One of the pieces of news that was making the rounds over the past week, at least in my little corner of the twitter-sphere was news that Watson a computer system baked up by the fun folks at IBM beat the pants off two of the all time best players on the popular trivia show Jeopardy. Like its predecessor Deeper Blue in 1997 who beat the pants off of the then world’s best human chess champion… Watson was designed from the ground up to perform a specific task, and to do it quite well thanks to modern capabilities around processing power, data storage and hundreds of simultaneous algorithms tasked with interpreting the natural human language.

But reading a bit more of the press about the event, something caught my eye, a reference to the fact that Watson doesn’t even use the Internet.  To which my immediate reaction (yes I think I’ve become a jaded and skeptical New Yorker) was something like this, well if it coulda, it woulda, so since it didn’t…  well something is up.   And my suspicions were confirmed when the author of the IBM post was kind enough to elaborate that yes he believed that accessing the free and open Internet for information would have been detrimental to Watson’s performance. Which upon reflection makes all the sense in the world…  why would you sift through the entire Internet of information, when you can carefully curate all the information you need for the job in less that 1 terabyte of data held in 90 servers stacked up back stage.

Now like most people, I don’t have a clue as to how much general knowledge trivia there is in the world, uh… a lot? But am I a little surprised that it  can all be crammed into 90 computers, well yeah I guess so, I’ve never really thought about it. I am certainly impressed with the fact that Watson can fish out any little corner of it in about the same time as it would take Alex to type in the question.

But I guess my whole point here is the bigger picture stuff… the folks at IBM wanted to solve a single problem… find answers to trivia questions.  And with the state of things in the world of processing, data storage and algorithms getting, storing and retrieving that information was best done in a closed environment…  the 1TB of factual data necessary, apparently not that big of a deal.

So getting back to local search. Now I had not dealt with buying or selling web search in quite some time now, but within the past couple of years I have started to go back to shows like SMX East, the east coast edition of one of the larger search marketing trade shows, where the subject of local search is a pretty hot topic these days.  What surprised me a bit is that finding places and things in the real world was generally just viewed as more or less the same as searching for and finding web pages about places and things.

Maybe it’s just me but this just seems downright weird.  The web is home to billion if not trillions of pages of content on topics ranging from what Julie in San Jose had for dinner last night to how to calculate the weight of an African tree frog… 99.9% of which has absolutely nothing to do with what’s in the ½, 5 or 10 mile radius around me where I live the vast majority of my life.

Now if someone can sort out the web stuff that’s relevant to my little physical personal world that would be an improvement, but still people put some pretty useless and irrelevant stuff on the web, thousands of people I don’t know or care about and a huge chunk of retail businesses with no significant web presence to speak of.

What I need is just access to the stuff that is relevant to me, good detailed information on stores and products, people I know or might like to know or communicate with, events, relevant news etc.  Much of this information already exists, but like with Watson, just because it exists doesn’t mean that one can get at it quickly and easily, and sorting through the entire web of content to find it, well just wouldn’t be the best way to do it.

Until last night I wasn’t very aware of what folks were doing in terms of creating hyper local networks, but at the LBS Apps developer meet up last night here in NYC,  a company called Nearverse demo’d  their app LoKast. The application allows an organizer to create an ad hoc local network between users of the application who all share a common space of between 300-1000 ft… using a combination of Bluetooth, wi fi or your cell carriers’ wireless data connection.  With file sharing at its foundation, the idea is to allow folks who share a common space to share, well…almost anything digital that they want, including videos, songs, photos, contacts or webpages.

Now Nearverse doesn’t seem to be looking at areas around local search necessarily, and I am not sure if it really directly fits, but it would seem to support the idea that just because there is the capability to push info out to the one mass Internet doesn’t mean that this is the best and only way to do something. Perhaps million of tiny micro locally relevant Internets that just contain locally relevant data, or a massive database of only locally relevant data that is built around location from the ground up would be two novel ways to help connect people with just the relevant info about the world directly around them.

Take all the simplicity and randomness of posting stuff you have or want to Craigslistand add some only-for-mobile features like filters based on proximity, 140 character limits on descriptions, and quick chat to check availability or coordinate for meeting up… and that’s pretty much Anttenna.

From my short experience with the app there is still a fair amount of work to be done to make the service a heck of a lot more user friendly…  like the somewhat unfriendly “Supply Chain” and “Demand Chain” terminology used to describe whether it something I have or something I want. The main page of listings defaults to stuff available nearby, and the list is full of the randomness you might expect with things ranging from a downright spamish offer for $200 rebate on blinds or a queens air conditioner installation company offering… and just a ton of nearby real estate listings with super short descriptions of apartments available for rent.

There is of course a way to filter just what you’re looking for by a variety of factors such as location and category by using the you guessed it ‘filter’ button. Categories include a long list ranging from straightforward things like books and furniture to less straightforward thingslike “items for rent”, “real time dating” and ‘rouse-around” (whatever the heck that may be).  But I think they’ll need to design the discovery process a bit better so it doesn’t take seven clicks to drill down into a category.

In theory the application makes perfect sense… connect the nearby people who want stuff with the nearby people that have stuff, keeping it simple for the mobile device experience yet keeping the power of filters, and added tools such as maps and communications to help improve the process.

Now comes the tricky part of how you take something that makes all the sense in the world in theory and get people to get the app, and post the availabilities of their rouse arounds en mass. 

Many of the things happening in the LBS space right now have a foundation in something that was successful on the web, with a mobile and location aware reinvention of a proven formula. That seems to be the case here with Anttenna as the mobile LBS equivalent of Craigslist, and we’ve seen it before particularly with efforts to re invent the social networking experience in a similar light via players like Loopt and Brightkite and many others. Ultimately I wonder how successful these can ever be.  As new and exciting as mobile location aware services on smart phones are, the total number of folks available to use the services is well below that of the web when services like Craigslist began to flourish online, which gives many of the web leaders in their space ample time to play catch up.

So I’ll just dive back in with one of the ones that I have been wanting to investigate further, just because it seems to come up the most and I’ve been negligent in checking them out… it’s Groupon and what I’ve heard more than a few times about them growing into a big player in the future of location based marketing.

So I finally spent two minutes signing up for Groupon and loaded up their iPhone app. As a consumer it’s pretty damn easy, simply register and tell Groupon what city you live in and every day they tell you about a super duper new deal that you can get at an area business… like a yummy Cheesesteak sandwich for $4 instead of the regular $11, or an $88 round of golf for $42. As with most anything there is some fine print, but it doesn’t seem too bad, and the savings often pretty significant.

For businesses the biggest benefit is driving sometimes huge amounts of foot traffic through the door to take advantage of the deal. Even if they make less (or no money) because of the deep discount, a bunch of customers being driven through your front door is usually not such a bad thing… and did I mention that unlike regular coupons, there is no upfront costs, Groupon just takes their cut once enough customers buy the deal through the Groupon website.

Coupons have been with us for over a century, and Groupon is just coupons on digital steroids with a few differences besides the no upfront costs for businesses. Unlike traditional coupons with Groupons there is just a single offer per market per day… so there is a sense of scarcity and ‘getting a deal’ created, and arguably Groupon gets customers a bigger discounts than most comparable paper coupons. Deals are marketed both by Groupon itself, but also since a minimum number of buyers is necessary for anyone to get the deal, customers are encouraged to promote the deal to their friends adding another powerful social marketing partner in the customers themselves.

So there you have it, a quite successful example of a company using a unique approach and leveraging digital technology to drive good old foot traffic into a brick and mortar store. Online driving offline…  woo hoo! The power of social networking… you betcha! Digital cutting out the middleman once again… yep. But is this really a killer location based opportunity? I am not so sure.

In the general sense, the offers are available on a market by market basis so in that sense its a location based offer, but only in the most basic sense. It’s not what I’d call hyper local or even local since they seem to be targeting large major metros… and from one point of view the lack of submarket geo location can be seen as a detriment… that $4 cheesesteak sandwich that is usually $11 is great but the heck if I am going to hop the subway ($4.50 round trip) for an extra 20 minutes during my lunch hour to go 25 blocks out of my way to save $7 on a sandwich… and that’s the problem I’ve had with many of the offers I’ve seen from Groupon so far: nice savings, but often not products relevant to me or convenient to places I go. The company seems to argue that this is kind of the point, getting people to go new places and try new things by dangling the carrot of a super low price in front of them.

But for Groupon, going more local than they currently do could begin to get tricky. In many ways their current model and going more local seems to work against one another… the web lowers barriers to make it easier and easier to get more and more people involved, achieving the big numbers of buyers that Groupon needs to be effective. Creating more locally targeted offers is great for potentially increasing relevance, but it also creates more and more offers diminishing the impact of any one offer, both in the marketing ‘wow’ factor and the number of folks who may be virally promoting any one offer. Too many friends ‘promoting’ their area deals would run the risk of devolving the offers into something that looks more like spam than a can’t miss opportunity, and seemingly the amount of Groupon promotion behind any one offer would also be diminished.

I also wonder how much of a role redemption rates play into their model… as in someone bought it because it seems like a cool thing to try and for not much money, but never get around to redeeming it. Stats seem to vary about redemption rates with gift cards ranging from 4% to 15%+ of gift cards going un redeemed, and 33% of the value never being redeemed (tower group). And you’d think that the potential for un-redeemed Groupons may even be higher for something like a $4 cheesesteak sandwich versus say a $20 Best Buy gift card.  This is another area where more localization may work against their current model, the closer and more convenient a retailer is, the less likely that they Groupon will go un redeemed.

It sounds like increased localization is already on the Groupon roadmap, it will be interesting to see how they do it and if it’s a success.  The amount of buyers they can get excited and on board for deals sometimes seems pretty amazing. I suspect there is a certain snowball effect derived from viral components of online social networking marketing that drive those large numbers of buyers today… the question will become how they’ll continue to exploit that when deals are geographically more fenced in, inherently limiting (or at least muddying the waters of) who is being marketed to for any single offer.

Now in the olden days when you just bought a printed foldable map this didn’t really matter much, but nowadays in the modern inter networked world of digital maps and folks creating a dizzying array of new services helping connect people with locations, it matters more.  Now within a single stand alone application like say a TomTom navigation device there is probably not much thought put into what you name a place, but in the web2.0 world where interoperability and information sharing reign, everyone needs to know what location everyone else is talking about when someone is talking about the business at 4151 North Central Expressway.

So rather than just getting everyone to try to agree on a standard, which could take years and years and would probably be a lot like herding cats, Placecast has announced today that it has developed a technological solution to the whole problem and they’re opening it up for free use.

The product is called the Placecast Match API…. and it’s described as “a Rosetta Stone for location data”. For those that need a refresh on their ancient Egpytian artifacts, this basically just means that they will provide a way to translate between the different “languages” that different services use to describe locations for the purposes of enabling interoperability between those services.

There is a great article on Tech Crunch that demonstrates how this problem manifested itself in the hot area of mobile social networking and the battle of the check-ins where folks may want to check in somewhere on a number of different services without having to fire up each service independently and do it manually. Given the viral and social nature of services like Foursquare and Gowalla, I guess it’s not surprising that this is where we’d first see the need for better interoperability between services.

One area where this is particularly interesting is around the area of location based advertising. One of the things that needs to happen to help ramp up growth in this area is more scale in order to make hyper local and location oriented advertising finally get on the radar screen of folks that control advertising dollars. It’s not that there are not a lot of consumers using these types of services today, there are… but usage is spread around among a lot of player.  Consumers may look up directions via Google Maps, Yahoo Maps or Mapquest, others may rely on their Garmin or TomTom devices, while urbanites without cars may just be checking in with FourSquare, Goawalla or Loopt or using one of a hundreds of local discovery services like UrbanSpoon, Yelp, Where, Geodellic, etc.

The amount of traffic to any one hyper local area on any one of these systems is likely not significant enough to create a media buy, but centrally tether them all together with a common reference point and pretty soon you have what begins to look like the beginnings of a network… a point of interest advertising network. 

Putting banners in apps and on wap pages is one approach to the location based advertising opportunity, but there certainly seems to be just as much opportunity if not more around “listings ads” connecting mobile users with the businesses they’re looking for from mobile search and discovery services and then capturing, sharing and aggregating the related check ins at scale across the ecosystem.

I am not saying that this is the Placecast end game, but something like the Match API and other similar offerings by competitors certainly seem like it could help spawn competitors to what folks like CitySearch are doing with CityGrid around the creation of ad networks tied to places.

What will be interesting  is to see how publisher view participating in such a system and the more thorough socialization of content from their system… when the depth, richness and accuracy of that content may be a significant source of unique competitive advantage.

Another up and comer in this area, with a new twist, that is beginning to get some press is a company called Hot Potato.  Here is where they fit in:

What they do: They create an online social network around the dimensions of “here” and “happening now”.  Facebook has people at its center of gravity and Yelp has places (mostly businesses) as theirs. Folks like Foursquare and Gowalla have seen the value of connecting the two with gameplay around the places where people go. 

Hot Potato is similar, but with a focus not as much on the places themselves as on the live events happening either directly in a real nearby place or one 1,000 miles away. Think of it as a mobile or virtual social layer on top of eventful or meetup.com where folks check in to events to socialize.

How it works:  As with Facebook, Yelp, Foursquare and Gowalla, having your friends involved is a key component of the service.  So the first step is to invite all your friends with handy friend imports from Facebook, Twitter and Gmail supported. Once your friends are connected you can kind out what events they’re attending or create your own events and invite others to join you.  Like with Foursquare, people check in to an event in progress and can share comments and pictures with other attendees… events can be open to anyone or made private for only a select group to participate.

I can see this type of tool being particularly good for a business conference where everyone is there to network and share information and to socialize. I tried to set an event up for the Where2.0 conference happening in San Jose this week…  seems that no one found it and a new one was created instead… although even that one had just 16 folks check in and only on posting that I could see.

The Hot Potato service is just getting off the ground, and seems to be in its very early stages at this point, with many kinks to be worked out. The website seems to be down a lot, and I left a question with customer service five days ago about how to set up an event, and have yet to hear back.

For attending real world events at physical places it will be interesting to see if Hot Potato can find enough ways to differentiate itself with features targeting the needs of live event goers maybe around tickets and what to do afterwards. Currently there is not a lot more you can do with Hot Potato than what someone might find checking in somewhere like at Madison Square Garden for an event or at ‘Snowpocalypse’ on Foursquare… with their more loose interpretation of ‘place’.

The service is currently heavily used for ‘virtual events’ around social television watching, like March Madness or the latest episode of ABC’s Lost… making what for many is likely not a very social activity of sitting in front of the tv at home, a bit more virtually social at least. Although it feels like the live and in person events need a different set of capabilities than the virtual event attendance like watching a tv episode, so I suspect that at some point soon, Hot Potato may need to split and decide which market they’re after and how to really differentiate themselves.

Its an interesting enough twist however to continue to keep an eye on.

There are two basic underlying practices as part of the guidelines:

1. Users must receive notice about how location information will be used, protected and shared… although the form of notice is not dictated

2. LBS providers must show that users gave consent to divulge location before initiating the location based service and users must have the right to revoke consent at anytime… although the way in which consent is recorded or retracted is not dictated

Some other details of interest, and what one may potentially read between the lines: • CTIA encourages the industry to develop “new technology to empower users to exercise control”… in other words lets not just bury some words in the terms & conditions somewhere to cover our butts, someone please come up with a cool system to give consumer controls over their location data that they’ll actually use… maybe a fireeagle-ish thing?

• A wireless carrier is a LBS provider when it directly provides users with a service, not when it provides location information to an application developer who then turns around and offers a location based service. In other words the guy directly offering the service is the one bearing the LBS provider responsibilities, not the originator of the location data, so lets provide protection (and remove some risk) to the carrier providing location data, thus encouraging it.

• When location information is not linked to a specific device or person, but only used in the form of aggregated or anonymous data, notice must still be given, but the consent requirement seems to go away… ie you still need to tell people what you’re up to, but since it’s not about any individual, getting individuals consent would be over-kill.

• LBS providers must inform users of how long location data will be retained and should only retain location data as long as business needs require and should afterwards be destroyed or converted to aggregate or anonymous data. This seems to be a tricky one, in many cases it would seem to be in the business best interest to retain as much information as it can for as long as it can… so I don’t see many folks being anxious to destroy this information if there may be a valuable business purpose down the road that they haven’t come up with yet.

 • “Consent may be implicit such as when users request a service that obviously relies on the location of their device”… ie all that stuff about consent doesn’t really apply if you’re running an app called “Whats nearby me now?” where it’s obvious that it needs to know your location to perform.

The whole things reminds me quite a bit of what the web community has done with regards to browser cookies and PII online, so there seems to be a lot of precedence here. As you might expect there is nothing revolutionary in the guidelines and it is more or less common sense and doesn’t disrupt much of the way the location based services I’ve seen operate already.

It may have been my imagination, but while reading it I felt as though the CTIA was really hoping that someone would develop an innovation that would allow users to actively manage their location sharing while realizing that in reality it’s likely to go the route of check boxes on multi page terms and conditions documents that no one reads.

Forget about having me book an airline ticket, I’ll spend a week on Expedia with all those awesome options to work with… well what if I try these days, in to these airports within a 50 miles radius, with these times… now I wonder what will happen if I can try to arbitrage either two one ways, or throw in that trip to Denver next month trying to cross book that return with this departure using the same flight numbers… what fun!

So you can only imagine my excitement when I heard about what a company ReserveX was looking to do tying together location based marketing with yield management designed for tickets sellers. Sloshing around in a big ol bucket of data trying to maximize revenue by continually re-pricing to match supply and demand is one thing, but to introduce real time proactive mobile marketing and trying to figure out how the completely new dimension of proximity will fit in seems pretty damn interesting.

 I suppose the proximity aspect is not truly new, since folks booking airlines flights have always had the option to fly into nearby but less convenient airports, and the sellers have long tried to put a value on that. But you have to think that physical proximity between a consumer and the goods they’re after is a great filter, if for no other reason than it’s inherently convenient and creates the least amount of effort… it could surely be a huge factor for all sorts of purchase and pricing decisions beyond tickets.

The ReserveX opportunity is seemingly pretty straight forward, just like the airlines, entertainment venues want to put as many bottoms in seats as possible. When Madonna comes into town this is not a problem, but at an industry wide level, venue fill rates are well below capacity. Right now it’s not always easy for a consumer to discover what and where events are happening and if there are still tickets available… while at the same time venues large and small are leaving many seats un filled.

Many of the large players like Ticketmaster, Live Nation and Tickets.com have developed systems to allow other application developers to query their inventory and to buy tickets, in an attempt to reach a larger potential audience of ticket buyers. But ReserveX is taking things a step further by doing a few more things. Not only are they aggregating all those source of tickets into a single place, from guys like Ticketmaster and Live Nation down to your local jazz bar, but they’re also developing a yield management capability which will allow venues to better fill and monetize those seats.

What is uniquely interesting about yield management for entertainment venue tickets sales versus say airlines is that there is the new opportunity to use location, including proximity to a venue, as an important new factor in the equation. Since yield management typically is used when inventory is perishable, and the value goes to zero at a particular point in time, the time element has always been a key part of the yield management equation. Now time can be paired with place to even better determine customers who may be most receptive to buying tickets, and to offer those who are most easily able to act with special last minute pricing or offers through their mobile devices.

Pair this with that Apple physical meets digital affiliate marketing patent, and pretty soon you might have your local bar offering you a free drink to book your tickets to tomorrow nights nearby Jay Z concert through your phone from his bar stools… not only for the potential repeat bar business, but for the direct affiliate fee revenue.

Juniper research estimates that by 2014 there will be 15 billion mobile tickets is use. And ReserveX is hoping that more than a few of these will be tickets to check out your favorite indie rock band, purchased a few hours before the event at a 50% discount, from the comfort of a bar stool, a mere ½ mile from the venue.

After playing with the geo location features on my mobile twitter client Tweetie and also playing with the location oriented Twinkle application by Tapulous, which all use various types of technology to determine your location and the filter out tweets from folks outside a certain radius… going back to the old school way of registering yourself on a good old fashioned website
with your twitter name and your city or zip code just felt well, very old school…

So I had to dig around and find out why such an old school thing like a local twitter registration site would even exist, let alone seem to be proliferating.

From the best I can tell, there seem to be two potential drivers… one is that I was suprised to learn that nearly 2/3 of twitter users are using the service directly through the web or via a desktop application. Maybe it’s because of how I was introduced to Twitter, but I always thought it more as a mobile thing… you know with the 140 character limit thing and all… well evidently it’s not. So that alone explains alot, most people don’t have the technological approach to a geo-filter available and they just want to find local people to twitter with… fair enough.

But the other cool aspect of a list of local twitter users is for accomplishing the opposite of what the location aware technology does for ya… location aware tech allows you to see those immediately around you and their tweets, but the old fashioned registration site in theory could let you drop in on virtual tweeps and their tweets in a specific area somewhere else.

Now the inner Colbert in me may joke that focusing in and reading the tweet stream of the general public in Shanghai if you live in New York, seems pretty damn useless, and in many cases it probably is. But in some cases it could be valuable, for example if you’re heading to a new city and are looking for recommendations on where to get a good steak, who better than to ask than the local twittersphere in the city where you’re headed. Or if you want to keep tabs on what the buzz is in your old college town, you can drop in on the local tweet stream there… in theory having a local group to zoom in on could have huge possibilities in allowing journalists to zoom in to follow the local action related to a breaking news event in a particular area.

On a related note there is a great article on Local Search News about how Twitter should register and create accounts for local businesses to help better identify them in the twittersphere. Not so we can follow the local Italian restaurant to read a constant stream of tweets about how good their last batch of lasagna is, but to allow for a common currency for referring to specific places and establishments as twitter nation so often does. It makes a lot of sense to me.

I am a little familiar with such things having worked for a leading cable network targeting kids and the various marketing to kids self regulation policies and the Children’s Online Privacy and Protection Act (aka COPPA).