Phone-based social networks such as Foursquare and Gowalla that let users “check in” to shops or restaurants and instantly tell their friends where they are. Fans of such services gush that they will mint money by allowing ads to be targeted at folk who are about to make a purchase. But the networks must negotiate some important hurdles first if such lofty predictions are to come true.
There are, however, several reasons why many marketers are still wary of committing big money to Foursquare and its like. One is that even the largest mobile social networks have just a few million members, which limits their appeal. According to a report published last month by Forrester, a research firm, only 4% of American adults have ever used such networks and far fewer do so more than once a week. Other forms of mobile marketing, such as SMS-based promotions and mobile-search ads, already reach far larger audiences.
Another challenge facing location-based networks is to prevent tech-savvy individuals from gaming their systems. The blogosphere is littered with stories of “fake mayors” and other folk who have come up with ways of checking in to places they haven’t visited.
