New research shows that consumers are very actively adopting mobile social networks such as Foursquare that retailers and marketers can use to provide loyalists offers to redeem in-store.
 
According to SNL Kagan, active users of location-based services in the United States, which includes registered users of location-aware social networks and monthly subscribers to carrier-based family tracking and navigation services, could hit 33.2 million at year-end, up from 12.3 million in 2009. SNL Kagan points to increased smartphone adoption as pivotal to the upward trajectory of location-based services.

“It is still early and the amount of start ups in the space is growing fast,” said John Fletcher, an analyst at SNL Kagan, Monterey, CA.

“While Brightkite, Loopt and Foursquare are currently the leading services by registered users, we expect the market will change fast over the next two years due to acquisitions,” he said. “Some services offer retailers promotional campaigns for free to drum up awareness of their service so if mobile marketers want to experiment, the time is now. 

“If the goal is to pick the winning service, it might pay to wait and watch.”

SNL Kagan, a division of SNL Financial LC, is a comprehensive resource for financial intelligence in the media and communications sector, including the broadcasting, cable, entertainment, motion picture, telecom, wireless, satellite, publishing and new media industries.

Smartphones on the rise
By the end of 2010, 41 percent, or 118.1 million, of U.S. wireless subscribers will be using smartphones, which is expected to rise to 50 perecnt next year.

The SNL Kagan study reveals that location-aware social networks are starting to attract consumer interest, with the leading six companies combining for a total of 18.1 million registered users as of September 2010.

Foursquare is the fastest growing service, with an average quarterly growth rate of 273 percent since second-quarter 2009.

Ad revenues
SNL Kagan indicates that advertising is still in the nascent stage for location-aware social networks, with 2010 revenues only expected to total $11.9 million for the top six combined.

Cashing out from checking-in will largely come from advertising and promotions as the services have a unique ability to communicate with users while they are on the town with wallets and purses in tow.

For now, most social location networks are currently pursuing a land grab and focusing on growing users to attract advertisers.

“Advertising and promotions are critical for the long term viability of location services like Foursquare,” Mr. Fletcher said. “Deal per city, per day service Groupon is expected to generate $150 million in revenue this year and already has comfortable margins.

“Many of the services profiled in the report can reach consumers while they are out on the town with purses in tow,” he said. “So marketing through location-aware social networks has the potential to generate hot leads, not just warm leads.

“It is worth nothing that Foursquare’s user growth is the highest of the top six social location services highlighted in the report. But the future of location-aware social networks is probably a cross between Foursquare and Groupon: a marriage of check-ins and healthy incentives through digital coupons.”