Are Location-based Ads a Coming Nightmare?

Foursquare and other location-based applications are a great idea, but commercializing them may be a challenge. Key will be making them minimally intrusive and maximally useful, as well as avoiding the nightmare scenario of a world totally engulfed in personalized, located-based ads.

The South-by-Southwest festival this week in Austin has provided a platform for Foursquare to demonstrate its social networking application, in which users give their friends permission to see their whereabouts after they "check-in" at specific locations.

This is not a space Foursquare has to itself. Gowalla, Brightkite, Loopt , Booyah, Yelp and Where.com already have location-based apps or features. Twitter has added location data, Google offers its Latitude service and Facebook is expected to add location information to its service.

Foursquare offers obvious marketing potential for businesses that can mine the check-ins and turn them into a reason for friends to gather and spend money. I am imagining restaurants, bars, coffeehouses and other places where people congregate, though other businesses might be able to profit from the scheme as well.

Perhaps the first person to check-in at a location might get a discount or freebie of some sort, one that grows as more people from their cluster of friends join them. I suspect there are places and businesses where this could work extremely well.

My nightmare scenario is of advertising personalized to my interests as well as my location. Imagine a world where as you drove down the freeway every billboard would be targeted and very precisely so, directly at you.

The ads would be so engrossing that it might be hard to pay attention to the road. Change my billboard example to your GPS display or smartphone and you can see how obnoxious this might become. And this is what Foursquare and other location-based apps must protect themselves and their users against.

Making this work--for better or worse--requires a device that you have given permission to display ads in exchange for some other product or service.

A future Googlephone, for example, might be priced less for people willing to accept Google's location-based advertising. Users might even tell Google the types of ads they would like to see while out and about. You can imagine such ads, which would need to include an offer that could be clicked on for Google to get paid its full fee, would carry quite a premium price.

Foursquare and the others are just beginning our new location-based world of mobile computing. It should be exciting, fun, useful and, hopefully, not too obnoxious.