In geolocation wars, SXSWi is mere skirmish

With the days leading up to this year's South by Southwest Interactive Festival (SXSWi) turning into hours, all eyes are on two scrappy rival start-ups, Foursquare and Gowalla, which both want to use the Austin, Texas digital-culture bash as a strategic playing field. They're the two most talked about start-ups in location-based social networking--using GPS on a mobile device to "check in" to places around you and announce it to your friends--and neither company wants to lose out to the other.

But in the real geolocation wars, these start-ups may be little more than toy soldiers. Geolocation is such an appetizing digital trend that significantly bigger companies want in on it, too, from sizeable Valley brands like Twitter and Yelp to the real behemoths of the Web--Facebook and Google. The geeky microcosm of SXSWi--where Twitter made its explosive leap out of the gates--may put Foursquare, Gowalla, and their upstart brethren front-and-center, but when it's over they may be in for a harsh reality check.

"The world has changed a lot," said Dan Melinger, founder of Socialight, a New York-based mapping start-up that launched way back in 2005--before Google Maps was even out of beta and GPS on a cell phone was an expensive luxury. Right before SXSWi, Socialight relaunched as a product for businesses to build branded "geo" apps. "I think the war is going to be between Google, Facebook, and Apple."

So far, we haven't seen anything from Apple pertaining to a potential competitor to the rash of check-in start-ups. But Google's new, shouldn't-be-discounted-yet Buzz service, a product that gives the search giant an inroad into the real-time chatter craze that Facebook and Twitter begat, already lets users "geotag" their status messages with their location. Its Google Latitude project has been live for over a year, but there's something suspiciously fallow about it, as though it's a dormant volcano that Google could set off into a geolocation powerhouse any time soon.

Facebook's plans are shadier, with public knowledge largely limited to some small privacy policy modifications clarifying how the social network regards location data. And earlier this week, a report in The New York Times suggested that Facebook will unveil a way for users to "check in," as well as a way for third-party services to simultaneously update a Facebook-based location, at its F8 developer conference next month.

Twitter, with a paper valuation of reportedly $1 billion and still no strong foundation for a business model, is a smaller company. So is local reviews site Yelp, which snubbed a buyout offer from Google late last year in the neighborhood of $500 million. But both are still large enough to potentially knock a Foursquare or Gowalla out of the competition.

Yelp, for example, quietly rolled out "check-ins" of its own earlier this year, a stealthy feature that CEO Jeremy Stoppelman says is showing early appeal to a different set of "Yelpers" than the ones constantly churning out opinions of neighborhood bars and restaurants ("Different motivations speak to different people," Stoppelman told CNET last month). Twitter already has an application program interface that lets users "geotag" their tweets with a set of coordinates, and it just went live this week on Twitter's own Web site; last month, CNET caught wind of the company's plans to launch a "places" directory, too.

"I feel like (Yelp's geolocation move) validates what some of the younger, smaller players like us are doing, and then we start to see Twitter start to do their places, and even Google Buzz, and we assume Facebook's doing it as well," Gowalla CEO Josh Williams told CNET. "The industry is going to have to take a hard look at what your core mission is in the long run. There are certainly going to be a lot of people who are building location plumbing and that kind of data."

There are a lot of reasons why start-ups and massive tech conglomerates alike want to know where you are. On the consumer side, they're a fun and potentially addictive way to stay in touch with friends, a novelty that the social-media industry needs as Facebook photo tagging, quiz apps, and link-sharing grow more and more commonplace.

More importantly, there's reason to believe that there's money in geolocation: Marketers are keen on the opportunity to be able to target users based on the most intricate of details. A location-based networking service could offer the opportunity to serve ads specifically to people who frequent a certain kind of clothing store, who stay out late at night, or who travel regularly--far more precisely and insightfully than a Facebook profile.

Does Facebook, which turned its targeted ads and "fan pages" into a runaway success that have reportedly lifted its revenues to the billion-dollar level, want to let a couple of start-ups get ahead in the next phase of social-media advertising? Absolutely not. When a big tech company sees a real threat coming from a start-up, it could freeze it out of the market, acquire it, or find a way to make that smaller company dependent on it. It's not clear what path Facebook will take, but whispers around the start-up community suggest that the executives of small geolocation services are nervous.

But could Facebook and Twitter's presence in the geolocation world be good for start-ups like Foursquare and Gowalla? The two start-ups' prominence at SXSWi can be deceiving. As the ultimate confluence of all things digital media, SXSWi is also the kind of environment where something front-and-center actually proves to have little mainstream reach--and that's something that Facebook could provide.

"That group of people (early adopters) love to try things, and experiment, and have the latest thing, and SXSWi is an important venue to talk to those people and to the journalists that cover that group and to a certain extent exist within that group," said Rob Lawson, chief marketing officer of Brightkite, a rival geolocation start-up. He should know what he's talking about: Two years ago, at the Web 2.0 Expo in San Francisco, hundreds of conference attendees were lobbying for private-beta invites to Brightkite, then the hottest name in where-you-at mobile networking--until then another company named Loopt had been the marquee title. In due time the hype wagon had lurched onward to the likes of Foursquare.

The Silicon Valley spotlight has long since dimmed on Brightkite, though it did manage to chalk up a roster of 2 million users in the process (Foursquare and Gowalla are still in the hundreds of thousands); Lawson says that its aim right now is to capture the attention of those mainstream users. It's not clear whether Brightkite, or Foursquare or Gowalla for that matter, can accomplish that push on its own, and that's why there still hasn't been a clear winner.

Looking at the history of social media, sometimes a niche product requires an external shove: The word spread about MySpace because of bands that were using it. Twitter, meanwhile, was a hit with geeks in 2007, but it wasn't until two years later when the brand power of Oprah Winfrey and CNN solidified "tweet" as a household word. For geolocation start-ups, that extra nudge could come from big partners--like the TV ad on Bravo that announced its Foursquare promotion--or from Facebook's massive size forcing location-based social networking into the mainstream.

Geolocation is unlike anything the Web has ever seen, but it's likely that the rush to dominate the space will pan out in a way similar to any other big development in social media. We've seen (and in some cases continue to see) the personal Web page wars, the blog platform wars, the social-network wars, the real-time-streaming wars, and the social-gaming wars. Like its predecessors, the geolocation wars will see major, complicated privacy concerns. There will be more hand-wringing from start-ups who don't believe it when a company like Facebook (presumably) says they don't want to snuff out third-party services. There will be poorly spent venture capital and ad dollars. And eventually, there will be winners.

But for now, Foursquare and Gowalla can enjoy their week of attention at SXSWi, giving out free T-shirts, turning on the taps at open bars, and wooing potential marketing partners. Their executives can get a little drunk, and it probably won't matter; in the long run, a week in Austin won't mean much.