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Danger: Commoditization Ahead

Back in September, Google announced that it was adding facial recognition to Picasa. That must have come as something of a blow to the facial recognition start-ups that are hoping to dominate that niche with superior technology.

Last week, Google released Latitude, which is an upgrade for Google Maps for Mobile that includes social networking features. Basically, it allows you to share your location with your friends in real time and see which of your friends are where. The application runs on your mobile device, uploads your location data (using GPS or cell ID) to Google’s servers, and from there its pretty trivial to integrate with other services.

Is Google Latitude perfect? No. I wish there was a better way for me to find and add my friends, and I wish there was an easy way to integrate contacts from other services such as Facebook and LinkedIn. That said, the service is really very good. I don’t even have GPS on my phone, but the cell ID approach is good enough for me to benefit tremendously and to want to keep using it.

What’s the connection between Picasa’s facial recognition and Latitude? Both are examples of a big player introducing a free feature that pulls the rug out from under a number of start-ups hoping to gain market share by introducing the same capability. There’s have been quite a few start-ups who struggled to make a business out of facial recognition. And there are quite a few working on mobile social networking based, in part, on marrying location data to social network data.

Unfortunately, I think Andrew Scott has it right, when he argues that LBS is not a business model. Its a post worth reading (and thanks, Boaz, for the link!).

Andrew is making a powerful point, and he does it better than I could. Bottom line: things that are ubiquitous are not differentiators. And business models based on features that are rapidly becoming ubiquitous are in serious danger. If that isn’t bad news enough, the pace of commoditization is getting faster and faster…