Hot Potato Could Become Facebook's Location-Based Social Network Differentiator
"If you can't acquire them, squash them" - might be Facebook's new mantra in trying to create a foothold in the location-based social networking space. Since Foursquare spurned Facebook's advances for acquisition in favor of seeking more funding - the mighty social network of half a billion has put Plan B into motion - acquiring Hot Potato, another check-in service for a fraction of the cost.
Considered a second-tier check-in service, the acquisition only cost Facebook $10 million where Foursquare could have easily set the network back in excess of a hundred million.
What differentiates Hot Potato from Foursquare is its focus on 'events' versus 'location' check-ins. By Facebook layering location-based services on top of its platform for mobile phones, the resulting social intelligence and data-mining could exceed anything that Foursquare could design at this point in time. With Facebook at 500 million users, the social network goliath dwarfs Foursquare's user base of less than 10 million.
Facebook's Open Graph - even with all its privacy infringement baggage -continues to gather data exponentially on all its users. Its power is based in its ability to now access this data, integrate it with Hot Potato's location-based application and virtually offer discounts and deals based on where the user is located at any moment in time. For example if a user was passing a theater in Manhattan, the service could provide him or her with discounted tickets, based on a specific Broadway show a user's Facebook friends have "liked" or attended recently.
Facebook, however, has been pretty mum on the topic. "We are working on location features and product integrations, which we'll be launching in the coming months, and we'll share more details when appropriate," Facebook spokesman Larry Yu told CNET.
Back in early May, Facebook test marketed a special location-based campaign with McDonald's which allowed users to post their location within a status update where a free offer for a Big Mac could appear in the post.
Earlier in the year, I speculated that "cost-per-check-in" would become the new ad model for location-based services (see "Cost Per Check-in: Has Foursquare Initiated A New Ad Model?"). According to ad sources, while it was noted that Facebook was not directly charging McDonald's to build the app (since Facebook doesn't normally charge developers to build on its platform), there could be a "cost per check-in" transactional fee built into the media buy.
CNET also reported that Facebook has partnered with Localeze, the local-search company that powers Twitter's "Places" directory--which lets Twitter users attach a location to their tweets if they are posting from a location-enabled device--to provide a business directory infrastructure for the forthcoming geolocation product.
If Facebook can get past its privacy issues, and once they are able to corral and integrate both Localeze and Hot Potato into its mobile platform, there will be no stopping this social network from virtually dominating the location-based service space before the year's out - potentially leaving Foursquare, on the outside of the check-in - looking in!