Sonar is a location-based social networking application which draws from Foursquare, Twitter and Facebook to help users discover connections they share with others in the direct vicinity. The New York-based company launched at TechCrunch Disrupt in May, where the product finished as a runner-up. Sonar is a one of a few leaders in what is becoming a vibrant ecosystem of applications built on top of the Foursquare API.
Street Fight caught up with Sonar’s founder Brett Martin recently to talk about his company’s revenue model, as well as his more general take on monetizing location.
Why do you think the time is right for geo-social apps like Sonar?
We spent the last five years uploading our lives to the Internet – our likes, preferences, activities and so on – and now, we are downloading that information and spreading it over the suitable world. So there is a gold rush of applications which are working to help navigate that data in a physical context.
Monetization is a sore subject for many startups. How have you approached the task of building a revenue model for Sonar?
When people open Sonar, they have the intent of connecting with others. From a monetization perspective, it is as easy as putting the person you would like to speak with in front of you. At this point, our business model is a rather simple, pay-per-promotion model: we help companies reach the right person, at the right place, in the time with a small message. Brands are spending millions and millions of dollars to create online communities and we believe that Sonar helps take online communities offline and then takes those offline conversations and get them back online.
The banner advertisement was critical to the growth of the Web. What role will traditional banner advertising play in the monetization of the mobile space?
My opinion on advertising is that during the next ten years there will be the biggest change in the history of the industry. It will go from mass markets to entirely personalized. Everyone will know who is where and what he or she is talking about. The concept of advertising as it currently is will be laughable. People do not look at banner ads on the Web.
Location is reaching an inflection point: it’s just now beginning to be baked into information.
Is location ready to be monetized?
Think of it as a timeline. Social is just now starting to really get monetized. What it took was that it had to go mainstream and it had to be baked into everything. We are really just seeing the beginning of monetization of social.
Location is reaching an inflection point: it’s just now beginning to be baked into information. And while people tend to think of location as purely a check-in, the check-in is just one, explicit declaration of location. Every time we open a map, or plan a Meetup, or book an event on Ticketmaster, location is being baked into the data. Once you have that level of ubiquity, it’s not going to be hard to imagine how brands are going to find that swaths of advertising to make it worth their time. But their markup is going to be infinitely better because the ads are going to be personalized.
For many, the implicit collection of location data raises serious privacy concerns. How inhibitive will the privacy issue be to the growth of the space?
There’s no question that privacy will be important to location. However, 10 years ago everyone thought it was crazy that you would put a list of your friends online. So you know, I’m actually pretty contrarian on this point. There is a whole opportunity to create a hyperlocal platform for self-expression. In the same way that you show off your professional accomplishments on Linkedin, or show to your friends all the cool things you are doing on Facebook, people will want to share where they are or have been. I think you will see people becoming a lot more extroverted in the local environment than they are now.
Most startups are reticent about implementing revenue models until they have scaled their user base. What’s your thinking?
As a startup, the lack of distribution and breadth clearly poses a problem in the monetization process. So initially, you are not going to focus on brands that require a national audience. Rather, what’s important to focus on, is making sure your monetization model fits your user model, and both fit your user base.
Take a look at LinkedIn: they have 80 percent of people who use the service every two years, then 10 percent of people who use it everyday, and then 5 percent of people who actually pay for the service. Of course you can’t live off AdMob ads but, if you can sustain a core group of dedicated users, then you can build from there.
Foursquare expanded their product dramatically over the summer. What are the implications for the smaller players in the space?
I think at this point, all boats rise with the tide. It’s better for the entire ecosystem when the big guys improve their product. For the smaller guys like Sonar to have a chance, we need the big players onboarding and educating users. To the extent that Facebook can drive the adoption of location and foursquare scan sign up users, we’re all behind their success. Its in Foursquare’s best interest to cultivate a vibrant developer ecosystem, otherwise how else can they develop the distribution needed to compete with Facebook or Google.
This interview has been edited for length and clarity.