Foursquare’s Future Slowly Takes Shape

23 thoughts on “Foursquare’s Future Slowly Takes Shape”

  1. Morning Om,

    Here’s the flaw in your reasoning… “Now imagine you had a platform big enough to encompass a lot of locations, married to an e-commerce platform and an army of local sales people:”

    I can imagine it, I can also imagine the costs associated with it. The costs will far outweigh the revenue for years and years to come. The goal of any business is “measurable, sustainable, profitable revenue from volume”. Any article that does NOT include that is not telling the whole picture. Sure we can imagine anything, but confront reality as it is, not as you want it to be.

    Foursquare just walked away from a HUGE win by rejecting FB’s offer. OK, so now they get to build a real business. Minimum investment according to Fred Wilson in a Web 2.0 play is $25m – they’ve take $21.35m so now we have to “beware of the C round” which you absolutely know is coming.

    Foursquare’s real focus should be a sustainable profitable business – and for that it needs 10’s of millions of users to support a 1%-3% conversion rate to fare paying customers. My prediction is that they will take a C round at even more absurd valuation and hope and pray that someone comes along to buy them out.

    I’d be happy to proven wrong but even as the GigaOM Network has learned you have to show value before you can extract value (hence the subscription part of your service). FS hasn’t gotten close to that yet – sure we can imagine it, but then we can imagine anything. Profitable income turns imagination into reality.

    1. Peter

      Morning and thanks for your comment.

      I think what you are saying is very valid. It will need a lot of money for a platform to get big, get attention and get revenues and eventually get the profits. This isn’t happening overnight and it might take a couple of years.

      I think it is the same old story — Google, Facebook and Twitter all grappled with lack of business model for a lot longer than FSQ et. al did. That said, if they can get a lot users (the operative word is if) then they will get the revenues and the profits.

      I am not going to speak to absurd valuations – all valuations are absurd because no one knows how to value ideas – but I do know, that whatever startup you take: they take time to become profitable businesses.

      1. Great article and interesting view of the potential of Foursquare (or its spawn). But my concern isn’t about fake check-ins, but real ones. Ours is a world where we can search out and find the best deals, best prices, wherever we are. Stop making me Work to get the best price. Give me the best price!

  2. Great insights about the LBS space. One of the key premises is that the LBS channel will be more effective and lucrative than traditional web-based advertising as well as traditional location-based advertising. Many of the case studies to date on mobile in general have shown early evidence that this is the case. So the conversion rates could be many magnitudes greater.

    Our platform will integrate both Foursquare and Whrrl as a solution for agencies and marketers to efficiently leverage LBS as a whole. Our whitepaper describes the many challenges and opportunities for marketers and LBS companies alike: http://www.momentfeed.com/whitepaper.

    Facebook is the 800-pound gorilla, though, and Google has made location a primary focus for growth. When it comes to critical mass at the local level, though, everyone has the same challenge. The rules of the world wide web don’t apply here. The local wide web is a new frontier, and while several companies have an advantage, it’s a bit like the advantage Barnes & Noble had over Amazon in 1994.

    1. Rob

      It goes without saying that Facebook and Google are the x-factor in this game, but Foursquare and their brethren will have to outwit them and find ways to grow their user base — or eventually go home. Perhaps that is why great “game mechanics” are a key differentiator in this game as it evolves.

      1. Om: I totally agree. Part of it will be outwitting them. Equally important is the “local mechanics” of the “digital-physical” world. Just as the centralized web and long tail were advantages for Amazon over Barnes & Noble, the localized web and smartphone platforms are advantages for LBS startups over Google, Facebook, and even Twitter. This dynamic also bodes well for highly localized LBS startups over Foursquare. He who has scale at the local level will win in local markets. We’re back to the dynamics of local and regional publishing…assuming these apps can be monetized accordingly.

  3. Several years ago we began testing an SMS service that enabled hotels to create customized search for their guests. It turns out that “activating” guests was a broad challenge, one that Foursquare neatly addresses. Foursquare is following in the same footsteps as OAuth and Microsoft Passport – providing secure authentication to data, but to physical locations, not websites.

    All of the “social media” or “geo-location” jargon obscures what is happening. This is about addressability; i.e., being able to target one or many things via a cheap, ubiquitous interface. The web gave us document addressability, Napster gave us music addressability during its Celestial Jukebox phase, Facebook and Twitter give us people addressability, Foursquare and its ilk give us geo addressability, and I’m sure X-10 or one of its logical descendants will give us device addressability.

  4. I have little doubt that companies like Foursquare and Gowalla will come up with a way to make a buck. Their database and function provide a tremendously valuable piece of the puzzle that small businesses require in order to conduct effective social marketing and bizdev tactics.

    When I can integrate one of these into a client’s strategy, the positive impact is always worth the investment.

  5. great post!

    what foursquare might find troubling are all the new players coming into the space that are doing things a bit differently and more intuitively. my prediction is FS be repositioning in a year, but we’ll see 🙂

  6. Hello Om,

    I believe that you are right own with your idea – “..a platform big enough to encompass a lot of locations, married to an e-commerce platform and an army of local sales people..”. I even believe that by being smart about how you aggregate the locations and the offers, a company may actually not have to spend a ton of money in the process. By partnering with the print publishers, ad agencies, newspapers, and magazine (current print aggregators), a company may be able to leverage the sales force of such partners to immediately tap into existing network of relationships with the merchants, thereby not reinventing the wheel (investing in its own sales force). Once a company is successful in aggregating a critical mass of content, it will be successful in attracting the mobile app developers who have been successful in aggregating eye-balls but need a way to monetize their app. Subsequently, more eye-balls will attract more print content publishers and merchants; and so on and so forth.

    Of course, this is easier said than done but there are start-ups currently attempting to do exactly that. I work for one such start-up, MobiQpons. MobiQpons is a location-specific mobile ad network that aggregates hyper-local offers from thousands of local businesses and enables app developers to seamlessly embed these offers into their mobile app (e.g. offers in a treasure chest), providing a mechanism for app developers to reward their users with highly relevant offers while monetizing their app based on the click-throughs generated.

    I believe that there is real shared value among advertisers, publishers, app developers and consumers in this play.

    Thanks,
    Uday
    uday@mobiqpons.com

  7. Hi Om and thanks for mentioning our party. It’s now a week since the swarm and the buzz we’re still getting from it is phenomenal. More than merely enjoying a chance to meet web ‘friends’ in the flesh, I think people who attended really felt/feel a sense of joint achievement and, as a result, feel a personal tie to us. The important lesson to us is that the more time/effort you can persuade your customers to invest in your business, the more they will feel ownership and the more they will evangelise and defend your brand. But we’ve all got to move on from the swarm badge now. It’s already getting old there are bigger, better ideas 🙂

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