Facebook Is Smarter Than You Think

If you think that Facebook is big now, just wait.

Bloomberg is reporting that the social networking giant is developing an app that tracks the location of its users. Two unnamed sources "with knowledge of the matter" claim that the program will help Facebook's more than 1 billion active users find friends that are nearby.

Yes, you've seen this before.

Apple was so fond of its Find My Friends feature last year that it made it a star in an iPhone commercial last summer starring Martin Scorsese.

If Apple didn't seem to gain a lot of traction with its friend-finding feature, why should Facebook fare any better?

Let's just say that I don't want to find my so-called friends
There are several reasons why a location-based application fails. The biggest stumbling block is failing to achieve critical mass. As big as Apple is when it comes to consumer tech, it never really did get enough people to turn on the "Find My Friends" feature.

Apple isn't perfect, especially when it comes to social media. Ping failed as a social music add-on to iTunes because folks just don't associate Apple with the art of social.

Facebook doesn't have that problem, obviously.

Another big reason for the failure of location-based platforms is apathy.

Foursquare and even Facebook check-ins have their fans, but to most consumers those "look where I am" apps are limited to hipster braggarts. If that's all that we're getting out of Facebook's new app when it reportedly rolls out next month, color me unexcited.

The real promise here is if Facebook can marry location with commerce.

Following the bleeder
Groupon is a broken company with a flawed model in many ways. However, one thing that it's doing right is Groupon Now. The ability to find instant deals by location -- something that forward-thinking merchants are also doing with Foursquare and Facebook check-ins to get the word out -- is a game changer.

Yelp is another company doing right by location. The app uses your location to search for well-reviewed places to eat, get a mani-pedi, or buy vintage clothing. Yelp is no stranger to commerce. It offers merchant deals. Foodies can also fire up OpenTable within Yelp to book reservations at popular restaurants. It's big, and investors will get a snapshot of how big this business may be when Yelp and OpenTable report fresh quarterly financials on Thursday.

However, Facebook has the ability to outdo anyone in this space.

Remember Graph Search?

The market wasn't terribly impressed with the new search platform that scours through friends -- and friends of friends -- to drum up relevant responses. However, put the location-based app that Facebook is working on and Graph Search beta together and you have something beautiful.

Rock on
Let's say that you're at a Matt & Kim concert -- yes, you're a hipster -- and your Facebook app alerts you that a high school buddy and a cousin that you haven't seen in a few months are there. Why not get together for a bite after the show? Graph Search can help you find that sushi place nearby that your colleague goes to every other week. You can hit up a sandwich shop that a friend of your cousin's friend actually owns. How about that Korean BBQ place two blocks away offering Facebook guests 20% off?

It can and all come together. It will.

Right now it may just seem creepy. Most people won't opt in, and those that do may feel guilty about it. You're no stalker. You're just a Matt & Kim fan that enjoys some Korean BBQ with friends. Since you will only have the location data of friends that opt in, it's not as if the potential interactions will come off as strange.

In time, the same people that have privacy concerns will come around. If it makes an experience better, cheaper, or more convenient, it's going to win.

Facebook doesn't have a choice.

Google is becoming a bigger competitor. Yes, Google Plus hasn't eaten into Facebook's popularity, but Google already has strength in mobile (through Android), local lead generation (through Google AdWords), and venue reviews (through recent acquisitions of Zagat and Frommer's). Facebook's advantage over Google Plus is critical mass, and it can't afford to squander that kind of opportunity.

Facebook has already changed the way we stay in touch with old friends, acquaintances, and family members. Now it's on the cusp of revolutionizing an even meatier aspect of our lives. As long as Facebook can pull this off without coming off as creepy, it's on to something here.

Face to Facebook
After the world's most hyped IPO turned out to be a dunce, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.

The article Facebook Is Smarter Than You Think originally appeared on Fool.com.

Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, Google, and OpenTable. The Motley Fool owns shares of Apple, Facebook, and Google. 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.

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