I used to do a lot of development, data warehouse and business intelligence work for a pharmaceuticals giant. During this time I learned a great deal about clinical trials, supply chain, HIPA, good development process, business intelligence and most importantly – the value of a day.

A Pharmaceuticals Analogy

For those of you who have never given big pharma much thought, consider that each time a company discovers a compound that they think will be useful to treat something, the clock starts ticking. In a nutshell, they need to patent the compound before anyone else does, run clinical trials to ensure that the compound will not kill anyone, document the effectiveness and the side effects, run results and literally truckloads of paperwork through the FDA, get the paperwork reviewed and approved and then they can market the drug. [Pharmaceuticals pros know that it is far more complicated than my summary!]

The problem is that patents on the compounds are not infinite and the company needs to get their meds into play for as long as possible before their exclusivity runs out and the generics come in with cheaper versions of the same thing. Insurance companies like to pay the cut rates for the generics. Therefore, a single day can cost a pharma company millions of dollars. This is why the industry is so cutthroat, fast paced and on edge.

I am looking at location based similarly from a “cost of a day” perspective. Foursquare and Gowalla and to a lesser exent Whrrl have enormous potential and also a set of hard problems. Dennis Crowley is on the cover of every magazine and out speaking everywhere to promote the product and that is working. I am not criticizing this nor do I want to spoil his amazing ride,* I just want to remind him and his counterparts of an ever looming threat.

Dennis Crowley steals Burger King's crown

The Giant is Going to Awaken

Facebook has been talking about getting into the location game soon. I thought it would happen at SXSW and I was wrong. It probably would have happened at D8 except that Mark Zuckerberg and company are a tad distracted right now by issues of privacy. I think that Crowley and fellow location based rock star, Josh Williams need to look at this as a stay of execution.

• Facebook has somewhere between 400 and 500 million active users.
• All other LBS combined have around 1/100th of Facebook’s user base
• Facebook has penetrated the main stream who largely still is either scared of or has no idea what a Gosquare is
• We do not have a clear picture of all of the services available on Foursquare, Gowalla, Whrrl, Brightkite, etc.
• Automation of services / self serve models do not yet exist or are as slow as molasses
• Business development teams are spread quite thin
• Case studies with ROI are few and far between

What’s going to happen

Here’s what I see happening. Facebook is going to get through this privacy thing. National Quit Facebook Day was a bust because people have no place else like Facebook to go. They have already made privacy easier to manage and now people seem to get that their data is not their own. Blogs like this one have documented what people are asking for in a Facebook alternative and identified the fact that they are going to have to pay for the bandwidth. Rumblings of Facebook entering the location game have been going on for months. Their developers are working on it as we speak and I would bet it is ready to roll out within hours of Zuckerberg saying “Go!” (pending Apple allowing an application update).

Josh Williams, CEO of Gowalla

I am sure that Facebook will have all of the features that we like about LBS. They will probably have check ins and specials that are activated by check ins or by loyalty. They will probably have something like a scavenger hunt that unlocks a prize. They will have an element of randomness with their PCP (post checkin page) where you can unlock achievements (badges / pins) or win prizes. (I am supposing all the aforementioned. Do not treat as fact.)

The Top Priority

The thing that the big 3 need to solve before Facebook gets into the game is ease of activation. They need to clearly state how to validate that a location belongs to the business owner and make this a speedy process. They need to tell marketers and brands exactly how to activate. We need to know what are the exact services they provide, what is the lead time and how much they cost. And they need to do this soon because there is really only two good, clean business case on LBS right now, by AJ Vaynerchuk and company at Vaynermedia and another by the Fleishman Hilliard team for Cheverolet.

Facebook will treat this like a revenue stream. Their LBS version 1 will go online with a method of business activation, tiered levels of service and a pricing model. They have the benefit of seeing where Gowalla and Foursquare are succeeding and where they are failing, plus they have the mainstream users on their site who do not need to be convinced to use a new app and build up a new social graph, rather they can just use the one they already have.

There goes the neighborhood

With Facebook on the scene, the openness of data is compromised. The current tools are reasonably open via the API or at least via data providers like SimpleGeo. Facebook’s data is harder to aggregate and will be less accessible. Facebook will be the ones enjoying an increased ability to target their user base and marketers will benefit because they will be able to take advantage of this new data stream as long as they want to use Facebook to do so.

So move quick Big 3! Fix your funnel. Make it clear how to activate. The value of a day for you, like big pharma, is extraordinary.

*I like Crowley. He’s dynamic, smart, confident, funny and a good sport. He has never given me shit for coining the #failsquare hashtag and he is fantastic at answering the hard questions in a public forum.