Pelago, the company behind the social networking, storytelling community Whrrl, and Collective Bias, the social media agency unit of MARS, today announced an exclusive partnership to co-develop and co-brand a mobile social shopping solution.

The application will offer consumers in-store promotions, coupons and discounts, and link them with a community to provide word of mouth recommendations about products and services. The application will be integrated into Whrrl and leverage its location-based and social technology, offering retailers and brands the opportunity to connect with consumers at the point of purchase - right from their phones.

As part of the agreement, Collective Bias will offer the new mobile social shopping solution to both prospective clients and their customers, which currently includes Colgate, Smart &Final, ELF Cosmetics, Hershey and Genesis Today, among others.

Finally, a real business?
Pelago raised over $22 million since 2006. The second round ($15 million – read story) which took place in May 2008 was supposed to expand the activities of the company in Europe and Asia, but this expansion never happened. The service was initially a mix of recommendation-based local search and friend finder which did not work very well and was transformed - with the version 2.0 launched in March 2009 - into a location-based storytelling application.

This partnership seems to be Pelago’s first move towards some kind of real business. This is probably good news for its investors, but we can question if the startup has enough eyeballs in its community to turn a profit. Location-based social networking is unfortunately not turning into a goldmine. Pure business to consumer models are difficult to sustain in that area as many startup companies have already found out (read story).