There has lately been a stream of positive signals emitting from the location and proximity industry (I include proximity in the location technology category), due to an increased use of location data to power various services, like in marketing, coupled with more and more investor dollars flowing into the space. On the investment side, you don’t have to look further than the recent $16m investment in Safegraph.
The intersection of people based products and marketing, big and small data, and accurate location data is quickly becoming a “must have” component of many smart product offerings and companies. The latest “must have” proof point being Snapchat’s 200 million acquisition of location and attribution startup Placed.
Snapchat and Placed are post-acquisition reassuring the market that business will be going on as usual. However, this is not a revenue acquisition by Snapchat, but rather a strategic one, and it should come as no surprise to anyone when Snapchat gradually shuts down external business in favor of powering the core advertising engine of Snapchat.
So, what does this power move by Snapchat mean for the location and proximity industry? I’ll try to break it down into three main observations.
1. The investment inflow will accelerate
There is a sense of flock mentality in all business, and also in the investment world. And that’s not necessarily a bad thing when the flock is moving towards green pastures.
With now a definitive seal of approval towards location-based products from one of the most prominent global tech startups of recent years, the risk of putting dollars into location startups will be perceived as lower and the potential upside now suddenly in a universe where funds will start to make notice - as they get into proximity (pun intended) of adequate returns. Case in point, ”only” $13.3m was invested into Placed, and with an $200m+ exit, investors should be satisfied with the return. Note that a portion of the $200m was likely in Snap Inc. stocks (Snap Inc. course being the mother company of Snapchat).
I can not underscore how important this delicate balance between risk and return is for venture funds, and how wide the cash floodgates can open when the balance is just right. It’s also worth mentioning here that few of the top tier funds have yet to invest in the location data space.
2. Mo’ FOMO
From Facebook to Google, and now Snapchat, I am starting to see an emerging pattern. Many, if not most, of their products, are built on robust location technology, adding crucial user context to their data sets.
You can bet that many startups and corporations alike are today and beyond evaluating their own location strategy, and that painful “Fear Of Missing Out” feeling will only increase as time passes. Who will be next to acquire some kind of location company? Twitter? Pinterest? Amazon? And would it be for marketing purposes, or perhaps in increasingly data-driven industries like retail or finance?
3. From quantity to quantity and quality
Most industries start by addressing scale, as the inherent supply/demand balance needs to be taken care before quality becomes a topic of differentiation.
The location and proximity industry are still young industries, and companies have been attacking the scale challenge from their different vantage points. And yes, scale is important, or else the actual use cases will not be there, but now is the time to also address the quality issue. Snapchat’s recent Placed acquisition ushers in a more mature location industry, and that stage of maturity comes with an increased need for quality.
That quality will be found part in new more accurate location-signals (like Wi-Fi, beacons or NFC) and part in more advanced methodologies to make sure we best understand the data already out there. As in many industries, machine learning and AI will be central to achieve the latter.
No matter what the future holds, Snapchat’s acquisition marks the start of an interesting period for the location industry. I believe we are nowhere near the end of that journey, and I’m excited to see where we and the industry will end up.