Deciding to share ones location using a mobile device is not a new phenomenon.  Several geolocation applications, described as those that use system location awareness as its core function, have served this market for some time. For the most part, the value here is that of forced serendipity.  For example:  if you’re my friend and you decide to share your location and I am in the area, perhaps I can drop by and have a chat. In many cities this is how groups of friends are assembling. Not through a process of phone calls and lengthy coordination—how old school!—no, today for many it’s about meeting up by displaying your location and hoping you are discovered or by you discovering the location of others. Clearly it’s not for everyone and subsequently, to date it has had a relatively niche following.

While many vendors have entered this market and have had some limited success (measured through usage and not revenue, mind you) a new entrant to this space has provided an unexpected boost and it may just be their unique features that propel geolocation applications into the pseudo-mainstream.

Recently Foursquare (http://www.foursquare.com), a geolocation startup, has entered the market with the same basic two features available from the incumbents: the ability to declare ones location (called checking in) and to view the location of others. But here’s the twist. Foursquare has made it a game. And it’s strangely addictive. Declaring ones location can result in two types of prizes. First, for specific behaviors you get badges (feels a little like boy scouts and I think that isn’t a coincidence). These behaviors include checking in to a location late at night or declaring your location in two different cities on the same day.  The badges show up on a website and are visible to others including through their mobile device.  The more badges you collect, the more bragging rights you get (like I said, it’s not for everyone). The second type of prize relates to the frequency of checking in to the same location. The person who has checked in the most to that location becomes its mayor.  Generally there are no privileges to that designation other than the fact you are the mayor.

With me so far?

I don’t want to dwell on whether there is any merit to what I’ve described here so far.  I’ll let you be the judge of that.  But here is where I think Foursquare and its gaming approach gets interesting: they can actually make money from this!

People who sell things love customer loyalty and for good reason. Loyal customers are cheaper to manage than acquiring new customers. So someone who frequents, say, the same coffeehouse would be considered a loyal customer. Visit the store enough and with Foursquare the person can become the mayor.  Now the person has loyalty credentials which may be valuable to the owner of the coffeehouse. For example, why not reward that person for their loyalty and further reinforce that loyalty? Organizations do this all the time. All the individual needs to do is show the coffeehouse owner the mayor designation on their mobile device. But let’s take this a little further. If frequency can lead to perks, then there is the possibility to generate more business as individuals try to earn mayor status. Or the owner may just reward the individual for simply checking in, thus providing additional incentive to visit the store in the first place.

So what’s my take on this? It’s a win-win. Foursquare makes money by becoming a marketing vehicle for businesses (and uses a smart business model not based entirely on ad revenue) and the individual attains rewards for simply checking into a location.  I’m not sure that I will be a power user of Foursquare, but I like this approach.  In social computing, monetization has been elusive and these guys have put their finger on something really smart. And that’s a game changer. Let’s see what happens.