by Mielle Sullivan, Janus Networks

The web world is a whirl for small business owners, especially in urban areas. First there was Citysearch, which did its own online reviews. Then Yelp, in which users wrote reviews — not always good. In 2005, business owners that had just figured out how to make a webpage found themselves making profiles on MySpace or Facebook. Now just when many small business were just beginning to feel good about Twitter, there’s a wave of new services for smartphone users, called geolocation applications.

Today there are three primary apps: Foursquare, MyTown and Gowalla. All cater mostly to iPhone users. As users move about in the physical world, these apps track where they are, so that they can earn points for visiting places, like a business, public spaces or even their workplace. Businesses are already using these apps to promote themselves. Here are some details on each:

Foursquare — Users or players get “badges” for visiting places, and can compete for a top spot — the “Mayor” of a particular location. Some small businesses have begun giving Mayors discounts, because having the Mayor badge means they visit frequently.

Gowalla — Similar to Foursquare, Gowalla is a game that also gives users virtual items that add an extra spin to the badge concept. Gowalla is partnering with big companies to promote them with branded items.

MyTown — For the moment the largest geoloco app, MyTown has almost two million users. In this game, users can “buy” real world properties then charge their friends rent for visiting, similar to Monopoly. This game is also partnering with businesses to offer virtual items. Players want these virtual goods because it helps them advance in the game. And businesses want to give them because it incentivizes players to visit.

For now, small businesses are still trying to figure out where they fit in. But it won’t take long. By the end of the year, geoloco apps will probably be a notable new marketing channel for local businesses in some areas. Areas with large populations of twenty-somethings and lots of smartphone users — like the Bay Area — will see the most growth in geolocation advertising.

For a long time people have predicted that local businesses will draw nearby shoppers by, for instance, sending a coupon to their phone as they walk by the shop; a geoloco game can alert its users to such copuons. It can also identify your existing loyal customers, and help you give them a reason to come back.

The promotions aren’t limited to brick-and-mortar stores selling physical goods, either. Even a virtual business can get some play. For example, The Travel Channel has partnered with Gowalla and MyTown to give out virtual items that promote a new show, Food Wars. Whenever users visit a food-oriented location, like grocery or restaurant they receive virtual good relating to the show.

For most businesses, these services are still in the “watch-and-learn” category–they could be a good place to advertise, but it is still too soon to tell. But if you run a bar, a coffee shop or a restaurant in a college town like Berkley, it’s worth looking into now.

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