You’d be excused for thinking LBS stands for a Lot of BS. To date, location based services such as foursquare and Gowalla are really just games. Users check-in to earn points or stamps and, in the end, bragging rights (see Battle of the check-ins). That’s been enough to keep several hundred thousand people interested (I’ll admit, I’m one of them) but is it enough to attract the millions of users facebook and Twitter have?

In and of itself, location is not very interesting but when location provides context for valuable data things get very interesting indeed. Yelp is a great example. They’ve been providing iPhone users with data on nearby businesses for a while now. Recently, Yelp introduced check-ins on it’s iPhone app and it will now compete head-to-head with foursquare and Gowalla. Yelp’s rich database of consumer reviews gives them a distinct advantage over location-only services and also enhances the value of their data by adding more credibility to their reviewers. If reviewers check-in to a local business, you know they probably aren’t just making stuff up.

At this point Yelp appears to have the most compelling app, but it’s still early and all location services must resolve some basic issues before they really gain traction:

  1. Lack of Privacy – Understandably, many people aren’t comfortable sharing their location with strangers or acquaintances and never will be.
  2. Low Signal-to-Noise – Your current location is not all that interesting to most people most of the time.
  3. Low Reward – The rewards for checking in are small indeed. Earning points or stamps is not interesting to the majority of people. Yes, there are some other benefits such as knowing where your friends are and maybe saving a buck on a beer, but for most people these are not compelling reasons to check-in.
  4. Inconvenience – Today it takes a lot of effort to check-in to a location. You need to take out your phone, launch an application, wait for it to locate you, find the matching nearby location (or create a new one) and click the check-in button.

Once these problems are addressed and more services take Yelp’s lead by marrying valuable data to location, I expect we’ll see much wider adoption of LBS among consumers.