This week I've read that Groupon have acquired mob.ly, which added another player in LBS game. Mob.ly acquisition pointed to pattern in VC and entrepreneur behavior where they invest like lemmings. When one thing is hot - everybody keeps rushing towards same goal. Same was with search, B2B, social network. Nowadays, as entrepreneurs across the glob has been creating groupon clones ( Groupola / UK, MyCityDeal / Berlin Germany, GoldenDeals / Greece ... ) , also Groupon has joined LBS race where we already have: Gowalla, Facebook, Yelp, Twitter and Google.
And they've got awesome player ! Foursquare incentive is gaming part filled with local business providing you free drinks or meals. For their 1 million users, they got crazy valuation of $100m. At current state it is frothy and unsustainable. Game element per se, will not keep people around for a long time. Another frothy part is business model oriented is mainly oriented towards local business. Foursquare is still at early adopter stage, mainly used by tech savvies. Obviously, such high valuation is on jokey ( such a ugly term ), knowing value of it's founder and superstar Dennis Crowley.
If , LBS service could turn gaming element into notification system of location based discounts/ coupons - then LBS business could market with cap north to $10b. And this is where Groupon jumps in. They already have sales force across US and have been closing deals like crazy. Only part they miss was LBS application that will notify users of discounts in current area. Brilliant move by Andrew Mason, congrats!
Still, Foursquare and other are ahead in game, but they have to work very hard.