Although location-based services (LBS) are best-known for providing features based on “checking in” at different locales, the future direction of LBS as a digital marketing tool will likely be shaped more by a combination of game mechanics and simple practicality than anything related to checking in.

Jeff Kirchick, director of university outreach at SCVNGR/LevelUp (SCVNGR is a mobile game provider and LevelUp specializes in mobile payments) opened his presentation at the FutureM conference in Boston entitled “Geolocation: Where Are We Going?” with a few statistics to emphasize the importance of mobile technology to commerce. Among them are the existence of 300 million smartphones in the US today, 26 million smartphone users who made mobile payments in 2011, 27% of consumers are interested in mobile payments, and 93% of current college freshmen are expected to own a smartphone by the time they graduate (current penetration rate is 52%).

LBS Fails to Meet Promise

One aspect of LBS Kirchick said many experts are loathe to discuss is that in many ways it has so far failed to live up to its promise. “Foursquare was valued at over $100 billion in 2011 and SCVNGR was valued at $100 billion,” he said. “You’d think with that big money you’d get big results. But you’d be wrong.”

In fact, Kirchick said only a tiny percentage of the population (4-5%) uses LBS services, such as check-in, today. However, 30% of the population uses LBS for getting directions or recommendations. “It’s very big for pratical things that help our everyday lives,” he said.

Do What Feels Right

The key to LBS check-in largely failing but more pratical uses gaining some traction boils down to people liking to do what seems natural, according to Kirchick. “My girlfriend checked in at a coffee shop on Foursquare and unlocked a free coffee,” he said. “But the counterperson didn’t understand it and Foursquare wasn’t connected to the POS system. We talked to the manager and finally got the free coffee, but it takes a lot of education and a lot of work.”

In contrast, using a smartphone scanner to pay by phone is “quite easy,” said Kirchick. “Learning how to do it is like learning how to use a debit card instead of cash.”

It’s All a Game

Looking ahead, Kirchick said in addition to practicality and activities that feel natural having a major influence on the evolution of LBS, game mechanics (or “gamification”) will also have a significant impact. He said there are three game mechanics dynamics that will influence the future of LBS: appointment, progression and countdown.

“The appointment dynamic can be seen in social games like Farmville, which has 40 million players,” he said. “You have to show up to water your crops at certain times. If you think about it, happy hour, where you show up at a certain time for cheaper drinks, is no different. As kids, we’re taught that games are games and life is life, but the same mechanics guide you through both.”

Kirchick then explained the progression dynamic as being at work in the LinkedIn professional social network. “Your LinkedIn profile says you’re 50% done, and will be 60% done if you upload a photo,” he said. “Even though it annoys me, I respond to it because I hate leaving something unfinished.”

Kirchick said the countdown dynamic can be seen in Groupon, where you have a relatively short period of time to take advantage of an offer. “Psychological studies show people who have 24 hours to take advantage of an opportunity are more inclined to do so than those who have 30 days,” he said.

Kirchik added that Groupon also uses the communal game play dynamic. “Groupon offers work through mass buying,” he said. “You assume when 500 people are taking advantage of the same offer, they can’t all be getting scammed.”