Foursquare on a smartphoneDespite an article on the New York Times blog today about how geo-location services haven’t caught on, recent announcements from Facebook and Yelp highlight the fact that businesses and marketers are paying close attention to this space.

Geo-location services, if you’re not familiar, allow people to “check in” with their smart phones to physical locations such as shops, restaurants, bars, concert venues, and other places where people gather. They are then able to share this information with their social networks on a variety of services like Facebook or Twitter.

At first glance, many people wonder why anyone would want to broadcast their whereabouts; the reasons are many, but one of the biggest is that they may want to meet new like-minded people or have their friends meet up with them somewhere.

A deeper look, however, shows that geo-location is a sort of holy marketing grail, especially for retail. Once a retailer plugs in to these geo-location networks, they are able to potentially tap into an entirely new clientele. For the first time ever, they have a voice with people who are physically near their stores but can’t be reached by normal display advertising.

Here’s an example: A small, independent bagel shop is right down the block from a big chain bagel place. The foot and street traffic to the chain place is doing well, and the indie shop is struggling. In order to level the playing field, the indie shop claims their business on the most popular geo-location service, Foursquare, and offers a “special”: Anyone who checks in to their shop gets a free coffee with any purchase. Suddenly, people who are checking into the chain store see the local entry for the indie shop and say “hey, a free coffee a block away”. They go to the indie shop instead. People in the neighborhood who happen to have Foursquare all start to see that a local shop is offering a discount. They check-in to the indie shop and talk about the discount, and their friends see it and decide to go as well. It sounds complicated, but it works.

Let’s use another example. A local indie bookstore decides to host a book scavenger hunt to highlight some authors they want to celebrate. Using a business SCVNGR account, they create an in-store scavenger hunt to find ten different books in the store. People who complete the hunt get an in-store $5 credit, or even something non-book related such as a free coffee from a local coffee shop or other related business. They advertise the contest on Facebook and Twitter, and the word spreads. The day of the contest, the shop owner has dozens of people who may never have been there before walking through her store, meeting others, browsing, and seeing what a cool place it is. Some of them will walk out as customers.

These are just two simple examples. The power of word-of-mouth and social networks is vast and so far, still relatively untapped. In the coming months and years we will see a major adoption of these tools as more and more people get smartphones and get involved in social networking.

It may not be big yet, but if you’re even remotely interested in marketing, it’s something you need to be paying attention to.