Where is the Money in Location-based Services?

I was delighted to write about the news of YFind’s funding. But truth be told, few if any location-based services have turned a real profit so far. Don’t get me wrong. I like LBS but not as check-ins or ads. I like it as part of a feature of a service, like Google Maps or when booking my hotels.

Anyway, I could be wrong about all this location-based mojo. But this question has been raised before, and I still don’t see any clear answer. My sense is that most location-focused companies are now still trying to figure out how LBS can fit into our lives and be profitable as well.

Foursquare can survive on raising multiple rounds from deep pockets investors in the valley, but YFind may not have that luxury here in Southeast Asia. Research is expensive and SGD$1.5 million ($1.2 million) doesn’t seem like a lot to burn while figuring out how to make money. It could be a great technology that YFind is making — detecting both horizontal and vertical position of users — but it would be a shame if the idea dies due to resource constraints. Like most products, it takes time to find the sweet spot where it fills a gap in the market, providing a solution to a problem which people are willing to pay for.

Location-based __ (fill in whatever service you want) is tricky because it serves only smartphone users. We do have a lot of people in Singapore using smartphones, when we look at Southeast Asia, smartphone penetration is indeed on the rise in countries like Indonesia, Thailand, and Vietnam. But feature phones still largely dominate the market. It will take several years for the market to mature. And even if people do have smartphones, how many regular users are savvy enough to use location-based services?

While Singapore is one level above its neighboring countries in terms of internet usage, smartphone penetration, and users sophistication, it is after all still a small market. Most Singapore-based startups have to expand abroad, likewise for YFind, I believe. With a market in Southeast Asia that isn’t ready, it looks like the U.S is a likely destination for them. I hope the money raised is sufficient to pull that off; to build the product and quickly and establish a business model around it.

I did reach out to the good folks at YFind on this issue before putting in my thoughts. And as expected, monetization isn’t the primary plan yet as the team is still looking to improve on the product while exploring ways to help companies with its technology. Co-founder Melvin Yuan says:

We’re not focused on monetizing indoor positioning technology – that is secondary. Our primary focus is on helping our customers maximize the value of their venues and their efforts.

I hope this model will work out for YFind in Southeast Asia. And I’m looking forward to testing YFind on my own, hoping that it can help improve quality of life in some way.