most used apps on the iPhone, with over 100 million active monthly users. One source, David Kirkpatrick, author of The Facebook Effect, claims that more than half of all usage of the iPhone of apps, other than those provided by the phone itself like telephony and email, is coming from Facebook.”

Apple has some $51 Billion in the bank meaning that they could afford to buy the social networking giant when it goes public.

Steve Jobs on a recent earnings call said “We strongly believe that one or more very strategic opportunities may come along, that we are in a unique position to take advantage of because of our strong cash position…And so I think that we’d like to continue to keep our powder dry, because we do feel that there are one or more strategic opportunities in the future. That’s the biggest reason.”

Perhaps the most important synergy is in the area of patents.  Facebook has been thinking about location for years and was recently granted a wide-reaching patent that could wipe newcomers off the social networking map.

Bnet, which broke the story, says the patent covers “a method of sharing locations of users participating in a social networking service at a geographic location” and the location is found using a “GPS Identifier”.

Similarly, Apple is hot on the patent bandwagon, in particular around NFC and location-based advertising.

Their recent patent application for “System and method for providing contextual advertisements according to dynamic pricing scheme” indicates.

Apple describes a mobile ad system that will work on your iPhone, iPod or iPad, and provide ads based on various direct or indirect marketing preferences through a “Local ad” app.  The owner of the network you are connected to at the time serves the ads.

A shopping mall owner, airport operator, or anyone else, providing Wi-Fi access, can serve ads from local merchants; wireless carrier can offer local ads, triggered by a location data from a base station or your GPS sensor, and search keywords you just entered in a search app, etc.

The combination of these two companies could indeed make them masters of the location-based universe.

Advertisement

Leave a Reply