I understood the value of Highlight immediately. Within hours of downloading the app, I walked into a cafe and ran into someone I had met before, but only in passing. Who was he, I wondered while talking to him in vague generalities so as not to give away my poor recognition skills. It was a pretty pointless conversation that perhaps could have been a great one if I could have just remembered who the hell he was.

I sat down and pulled out my phone which had been buzzing since I entered the cafe. There, right in front of me in the form of a push notification was the name of the guy I was just talking to. I swiped it and got taken into Highlight where I could see his picture, where he worked, and our common friends. Brilliant.

Ideally, of course, I’d check the notification before I talked to the guy. But that’s my own fault. I was new to this. You get the idea. And this is just one potential value of Highlight.

The service, which CrunchFund has invested in, pushed a major app update today to gear up for SXSW. They know the potential this app has there. My first conversation with Highlight co-founder Paul Davison immediately went in that direction. “This is going to kill it at SXSW,” I believe were my words.

But as repeat offenders know, SXSW is now a very noisy time to launch an app. Twitter and Foursquare had it easier when they found success in Austin a few years ago. Thanks to that success, the event has become a launch platform for apps. Last year it was group messaging services (GroupMe, Beluga, Yobongo — all of which, coincidentally, have now been acquired). This year it’s the passive location apps, of which Highlight is one. There are many others. Several of them are also strong apps. It’s going to take an app really extraordinary to stand out in the crowd.

The truth, of course, is that passive location apps are not new. It’s the way that apps like Google Latitude started. And Loopt has been doing it for a long time. But it’s one of those situations where the initial wave was too early. The check-in apps — namely Foursquare — came in like a buzzsaw and cut down the passive apps. 

But good ideas that don’t work the first time find a way. Our technology is more advanced now than it was even just a few years ago. Back then, the iPhone couldn’t do background location (or, more accurately, Apple wouldn’t allow it to do background location due to battery concerns). Now it can. Hence, Highlight and all the competitors.

The reason why Highlight is exciting to me is because it has the potential to be a lot of things. I get the feeling that like Twitter and other social services, the users will end up determining the best use case. The Highlight team have features they’ve implemented based on how they think people will want to use it. But the truth is that no one really knows.

My initial example is one use case. I’ve used it a dozen or so times over the past several weeks as a refresher course before saying hello to someone. 

But not everyone is as bad at remembering names as I am. Instead, they might find Highlight useful simply to know when friends are nearby. You can obviously do this on Foursquare — as I have been since day one — but that puts the burden on someone else to check-in. If they don’t, you won’t know that they’re nearby. 

The check-in had to come first because it eased people into the idea of sharing their location. It’s a very explicit action. It has now been around long enough where it’s time to evolve to passive location for certain use cases. Of course, this will freak some people out. But in a couple years it will be the norm. Just like checking-in is today.

Another interesting thing I’ve noticed while using Highlight: there are people I am near all the time that I’ve never actually met. We’re in the same cafes every day but we never speak. And that’s fine — I don’t like talking to total strangers, I’m sure most people are the same way. But if we’re in the same spots often and we have several mutual friends, which Highlight tells us, it gets interesting. And maybe we have interests in common too.

In a regular social setting, if the mutual friend was present, they’d introduce us. Highlight can act as a virtual representation of your mutual friend in this case.

Still, that’s a bit weird to think about, I admit. But one of the new features that Highlight launched today — appropriately called “Highlighting” — can help nudge this notion along. You can now highlight people you think are interesting and they’ll see it (who you highlight is public on profiles, which was probably a tough call, but the right one, I think). It’s a lightweight interaction — perfect if you don’t want to message someone (which you can do as well in the app), or, god forbid, get up and go talk to them. 

Maybe this spurs interaction. Or maybe people won’t use the feature that way.

Seeing how people using the highlighting feature will be fascinating. At SXSW, you meet so many people for brief moments of time. Thousands, tens of thousands, hundreds of thousands business cards trade hands. Most people will never look at those business cards again. I never do. I hate business cards. Why not just highlight someone you met that you found interesting? The best thing is that only one of you has to do anything because again, both sides can see the highlight. 

Maybe that use case doesn’t scale at SXSW. Or maybe it does. Or maybe it just doesn’t catch on. Maybe it evolves into some sort of flirting thing. Again, the community will decide, which is exciting.

Or maybe highlighting is a niche thing that a small percentage of users end up doing. Maybe the main benefit of Highlight (the service) is simply to be passive in the background and only alert you when you want it to (a friend is nearby, for example). I love the trend we’re seeing of apps that work without you having to explicitly interact with them. Foursquare Radar is another great example of this.

My main concern for Highlight at SXSW is the noise. In San Francisco, I get maybe 10 Highlight notifications a day (they’re smart about how they do it, and don’t do it every time you’re near someone — and they’re getting smarter about it over time). In Austin, I’m worried I’ll get 1,000 notifications as every geek on the planet crams into a couple mile radius. I know they’ve thought a lot about this issue. Can’t wait to see what happens.

I also worry about the battery life of my phone. Forget privacy fears, this is the real downside of these passive location apps, in my opinion. The latest version of Highlight is the most optimized yet for battery life. It knows to rest until there’s a major location change, for example. 

I’m still bringing two Mophie battery packs with me.

I swore I wasn’t going to go to SXSW this year. I say that every year. And yet, every year I go. But this year I’m actually excited. I’m excited to see how Highlight gets used in its first big test. And I’m excited to talk to Dennis Crowley about all of this on stage at 3:30 PM Saturday in Exhibit Hall 5.

Longest promo for a talk ever.