Why Foursquare needs to follow Twitter’s lead

By on November 30, 2012
foursquaremayor

I just rescinded the mayorship of my gym. I didn’t lose it in a fierce competition with someone else, I simply unchecked my desire to be mayor of meathead city and that was that. The fact that I hadn’t checked in to the gym in 18 months (despite going 5 days a week) was a factor, but it was mostly that I seem to have grown beyond bragging about my propensity to hit the weights.

I’m not alone.

For 4 years, Foursquare has been a default app installed on every version of every phone I’ve carried until this latest one. I simply didn’t install it and, oddly, don’t miss it and this highlights the deep rooted challenge companies like Foursquare face. We’ve become more sophisticated users of mobile technology – at least I like to think we have – to the point where there needs to be a strong return for giving up a portion of the precious real estate that is our smartphone screen.

Foursquare has 25 million total users with 8 million active users per month (“active” means they have used it at least once during the month) and, since recently turning on the start of their revenue strategy, has earned around $2 million. They are too young in the revenue game to know if this is good or bad so commenting on the number doesn’t do any good, commenting on the WAY the number is earned is a better focus.

There are, however, two big hurdles facing Foursquare as it tries to grow revenue and build a sustainable business.

The open API conundrum

The fact that I don’t have Foursquare on my phone doesn’t preclude me from participating in Foursquare. Because of their proclivity to give access to data away, I use Foursquare through apps like Instagram, Path and Banjo. It isn’t truly “using” the service but I can contribute to Foursquare and see what is happening without even launching the app or visiting the site. Herein lies the lesson that Twitter faced as they too struggled to figure out their revenue strategy.

The great majority (I’ve seen numbers as hight as 85%) of activity on Twitter was through 3rd party applications that they had no control over and thus could not monetize. When the time came to start to turn revenue on, they began by purchasing some of the more popular tools in the market – essentially spending money to recapture the audience that already used their service.

At the same time they also started to clamp down on API access and usage for third party developers. This enraged the development community that had contributed so much to the reach and regency of Twitter and rightly so but from Twitter’s perspective, they needed to pull back in order to move ahead.

Foursquare faces this exact challenge. As they move to monetize, more and more restrictions need to be placed on the way their data is displayed and what types of data can be accessed by 3rd party developers. It only makes sense for them to look at what Twitter did to course correct and part of that is reclaiming the users back into the Foursquare app or forcing partners to display the deals that Foursquare is signing with retailers for example. Whatever they decide, the free API ride is about to be over – out of necessity. If they don’t do it, they are over.

As a side note – if you are a developer who’s business leverages the Foursquare data as core to your livelihood, I would start to think about lessoning your reliance on it and them. There are countless numbers of companies that were left for dead in the wake of Twitter’s clampdown – hard lessons for sure.

The Check-in vs buy-in gap

Discovery is a tough concept to sell effectively. It is hard to measure, hard to understand what outside influences contributed to it and even harder to show the “find-to-buy” relationship these days. Oh, and boy is it ever competitive – GPS companies, Google, Apple, Square, Yelp! and probably close to 100,000 other businesses have all entered the fray since Foursquare launched. Discovery isn’t enough anymore. It isn’t a differentiator. It isn’t something that can make the money that a company like Foursquare, with over $70M in VC funding, needs to be making.

There is a gap between discovery, checking in and buying product. This gap is the value that most businesses are looking to spend money on. No window shopping apps, they want a proven something that will help bring buyers and their business together. Arbitrary discover and coupons may work today but they are, well, arbitrary and coupons, not a strategy.

Foursquare needs to be in the business of closing that gap and being able to measure it. Focusing on the gaming aspect of discovery is too whimsical for most to invest in and there is a considerable difference between casual location data (what Foursquare is doing) versus true discovery with deep and pervasive location data (what Google and Facebook are doing). Then there is Apple and their recently awarded location patent that puts location on top of everything we do with our phone. How does Foursquare compete with this? It can’t so it needs to change. Quickly.

With 8 million active users every month, there is still opportunity for Foursquare to find its way. To do this it needs to begin leading again instead of following the herds down a road that they and they alone have cleared and paved.

About Rob Woodbridge

I'm Rob, the founder of UNTETHER.tv and I've spent 14 years immersed in the mobile and pervasive computing world. During this great time I've helped some of the most innovative companies grow their business through mobile. If you are in need of a mobile business advisor or coach, connect with me here to schedule a 30-minute chat.
  • Carlos Lagares

    Fantastic post and completely agree about how to monetize a market that others are disrupting in several ways based on what you have built over the past years.
    You can climb the mountain the first, but once that you have arrived, you must have combat force troop and experience to conquer it :)

  • http://about.me/kylemcinnes Kyle McInnes

    I’m in New York for a couple weeks and Foursquare has been a huge help. Here are a couple use cases:

    Eating and Drinking Like A King

    Foursquare’s Explore feature is very helpful when you’re travelling. I just searched “dive bar” and ended up at the oldest saloon in New York, McSorley’s, established in 1854. Today I searched “cheap” for lunch and ended up at this amazing authentic falafel shop where I had the most amazing falafel for $3. If you’re travelling and want to experience the best of that city, foursquare kills it.

    Promoting Events

    Foursquare’s ability to combine venue data, pictures and details makes it a great event promotion tool. Yesterday, I went to the Nike+ Accelerator launch at TechStars. Choose a venue, take a pic, write some details and all my friends know how cool I am and my coworkers know that I’m actually doing something valuable for the company and not just partying my ass off.

    I’m sure there are other apps that can do the above, but Foursquare has the name recognition and user base to be useful to the average person, not just tech mavens.

    Also, don’t checkin to the gym. You’re doing it wrong.

  • http://untether.tv Rob Woodbridge

    No doubt it can work Kyle but how do they grow their base in an insanely competitive space? Also, what happens when/if Facebook moves their Graph Search to mobile (provided they get it right)? Does that make what Foursquare is doing more valuable or less valuable? Whatever happens, I’ve used FS to help find great food, venues and to remember where they are but I’ve never paid them a single hard-earned penny. You?

Daily Email Daily Email Required fields are bold...
Email Address *:
*|HTML:EMAILERROR|*
First Name:
*|HTML:FNAMEERROR|*
Last Name:
*|HTML:LNAMEERROR|*
Company Name:
*|HTML:MMERGE3ERROR|*