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Summary:

As location-based services grow up, we’re seeing that games are not the appealing part of location and increasingly it seems like start-ups are acknowledging that games are tough to build a business on. Gowalla seemed to acknowledge that by killing its virtual items feature today.

gowalla

When check-in services first appeared on the scene, they were often understood in the context of games, like Foursquare’s mayor competitions and Gowalla’s quests for items and pins. But as location-based services grow up, we’re seeing that games are not necessarily the most appealing aspect of location, and it seems like start-ups are acknowledging that they’re also tough to build a business on.

The latest example of businesses shying away from location-based games is Gowalla’s announcement today that it is doing away with items in its next release of the app. The items were virtual goods picked up by users for visiting locations, which could then be traded or left for other users. Gowalla’s CEO Josh Williams said items were used by less than half a percent of its active users.

He said virtual goods unlocked through real world interaction is a remarkable idea, and one that helped Gowalla get its start. But now it causes more distractions than joy for most. What Gowalla will focus more on is helping people explore the world, in keeping with its passport theme.

SCVNGR, another location service that wants to build a game layer on top of the world, invites people to play and create location-based games. But these days, the big news for SCVNGR is around LevelUp, a daily deal program that uses some game mechanics to build consumer loyalty for merchants. LevelUp’s game elements are more limited, however, and consist mainly of establishing three daily deals instead of just one to ensure that consumers come back to a business.

SCVNGR still has a business built off its traditional gaming model but it seems like that real dollars are in tapping local advertising dollars through LevelUp. SCVNGR’s move with LevelUp seems to acknowledge that games by themselves have a limited appeal, and that the real opportunity is in improving on the daily deal market.

Foursquare also has also moved beyond games and is focusing on more recommendation services through its Explore tab. More recently, it rolled out a list function for curating and sharing locations and event check-ins, which allow people to use Foursquare as more of a digital scrapbook. And the company’s been lining up big daily deal discount partnerships with Groupon and Living Social, too. As Foursquare co-founder Dennis Crowley told me last week, the check-ins were the first step in building up a user behavior that can unlock a lot of other services and features. Games were the first reason to check-in, but now there are plenty of other reasons to do so.

What it all means is that location is maturing, and while there is still a place for games, location-based services are becoming more about business. Which makes sense, because these companies are interested in making money first and foremost. We’ll still have game mechanics, and other start-ups might come along with even better ideas on how to use games and virtual items, something others have argued that Gowalla didn’t manage well enough. And gamification can still work as a motivational force for all kinds of behavior, though it needs to consist of more than just badges and virtual goods.

As Gowalla’s Williams points out, there’s a lot more to location than games. A JiWire survey last year found that scoring points was the least popular reason for checking into a location, while getting a deal was the most popular motivator. There’s so much opportunity for end users in terms of discovering the world, documenting travels, unlocking deals and finding people nearby. And many of these things are easier to monetize for companies, too. So while I don’t think we’ve seen the end of games in location, it looks like we’re moving on to bigger ideas and more lucrative opportunities.

  1. Fieldforce App Thursday, August 25, 2011

    This title’s a bit misleading. Thought you were going to talk about location based services (LBS) being adopted by more than just consumers, but relied upon by enterprises as demonstrated by apps like @DoubleDutch and (ahem) us @fieldforceapp. LBS for enterprise is the link between mobility, productivity and true customer engagement.

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