Executive Summary

The convergence of social networking, smart mobile devices and location based services, has driven significant change across the mobile computing landscape. Mobile users and developers are experimenting with new ways to interact with their physical environment using the web and mobile phones. This trend has given rise to the “gamification” of the world where everything and everyone can be incorporated into a game or new experience. Astute mobile application vendors have spotted this shift and are bringing to market applications that help mobile users make new connections and interact with people in close proximity. We expect this emerging market to grow to $1.9 billion in revenues by 2015. Not only does this trend provide new opportunities for application vendors but has the potential to disrupt the current social networking market and architecture of the web.
Smith’s Point Analytics defines proximity based social networking applications as those that use geo-proximity as the primary filter in determining who is discoverable on the social network. This differs from location based social networks such as Foresquare and Gowalla that broadcast location to existing friends or mobile dating sites that match people primarily based on compatibility.
By enabling users to meet new people and interacting with them and their locally relevant content, proximity based social networking applications are highly engaging. This experience of will drive user adoption and presents multiple opportunities for advertisers to interact with potential clients in innovative ways. Brands that can interject themselves into the experience will see valuable returns.
The rise of proximity based social networking also lays the groundwork for long-term disruption in the mobile landscape. The trend toward social interaction though proximity social networks will drive content to the edge of networks which will be consumed by users through ad-hoc peer-to-peer local area wireless networks. This shift from wide area wireless networking to local area networking will mitigate the data burden on carrier networks while reducing their influence, creating opportunities for new players and innovative initiatives by mobile operators.
In the future, proximity social networks will manage and define the social and technical processes that dictate connectivity and interaction between mobile users in the same location. Discoverability and privacy are at the core of these protocols and vendors are approaching these mechanisms differently and getting it right will be paramount to which vendors survive and which ones fail. The high profile pivot of Color, after raising $41 million, is a good example of challenges in this market. Vendors must overcome difficulty of attracting a critical mass of users to create a compelling experience.
Facebook has won the first stage of the social networking market evolution but may miss the rise of the proximity network due to their focus on controlling identity. Many vendors are looking for next generation social networking technology and interacting with people and the environment in a user’s immediate proximity will be an important part of the next evolutionary stage.

Table Of Contents

Table of Contents

What is Proximity Based Mobile Social Networking? ...... 1
How Proximity is Different Than Location ........ 1
How Mobile Dating is Different Than Proximity .......... 1
Proximity Based Social Networking Application Strategies ........ 2
Proximity Based Social Networking Discoverability ..... 2
Connecting on the Proximity Based Social Network .... 3
Segmenting Proximity Social Network Applications ........ 5
Friend Finder Applications .......... 5
Over the Top Proximity Applications ..... 6
Presence Based Social Networks 6
Technology and Market Structure ..... 6
Location and Proximity Technology ....... 7
Peer-to-Peer Networking Technology ... 7
Business Models.... 9
Market Opportunity 10
Gamificaiton of The World ........ 10
Proximity Social Networks Create New Connections 10
Proximity Takes Engagement Beyond Check-In ......... 11
Dating Sites and Proximity Social Networks are Going Mobile and Usage is Growing..... 12
Proximity Based Social Networks Support Pull vs. Push Marketing 12
Proximity Apps Provide Long Term Strategic Value to Advertisers . 12
Influx of Capital ... 13
Growth Barriers ....... 13
Privacy and Safety Concerns ........ 13
Creating Networks Effect for Social Networking Apps ......... 13
The Market is Becoming Crowded ....... 14
Scalability of Business Models .. 14
Forecasts ...... 14
Proximity Based Social Networking Apps ....... 14
Geography 16
Company Profiles .... 17
Color Labs . 17
NearVerse/LoKast .......... 18
Loopt ........ 19
MyRete/ WhoHere ......... 20
Sonar ........ 21
Industry Outlook ..... 22
Reaching Critical Mass ... 22
Proximity Social Network Vendors Position Themselves to be Gate Keepers of Ad-hoc Peer-to-Peer
Networks of the Future .. 23
Discovery Across Networks Will Create the Hockey Stick .... 23
Proximity as a Feature of All Social Networks 23
Proximity Applications Will Help Drive Demand for Augmented Reality Applications .... 24
Friend Finder vs. OTPA vs. Presence Networks ......... 24
How will Band of Four Participate?...... 25
Opportunities and Threats 26

Table of Figures

Figure 1 - Proximity Apps vs. Location Apps ........ 1
Figure 2 - Proximity Apps vs. Dating Apps . 2
Figure 3 - Connection Discovery Strategies.......... 3
Figure 4 - Identity Management Strategies ......... 4
Figure 5 - AllJoyn Heterogeneous Network ......... 8
Figure 6 - Fanta Augmented Reality Tennis Game ........ 10
Figure 7 - VC Deals in Proximity Base Social Networking Application Vendors ........ 13
Figure 8 - Total Proximity Based Social Network Users Forecast: 2011-2015 .......... 15
Figure 9 - Average Revenues Per User of Proximity Based Social Networks Forecast: 2011-2015 15
Figure 10 - Total Proximity Based Social Networking Revenues Forecasts: 2011-2015 ...... 16
Figure 11- Color’s Blue Screen Shot ......... 18
Figure 12 - LoKast Screen Shots ... 19
Figure 13 - Loopt Mix Screen Shots ......... 20
Figure 14 - WhosHere Screen Shoots ...... 21
Figure 15 - Sonar Screen Shots ..... 22

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