Why A Closed Location-Based System Has Value

I suspect this post may be a little controversial, but here goes. facebook_places.jpgNow that Facebook has implemented Places - and putative location-based rivals Foursquare and Gowalla have "partnered" with them - the tech pundits have all jumped in to proclaim that location-based data is here to stay. There is a key difference between "checking in" on Foursquare and broadcasting your location on Facebook, however. If you are a Foursquare member, you joined it specifically to broadcast your location, earn badges and score a few dubious mayorships. The very fact that you signed up is the implicit signal of your desire to broadcast your location-based data.

That's not why nearly half of online Americans joined Facebook however. That's right, nearly 1 in 2 online Americans have a Facebook page - your sister, your mother, your boss and your ex. They didn't sign up for "Places" - and they didn't ask for it either. Make no mistake - the addition of location-based data was not a customer-focused addition. Though location-based services are popular amongst the twittering classes, the vast middle of the bell curve did not ask for this function, and if it were carefully explained to them, don't want it, either. It was added purely for Facebook's benefit, to generate data for advertising purposes, but was certainly not added for your benefit.

Wayne Sutton has helpfully provided six steps to change your privacy settings to ensure your location data is private, but I submit that this is five steps too many. Facebook is America's home page - the Wal-Mart, or Target, of online activities. The vast majority of users are simply not aware of all of Facebook's privacy implications, and Places has kicked us all a little further down the slippery slope that the new "Like" button started. Let's be clear - if your current privacy settings are set to allow "everyone" to see some aspect of your data, you are, by default, set to allow everyone to see your location data - and to allow "friends" to check you in to places without your knowledge. There are other privacy implications, as well, some of which are detailed on this helpfully scary page.

I can guarantee you, your mom doesn't want this. If you are the parent of a child with a Facebook page (almost all online teens have one), you don't want this either. If Facebook were to provide a pop-up for everyone when they next log in that carefully explained Places, and provided a big red "opt out" button, let me assure you that most Facebook users would click it. But, again, Facebook is not a user-centered enterprise, and their convoluted privacy scheme for Places is but one in a long line of goalpost-moving assaults on the data of your life.

Yet, there is a value for consumers in an opt-in, location-based service to express loyalty, have that loyalty rewarded, and build a relationship with advertisers of products and services that are meaningful. I've written before ("Antisocial Location Apps") that I want to check into Nordstrom, express my loyalty, and learn about discounts and sales. I want to check into my favorite coffee place because I love them and want them to flourish. I just don't necessarily want this to be a public transaction. Conventional wisdom is that open systems thrive, while closed systems die on the vine - that's why the Foursquares and Gowallas of the world jumped quickly to integrate with Facebook's "Open" Graph. Ironically, many of the same people who evangelize open systems and transparency are doing so on Apple products - the very paragon of a closed ecosystem. I can't help but wonder here if the Apple way - the "safe," controlled entry into the world of location-based apps and services, might not be the better way forward for mainstream Americans.

Some have posited that Facebook's Places move will obviate the need for Foursquare and Gowalla, putting them out of business. Perhaps, but I can't help but wonder if "joining" Facebook is the only alternative to "not beating" them. Here in the Triangle area of North Carolina, we have a vibrant location-based startup called TriOut that is making all kinds of moves to connect local residents with local businesses. Not that they asked, but if I were to give them some advice it would be this - in the long run, mainstream America is going to figure out location-based social data, and is going to pass some kind of judgement upon it. The natural result will be some kind of change in how location-based apps do business.

If I were starting a location-based social network as a play for local advertising dollars, I'd anticipate those changes, and position myself now not as an openly-integrated Facebook partner, but as a private way for middle-of-the-bell-curve Americans to learn about discounts, sales and promotions from their favorite local vendors. I'd worry less about badges and letting my "friends" tag me, and more about security, logistics and fulfillment for local promotions. I would not integrate with Facebook, and I would make that a selling point. The flying monkey hooligan tribe might reject your offering, but your Uncle Bob might find it appealing for the same reasons.

In other words, I'd let Facebook warm up the market for you - and let them take the privacy heat that is sure to come - while you build your brand now as a customer-centric, private and secure way to make people's lives better without exposing private data.

What do you think? Am I misreading the general population? Would not integrating with Facebook be a death sentence for a would-be local service? Am I just a privacy Luddite, clinging to the last desperate illusion that my data belongs to me? I'm wide open to debate here, so let's kick things off in the comments.