Facebook’s 'Nearby Friends' -- 3 Critical Questions

Facebook just launched “Nearby Friends,” a real-time location tracking app that allows users to find each other. Could this app put its users at risk?

Apr 19, 2014 at 10:27AM

Facebook (NASDAQ:FB) recently launched "Nearby Friends," an opt-in service that allows users to share their precise real-time locations on a map. This doesn't mean that everyone on your list can track your movements -- you only become visible to friends who turn on the feature as well. Yet in an age where people regularly overshare selfies, pictures of food, and passive-aggressive insults across social networks, Facebook's real-time location tracking service raises some serious concerns.

Let's take a look at three key questions about "Nearby Friends" -- why Facebook wants its users track each other in real time, how the company could benefit, and what risks are involved.

Image

"Nearby Friends". Source: Facebook.

Why does Facebook want to track users in real time?
To understand why Facebook wants users to share their locations in real time, we need to look at several industry peers -- Google (NASDAQ:GOOG), Foursquare, Yelp (NYSE:YELP), and broadcast dating services Tinder and Hinge.

People use Google to look up directions and ratings of local businesses. These ratings are provided via a combination of user reviews and Zagat ratings. Foursquare allows users to check in and rate places as well. Yelp, which offers similar services, has been marginalized by both competitors. More importantly, Yelp's reputation has been tarnished by persistent accusations of fake reviews.

That's where Facebook comes in. Last May, Facebook started allowing its users to rate places that they checked into. That one little tweak turned the business model used by Google, Foursquare, and Yelp upside down. No longer were people relying on reviews from strangers, they were relying on the recommendations of their Facebook friends. In one fell swoop, Facebook solved the problem of fake and inaccurate reviews.

Meanwhile, location-based mobile dating services such as Tinder and Hinge have risen in popularity. Members on these services can broadcast their profile and location in the hopes of meeting compatible people nearby. Matches are made based on social media profiles. Of the two services, Tinder is more controversial, since it allows complete strangers to meet up. Hinge, on the other hand, only matches its users with mutual Facebook friends.

Image

How Hinge works. Source: Google Play.

Hinge is notably an improvement over Tinder, but there's still no guarantee that all the friends of your Facebook friends are well-adjusted people. Therefore, Facebook's "Nearby Friends" feature upgrades Hinge's exclusivity and restricts real-time meetings to carefully selected people on a user's friends list. In other words, it's going after Tinder and Hinge in the same way that it challenged Google, Yelp, and Foursquare -- by replacing strangers with trusted friends.

How could Facebook benefit?
However, Facebook's goal isn't to put Tinder and Hinge out of business. What Facebook really wants is your location-based data.

Just as all your check-ins and ratings were being collected for advertisers, your location history will be used for targeted ads. According to TechCrunch, Facebook recently stated that "Nearby Friends" will indeed be used for marketing and advertising in the future.

For example, if you travel from San Francisco to New York, Facebook can instantly display relevant News Feed ads for New York. It could also advertise special deals for shops that frequently appear in your location history. Combining that data with a user's Facebook profile information could produce very specific ads that appeal to specific people -- a strategy which would be highly appealing to advertisers. The idea is similar to the location-based features found on Google's Google Now personal assistant, which was launched in 2012.

Facebook's advertising revenue, which accounts for 90% of its top line, surged 76% year-over-year to $2.36 billion during its fourth quarter. 53% of that was generated from mobile ads alone -- up from 23% in the prior year quarter. Considering that total smartphone users in the U.S. are expected to jump 29% from 160 million in 2014 to 207 million in 2017, tracking users' everyday movements could turn Facebook into a gold mine of targeted marketing.

What are the risks?
The downside of this technology is that social media has a proven track record of causing people to overshare information without considering the consequences. People have gotten sacked for insulting their bosses or arrested for boasting about crimes on social media.

There have also been accounts of Twitter (NYSE:TWTR) and Facebook users' homes being burglarized by followers or "friends" after they revealed that they were away on vacation. An entire site, Please Rob Me, was even launched to raise awareness of the dangers of oversharing their physical locations across social media networks. Meanwhile, controversial apps like Girls Around Me (which was discontinued after a scathing article at Cult of Mac) allowed anonymous users to track strangers in their vicinity via Facebook and Foursquare check-ins.

As I mentioned earlier, Facebook intends to avoid these problems by only allowing friends to connect with each other. While that might be enough security for a person who only confirms real-life acquaintances as friends, users who've added thousands of strangers to receive daily boosts for FarmVille could be putting themselves at risk.

The bottom line
In conclusion, Facebook's strategy is a bold one that requires an open mind about the future of social media. It also makes its social network much more attractive to potential advertisers who are targeting specific location, gender, and age-based demographics.

"Nearby Friends" might become a useful tool for meeting up with Facebook friends who just happen to be in the area. However, it could also be misused for creepier purposes. What do you think, dear readers -- is "Nearby Friends" a step in the right direction, or a step too far?

3 stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

 

Leo Sun owns shares of Facebook. The Motley Fool recommends Facebook, Google-Class C Shares, Twitter, and Yelp. The Motley Fool owns shares of Facebook and Google-Class C Shares. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers