Why Facebook Places Will Be Better Than Foursquare

Facebook held a press conference today to discuss the latest in their mobile features. They talked about a streamlined log-in process and the addition of "deals" to their recently launched location-based Places application. They've also created a Places search API to enable mobile, social, local applications.

But it was while Dave Fetterman, an engineering manager, was talking that I was struck by a realization about why Facebook's Places platform is going to be better than its competitors.

"Places are ranked by how important they are to that user," Fetterman said.

Just like Facebook filters your News Feed based on what's most relevant to you and your friends, it's going to filter real-life locations in precisely the same way. It will be seamless and easy and ridiculously useful.

So, if all my friends check into Beretta in San Francisco, and I hit the "Nearby" button in Places, it will show Beretta at the top of a list of restaurants in the Mission. That's powerful. Think about it as a travel tool, too. You go to New York, where you probably have some friends. Even if you've never been there and have no idea where to go, your friends checking in at their favorite places will provide you with a custom list of places to go in the city.

All Facebook needs is everyone to start checking in and generating data. And that's where these new "deals" come into play. They enable businesses to give what amounts to a virtual coupon to proximate consumers. Facebook doesn't take a cut of that transaction or anything because they don't care about it. What they want is the data that you're generating so they can use it to fine-tune their algorithms. And as a bonus, local businesses market Facebook's product, Places.

One big example? Some day soon, Gap is going to give away 10,000 pairs of blue jeans to the first 10,000 people who check-in at their stores. And they'll be giving a 40% discount to those who check-in after that. Suddenly, tens of thousands of people will have used Places and hundreds of thousands (or millions) more will have heard about the promotion. Gap will drive foot traffic, 10,000 people will get free pants, and Facebook will silently collect their data and use it to best their location-based competition.

Could Foursquare and other competitors get better at optimizing results based on your connections? Sure, but they just don't have the scale of 200 million mobile users, the preexisting social network, nor the experience developing social algorithms that people like.