Sept. 7 (Bloomberg Businessweek) -- Sept. 7 (Bloomberg.com)—Location-based services are a $1.9 billion business, projected to hit $3.8 billion by 2012, according to research firm Gartner. Since its launching in 2005, Loopt, a pioneer in making software for people to find each other on a map displayed on their mobile phones, competed mostly with other startups, including Foursquare Labs and Gowalla. Now the 45-employee Mountain View (Calif.) company faces a behemoth with a half-billion users: Facebook, which launched its own location-based service on Aug. 18. Sam Altman, Loopt's 25-year-old co-founder and chief executive, spoke recently with Bloomberg contributor Antone Gonsalves about how his company, which has 4 million users and more than $17 million in venture capital, is reacting; why Apple's iPad is unlikely to have much impact on Loopt; and the challenges of persuading small businesses to advertise. Edited excerpts of their conversation follow.
Antone Gonsalves: What was your gut reaction when you discovered that Facebook was going into location-based services?
Sam Altman: They had been talking about it and there had been a lot of rumors about it for about two years, so my reaction was it's finally here—people can stop wondering about it and stop asking me questions. My second was, wow, this is a little scary, but if we play our cards right, this is going to propel our company to that next level.
How will Facebook change the market?
This is going to be the best thing ever to happen in the history of Loopt. Facebook is going to educate lots and lots of people who have never heard of these services before. Given that Facebook takes the approach that it's going to be the platform for the entire Web, we now have access to 100 times more data than we did before. If we could show you where 11 of your friends were before, now we can show you where 110 of your friends are. So Loopt will offer unique services on top of what Facebook is offering. It would be suicidal for anyone in this space not to integrate with Facebook, and I expect them all to do it. Then the question becomes which of us can build the most differentiated user value experience on top of this very basic data layer.
Do you see yourself integrating with a lot of Web platforms in the future—Facebook now, possibly Google later—and becoming an aggregator of information?
Our feeling is that Facebook is going to be the dominant platform and that Google's expertise is not really in social. We'll aggregate multiple data sources to present you with the most relevant information [about] what's going on around you, but I'm not sure what role Google will play.
Do you see tablet-style computers, such as the Apple iPad, playing a big role in presenting location services?
Not really. I think tablet computers are a huge trend, and they're going to be really important in the industry. But location-based services are interesting when you're out on the go and you have your phone with you. You can't put a tablet in your pocket, and most people don't carry a tablet with them all day everywhere they go. So I believe the primary mode of interaction is going to remain via a mobile device.
What are the challenges in getting local businesses to advertise on Loopt?
The biggest one is to just reach them. How do I sign up mom-and-pop businesses that may not even have a computer, much less an iPhone? How do I reach them; how do I convince them that they should do this?
The second is to understand that this person who has e-mailed me and wants to advertise does in fact own the business at this address. How do I know the person who contacted me and wants to offer 25 percent off at this restaurant really owns this restaurant and is not his competitor trying to cause trouble. We're still working on a strategy, but we're not going to hire hundreds of salespeople. It's going to be a more automated process.
Why have location-based services such as Loopt failed to reach folks over age 30? Why haven't mainstream consumers embraced the technology?
Time and again, people over age 29 who are distrustful of technology make two mistakes. They overweight the downside risks. They can't articulate why it's so bad to have a photo on the Internet, but they're uncomfortable with it, and they underweight the value. They don't see enough upside. As it becomes more mainstream in the younger demographic, the older demographic takes note and experiments a little and eventually embraces it. We've seen this with five or six technologies on the Internet: instant messaging, photos, and now location. We have noticed over the last six months a trending of our average age upward.
Do you see a difference in privacy settings between older and younger users?
Younger people tend to share their location with more people more of the time. The default for the average younger person is, "I'm going to share with everybody and block these few people." Older people tend to share their location with fewer people more of the time. Their default is, "I'm blocking everyone, but then I'm going to allow these few people."
Why the difference?
Young people are more comfortable with technology. We're the first generation to grow up on the Internet. We don't know anything else; we're just sort of used to it. And also, we value our friends knowing where we are. We value knowing more about our friends. And I'm not sure why that is.