Facebook launches Places service to let your friends know where you are

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As part of its effort to capitalize on its exploding popularity, Facebook Inc. unveiled its new location service called Places at a company event in Palo Alto on Wednesday.

The service, in the works for months, could eventually deliver a windfall in advertising dollars and heighten competition with Internet giant Google Inc.

Facebook is moving into the world of location-based services that allow users to check in at places and find their friends.

The trend, which has caught on with the rising popularity of smart phones, may take off with Facebook rolling out a service to its more than 500 million users, analysts said.

Facebook is also releasing a new iPhone application.

‘With Places, Facebook hasn’t rewritten the social media world, but it might just rewrite the way people think about social networks,’ Forrester Research analyst Augie Ray said. ‘Soon, the local restaurant or hiking trail may have as rich a personality as do the people on Facebook, not because everyone has visited but because your friends have. And in the end, isn’t that what we really care about?’

Using Places on the iPhone and other smart phones, users will be able to check in at a restaurant, theater, bar or museum, and alert their friends that they are there. They can see if they have friends who are there or who have checked in in the past.

Users will be able to “tag” friends who are there with them. The check-ins will be broadcast in status updates and other spots on Facebook.

The service began rolling out Wednesday to users in the United States. More than 150 million Facebook users access the service on a mobile device, the company said.

Facebook has given users controls over what and how much information they share on the service. Users can remove themselves if someone tags them. They can also disable the feature if they are not interested.

Analysts say Facebook seems to have heeded harsh scrutiny earlier this year when it made changes to its privacy policy that encouraged users to share more information much more publicly.

If the service works as Facebook hopes, it will increase how much and how often people share on Facebook. It may also give Facebook another way to generate revenue.

Facebook CEO Mark Zuckerberg declined to say how Facebook will make money from the service. The company is not yet offering advertising on the service.

But advertisers are flocking to Facebook, which could bring in as much as $1.4 billion in revenue in 2010, up from $800 million last year. The company is widely viewed as a competitive threat to Google, with each company jockeying for eyeballs and dollars. The more time people spend socializing with friends on pages that Google cannot crawl, the less time they spend on the company’s search engine and other products and clicking on its ads.

Both companies are keenly pursuing the potentially lucrative location-based market, which remains largely up for grabs. Mobile advertising that targets users based on their location by sending a coupon or special offer to users when they are near a store, bar, movie theater or restaurant could grow to $3 billion in annual advertising spending by 2014, up from $200 million this year, according to Borrell Associates.

Gartner Inc. analyst Ray Valdes said Facebook is smart to roll out the service slowly.

“It’s a case of build now, monetize later,” Valdes said. “They don’t need to monetize right now.”

Facebook also softened the blow of launching its own service on its young rivals. Instead of competing head to head with the front-runner, New York-based Foursquare Labs Inc., or Austin, Tex.-based Gowalla Inc., Mountain View-based Loopt Inc. or San Francisco-based Booyah Inc., Facebook is opening up its platform, giving those companies an opportunity to get much broader distribution.

Foursquare, which recently got a $20-million investment from venture capital firms including Andreessen Horowitz, valuing the company at $115 million, was in talks to be bought by Facebook. Executives from Foursquare and other companies joined Facebook at the event. Foursquare users earn rewards and bragging rights by visiting locations. The service has established partnerships with thousands of businesses including Starbucks. It averages 1 million “check-ins” a week. In July it said it had 2 million users.

Still, Forrester Research reports that only 4% of adults in the United States use such services. That could change now that Facebook is in the game.

Facebook is known for its “network effect,” Valdes said.

“I think [location-based services] will go into the mainstream by osmosis over time,” Valdes said. “We are still in the early adopter phase.”

-- Jessica Guynn