Is it time to check out from location-based check-ins?

Bravo, The Financial Times, Starbucks, the Nets, Domino's Pizza, Zagats, Best Buy, Eye-Fi, and the NBA are a very abbreviated list of companies partnering with location-based social networks.

The hype reminds me of the early days of YouTube when the press and the pundits were lauding its revolutionary nature. I disagreed with the hype then, and see many similarities with today's check-in services with one key difference: I think location-based social networks can turn a profit--but they won't be able to do so as independent check-in services.

There are a few reasons for this, many of which I cover exhaustively in my soon-to-be-published Strategy Analytics report, "Check-ins drive headlines today and revenue tomorrow." There are three key reasons for a plethora of independent services will struggle to survive.

1.       There are too many of them. I've already covered my check-in fatigue in the FierceWireless article, "Unification could unlock the value of mobile social networking." But the growing popularity of Brightkite, Gypsii, Whrrl, Aka-Aki, Loopt to known entities Foursquare and Gowalla not to mention the new services launching daily will result in broader fatigue. Unified interfaces such as Bightkite's while interesting appear to be a stop-gap solution because as individual companies enter partnerships, build a user base and start generating advertising revenue they will want eyeballs on their service. Eventually, users will have to pick a service or dedicate half their day to checking-in. This will eventually limit the active users per platform

2.       Check-ins are going everywhere. GetGlue, Tunerfish, Miso and Hot Potato are examples of services that allow users to check-in to TV shows, movies, events, books and more. While niche services could garner a unique and engaged audience such a small group of users will make using the service non-compelling. Yes, hundreds may check-in to "The Girl with the Dragon Tattoo," but all but one or two (at most) will check-in to "The Devil's Gentleman," and since part of a social network is being social a lack of similar users could slow check-ins.

3.       The competition is catching up. Yes, Yelp's royalty (a clear nod to the democratic Mayorships awarded via Foursquare) may be a bit kitschy, but despite it being seen as a follower it has a dedicated user base who will opt for its check-in service instead of a new social network. What will happen when Amazon launches a book check-in service to its tens of millions of users or Rotten Tomatoes begins allowing users to check-in to movies? The independents will be challenged to maintain relevance.

4.       It's all about privacy. The broader mass market is not like early adopters. The early adopters are willing to check-in to a location, post that information to the entire world via Twitter or a social network via Facebook and accept the risks of the world knowing where they are. The mass market isn't going to do this and that will hurt the growth of location based check-in services that don't evolve.

It may seem unfathomable that such hot services could inevitably begin to falter, especially when data is showing such incredible growth. But the one piece of data that check-in services are not publishing is active users. It's a fantastic accomplishment that Foursquare has now surpassed 2 million users. Many other services are in the same range of total user numbers but until it's known what the total number of active users (users that have checked in within the last 30-60 days) the true popularity of these services will remain unclear.

Remember Revver? It was the service that was going to make YouTube obsolete. No? I didn't think so. Many of these services will follow the same fate but the ones able to evolve could become profit generating business for the long term. And because of that the market is not full of doom and gloom.

There are six primary ways for existing location-based social networks to succeed.

1.        Loyalty programs of the future. Today, buyers use a card to let a store know when they have made a purchase. But stores don't know if/when a buyer is in their store and not buying items, near their store or at a competitor's store. Location-based social networks will provide this information to retailers large and small. Instead of sharing location with friends users will check-in to a store and receive rewards. Think of it as a private Mayorship. Gowalla and Best Buy have already entered a partnership giving away Eye-Fi cards to some users that check-in.

2.        Location-based gaming. Booya's MyTown has helped to pioneer the location based game allowing users to buy real world locations, charge rent and fix up a virtual locale akin to Monopoly. Games such as this may be more suited for selling virtual goods in lieu of loyalty rewards but with games dominating the top ten Apple apps regularly a new type of game could be appealing to the masses.

3.        Remaining independent. All but a select few will be able to accomplish this but the one or two that does in fact find long term success engaging users the service can generate revenue from mobile advertising, mobile coupons, analytics, white labeling and partnerships with existing players.

4.        Outright acquisition. Facebook, Google, Twitter, Yahoo!, Yelp and many other platforms have considered getting deeper into the location business. Being acquired will provide a service with the resources and built-in audience necessary to expand. If a service is even popular enough the buyer may even keep the brands identity as Yahoo! did with Flickr.

5.        Offering a business intelligence product. Knowing where people are, where they are going, and where they have been is a powerful tool not only to national advertisers but local retailers looking for low cost business intelligence. While not all services will have enough users to create a broad offering, partnering or being acquired with a larger entity opens up this business model. Foursquare has already dabbled in this market.

6.        White-label services. Gypsii has been the most active by white labeling its service for Telefonica in South America, China Unicom and China Telecom. These partners allowed Gypsii to reach millions of users quickly giving it scale to become a viable mobile ad network and analytics platform while maintaining its own branded identity.

Clearly there is an opportunity for check-in services to find success. But in order to do some the companies will have to forego some of the headlines to engage in business models that promise long term engaged users and a viable business opportunity.

Josh Martin is a senior analyst for wireless media services in the Global Wireless Practice of Strategy Analytics.