One question : since you app v1.x was released, hence there could be no more development costs, why didn’t you leave the app and servers running ? Was it too expensive, was it pointless ?

Great post. As someone that has run a geo-aware startup, I value your opinion on this space immensely. And I think you are right, we were/are headed toward somewhat of a bubble similar to the early 2000s (although much smaller and much more confined).

Mike makes some good points — namely, Gowalla had lost some of it’s mojo over the last year and I think part of that was because Josh Williams was never about conquering the world. To be honest, knowing Josh enough to be dangerous, I think he was a purist that happened to put a great app together but he wasn’t willing to do some of the things that would have made him more money but didn’t align with his original vision of the platform.

To that last point, I believe that Gowalla got to a point (especially after their most recent tack in a different direction) where they were going to run out of money. At that point, Josh and Scott needed to either shutter the business or sell it to someone. Given the fact that they were able to make some money, pay back their investors (albeit pennies on the dollar) and ultimately get cool jobs at Facebook, I’d say they did okay.

Back to your original point, however, LBS start ups not named foursquare may not cut it down the stretch. Like Mike said, people are using these services for more pragmatic and intuitive uses like finding coffee locations and cashing in on deals on Black Friday. There will be lots of smart applications that tap into the power of social but just like Facebook has won the war of the social graph, I’m not sure anyone is going to unseat foursquare (and Twitter and Facebook) for top position when it comes to check-in services.

Best,
Aaron | @aaronstrout

I agree with you completely. My point is not that the LBS market die or dying, but that it was way overheated. Being number 2 or not, Gowalla was a significant player in the market and got some real user base (2M is not a tiny number). Seeing Alfred goes today as well (most probably for not much more) makes me think that founders need to revise the way they think about their business plans. It is no longer “if we get enough eyeballs we can rule the world” kind of game.

Location based services will continue to flourish as we are still in the early innings of the game with less than 10% of the population having adopted LBS. I think the check-in game is likely over as Yelp (still kind of a big deal), Foursquare, Facebook and even LevelUp seemed to looked things up. We might see Google make a run within the G+ platform once Zagat is fully integrated but there isn’t much room left for competition as local establishments can only deal with so many check in, mayor, duke and other reward type promotions.

LBS in my mind is a much broader market. I look at applications like the Starbucks app which tells me where the nearest stores are, what features they have and whether they are open or not and see a ton of value still to be surfaced using location.

There is still a huge amount of opportunity available in the areas of discovery, evaluation and decision assistance, analytics, guidance, commerce and even the social element of the location space. What we are seeing now is just the first ebb in the ongoing flow of innovation.