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Loopt sales shows future of location is commerce

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I’ve been following Sam Altman and his location-based start-up Loopt for years. So it was a bit of a surprise to hear that the company was sold today for $43.4 million to pre-paid card provider Green Dot Corp (s gdot). But in a phone chat with Altman, it’s become more clear why Loopt sold and how that all fits into the larger location-based services market.

For background, Loopt was one of the early pioneers in location with its ability to let friends track each other passively. It later took on features like check-ins, incorporated deal discovery through Groupon (s grpn) and Living Social and let people get reviews and tips on venues.

Altman told me that over time, Loopt focused more on deals and loyalty and was looking more at the intersection between location and payments and commerce. That’s why it was open to being acquired by Green Dot, which sells and reloads prepaid cards at 60,000 retail locations and recently bought a small Utah bank.

“We needed to figure how location could be more closely tied to finance and payments. What makes location compelling is not just discovering deals but helping people make purchases,” Altman told me. “We knew we needed to partner with a company such as Green Dot. They have a lot of things they want to do and we will take what they have and help build the most innovative finance service out there.”

Altman said the future of location-based services is increasingly about commerce. That’s behind some of the acquisitions in the location space, he said. Groupon bought Pelago in order to bring together consumers and local discount offers. EBay (s ebay) bought WHERE to help bolster PayPal’s ability to deliver location-based offers to consumers with PayPal closing the loop on redemptions.

As I wrote earlier, mobile wallets and location-based offers go hand-in-hand. You need a reason to turn to a mobile wallet both for consumers and merchants, and a personalized and location-based deal service is one way to provide that value to consumers and help walk customers in the door for merchants.

“If you look at companies that made the acquisitions, eBay, Groupon, the common thread here is companies that are in the finance and payment industry. Many companies are realizing the powerful combination of location with payments and finance products,” Altman said.

But Altman said while he can’t talk about what Green Dot and Loopt will work on, he said it’s not just a mobile wallet, which he finds unexciting by itself. He hopes to build something much bigger than just a wallet. But he said this combination of commerce and location will be the most impactful thing to emerge from the location space.

In that light, it’s not surprising that Green Dot bought Loopt. Loopt has been working in this area for a while and has patents that are helpful for mobile marketing. Location leader Foursquare is also moving in this direction with its Explore function helping users discover local deals. It has also signed a partnership with American Express (s axp) to link Foursquare deals to a user’s credit card. SCNVGR, another location-based start-up, has also been exploring the link between place and payments with its LevelUp service, which has its built its own mobile wallet from the ground up. Google Wallet(s goog) is closely tied to Google Offers for local deals.

As Walt Doyle, CEO of WHERE, recently told me: “If you only enforce payments without content advertising or offers, it’s simply not compelling from the acceptance side or from the consumer side.”

There will be other compelling uses of location aside from commerce. But that seems to be the big play right now and for anyone building a mobile wallet, you need to think location-based marketing and deals. And for location-based services, the most promising way forward is linking to commerce.