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Facebook's latest add-on is an advertiser's dream


Facebook now has more than 500 million members

Facebook now has more than 500 million members

Facebook now has more than 500 million members

When the film Minority Report was in cinemas in 2002, they called it science fiction. As Tom Cruise's character walks through a shopping mall, he is assailed by talking billboards that recognise him and target him with personalised advertisements. "John Anderton, you could use a Guinness right about now," one calls out.

Eight years later, we have just moved another step closer to that world with the launch of Facebook Places, the social networking giant's move into "geo-location" services, which have already been pioneered by start-ups such as Foursquare. From now on, you will be able to tell your Facebook friends not just what you are doing, but where you are doing it – and if that sounds appealing, you won't be half as excited as your local businesses, who are salivating at the prospect of being able to advertise directly to passers-by.

It is happening already. New York-based Foursquare has gone international and now claims three million users who "check in" regularly with their location. Its business development team has been overwhelmed with companies wanting to get in on the act by offering discounts to users who check in at their store or coffee shop or bar. Starbucks is running a whole mini-loyalty programme with Foursquare, offering discounts to people who check in frequently. Its rival Shopkick has been advertising in US newspapers that users who check in at the retail chain Macy's can get money off in-store purchases.

The arrival of Facebook promises to turn the practice of "checking in" from the preserve of a few million early adopters to a mainstream phenomenon, says Ronan de Renesse, mobile media analyst at research firm Screen Digest. His own experiments with Foursquare make him confident people will find myriad uses for the services. "I used it to check in at each venue on a pub crawl. After the fifth or sixth pub, I wouldn't have remembered where I'd been without it. Facebook Places takes things to another level. The site has 500 million users. Now these services will involve a greater part of your network of friends, meaning you are more likely to interact with it. I expect it to grow not proportionally but exponentially."

Facebook launched Places late on Wednesday with great fanfare. "Everything happens somewhere," the company's product manager, Michael Eyal Sharon, declared on the website. "Maybe it's a new restaurant, a beautiful hiking trail or an amazing live show. Starting today, you can immediately tell people about that favourite spot."

Starting in the US, that is. The company is rolling out the service in its home market first, and only for certain smartphones, including the Apple iPhone. It is also being cautious about privacy, laying out a long list of ways users can avoid having their whereabouts broadcast to the world without their say so.

But if this feels like a soft launch for users, Facebook was immediately giving it the hard sell to potential advertisers. "The Places product creates more ways for you to promote and grow your business on Facebook," it said. "By giving your potential customers the ability to check in at your business, you give them the power to tell their friends about your business."

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The company hopes that these local businesses will quickly begin paying to promote their wares using the site's targeted advertising system. That system will not enable Minority Report-style advertisements at the moment, but few doubt the targeting will become more specific over time.

Debra Aho Williamson, senior analyst at researcher firm eMarketer, called the idea a "no brainer". She said: "As Places is rolled out and people get accustomed to checking in, there will be a prominent role for advertising delivered to you on the go. It could be when you are looking for a place for lunch, or at the mall looking for shoes, ads would be delivered while you are in the moment, without you having to do a search, or without you having had to anticipate your needs and clip out a discount coupon in advance. This sort of advertising is so powerful – and so obvious."

When Foursquare tied up a recent venture capital fundraising, it was "the wire transfer heard around the world", according to a board member, Bryce Roberts. He wasn't joking. The $20m (£13m) injection valued the company at over $100m, and signalled the arrival of geo-location services as serious business. Advertisers are already expected to spend $1.28bn worldwide this year to reach Facebook's users, eMarketer calculates, and $1.76bn in 2011, representing a 165 per cent increase in two years. Adding geo-location advertisements, says Ms Williamson, "is a huge opportunity".