For those on the bleeding edge of technology there are seemingly hundreds of new applications and networks, each with slightly different functionality, each competing for the icon space on my phone (Blackberry). One that has been getting a little bit more share of voice is a location based application/game called FourSquare.

Location has always been important to relationships – the ‘L’ in ASL still begins thousands of online chat encounters daily, but over the years, those who have tried to launch location based services have come up against the same barriers. Those barriers are rooted in basic economics, which most application developers have never studied, so they don’t have any concept of utility or critical mass or switching costs.

A service like FourSquare is actually very simple to build. You don’t need GPS or an iPhone, all you need is 2 basic data points:

1. Unique Users (A) – This has been made super easy by things like Twitter, Facebook and OpenID.
2. Unique locations (B) – This is hard. Even FourSquare hasn’t cracked this yet. As soon as there is duplicate location in the system it breaks. Users are split across locations in the system that are the same place in reality. This reduces the utility of the service for the user. Nevertheless, a unique user can set their location by choosing from a list or simply stating where they are.

Once you have these two pieces of data, you can do things with them. Leaving aside privacy issues for the moment, a location based service like FourSquare is very similar to an SMS application that I designed in 2000 enabled users the following commands:

• I am at (B)? – Sets user’s location.
• Where is (A)? – Return’s user’s location.
• Who is at (B)? – Returns all users with the same location.
• Show me (A’s) Profile – Returns information about user.
• Send (A) message. – Sends message to user.

So like most applications circa 2010 – technically simple. Add some GPS filtering that only allows a user to set a location within a certain distance of where they are and you reduce some of the ‘gaming’ that older location services were susceptible to. Add a challenge element like a arbitrary badge and some APIs and suddenly a platform, not just an application.

So now you too can develop an application like FourSquare. All you have to do now is get people to use it. The question then becomes – Why would people use it? Or in economic terms – What utility does a user get from this service?

Here’s the pitch:

We’re all about helping you find new ways to explore the city.

We’ll help you meet up with your friends and let you earn points and unlock badges for discovering new places, doing new things and meeting new people.

You’ll find that as your friends use foursquare to check-in, you’ll start learning more about the places they frequent. Not only is it a great way to meet up with nearby friends, but you’ll also start to learn about their favorite spots and the new places they discover.

In other words, I have to change my behaviour to get benefits I currently receive using practises that are part of my everyday life – like phone calls, email and talking to friends in the pub. Not only do I have to download a 3rd party application and hope all my friends do too, I also have to remember to use the application every time I go somewhere, even if it is as mundane as the ASDA carpark.

The basic problem with FourSquare, like many free applications on the web, is that it requires the user to give up a valuable piece of information for little or no reward. I don’t need FourSquare to signal where I am. I can Tweet my location, I can put it in my Facebook profile. I could text my whole address book and tell them that I am standing on Platform 3 of Richmond Train Station, but what would be the point?

Here lies the real purpose of FourSquare. The application allows FourSquare to mine one of the most valuable pieces of personal information you own and sell it to companies who want to advertise to you. The deal will be sweetened by childish ego-boosting activities like the concept of becoming the ‘Mayor’ of a place which may or may not entitle you to a benefit.

Not only will you give up your valuable data for free, you will also suffer any opportunity costs of letting people know where you are not. This has been highlighted by such spoof sites as www.pleaserobme.com which show that announcing to the world that you are in a resturant means you are also announcing that no-one is home.

In places like London, where there are very few businesses that know what FourSquare is, let alone know the promotional opportunities it may present, the most common question from users is – “I’ve checked in – what now?” Without critical mass, these services are like owning the only phone in the world.

Even FourSquare themselves understand that trying to explain the benefits to users is difficult. The site says:

It may sound a little silly until you see the list of places that are offering freebies to our mayors – free coffees, free ice-cream, free hotel stays – it pays to be a foursquare loyalist and check-in whenever you go!

In reality, people are the Mayors of their own houses and carparks. I don’t need to become the Mayor of my local supermarket, they already have a loyalty system and my ‘friends’ couldn’t care less which supermarket I shop at.

Perhaps FourSquare will become a standard. Perhaps the benefits provided by FourSquare and it’s commercial partners will compensate you fairly for making public your current location. Perhaps you will not need to make those calls that are the glue of most relationships that start with the words “Where are you?” Perhaps the makers of such applications will understand the difference between functionality and utility.