After Foursquare and its CEO Dennis Crowley struggled for several months to cobble together this week’s whopping $41 million funding round, the social check-in service is still getting heat over whether it will be able to draw revenue and maintain its high $800 million valuation.
While emails to Foursquare went unanswered about how it might advance its ad strategy — which has been fairly limited in scope and placement to promotions from major marketers — AdAge cited unidentified sources saying the social check-in service will roll out new behavioral targeting tools to ad networks, exchanges and agencies.
“We are always looking at ways that could make our data more useful for advertisers and partners, while respecting the privacy of our user’s information,” Foursquare said in a statement. By pulling out the most valuable part of its business after four years, Foursquare is betting that it can still keep its users checking in even if that sharing will mean more direct marketing from advertisers and retargeters.
In an official blog post heralding the new funding, which was a mix of loans and investment, Crowley outlined the new business model as inspired by Google. Although Foursquare has trumpeted its “discovery tools” with every significant update, it’s perceived as lagging behind the publicly traded Yelp in terms of the use of local search to find new places and services.
Recently, Cantor Fitzgerald internet analyst Youssef Squali paid a visit to Yelp and came away impressed with its roadmap to attract and maintain its string of national advertisers. Yelp has 100 million monthly uniques worldwide, 36 million-plus reviews and over a million merchants signed on to its system. The company “seems close to hitting a tipping point in terms of scale and reach to become a major buy within this growing pie… Yelp is clearly positioned to benefit from the ongoing shift from offline to online,” Squali says.
But Foursquare does have certain advantages that it only now seems to be activating, notes Tadji Akhavan, social strategy director for digital ad shop mOcean.
“The fact that Foursquare has 93% penetration in local retail is a tremendous marketing opportunity,” Akhavan said. “Even beyond direct advertising on Foursquare, the data about consumer behavior and business traffic in local areas represents a significant business potential for them… If they can figure out a way to market their data effectively, they could make a leap from just being a geo-targeting app.”
With 3.5 billion check-ins in four years, plus current relationships with 1.3 million business, Foursquare has covered a lot of ground so far. Thirty-three million have tried Foursquare already, Crowley notes in the funding blog post, suggesting retention has been a problem
But observers in the local geo-targeting space still have questions about whether Foursquare can effectively turn its analytics into actionable insights.
“Only when you can understand consumers’ offline behaviors, can you take steps to effectively change them,” noted David Shim, CEO of local analytics provider, Placed. “Foursquare is one of the few players with insights into offline behaviors, but the monetization of this data beyond ads is an open question. How will users respond if Foursquare commercializes their data outside of the app? Will the biases inherent with check-ins impact the actionability of insights?”
