OK What is Foursquare all about…letting your friends know where you are, getting into a competition to earn statuses in several places, getting credits in places you visit most…these are all benefits perceived by the users. Launched 13 months ago, Foursquare now has almost 1 million users, according to CEO and co-founder Dennis Crowley. But what’s there for Foursquare. It all started as a mobile application, a game for iPhone, but now it’s growing so fast it’s quite logical that Foursquare started thinking about profits.
On Foursquare’s website, they invite businesses to engage with Foursquare in order to get closer to their customers, track their behaviour and reward loyal customers. It’s free for the moment but things will change at some point I think.
So where will the money be coming from? I see a few options:
First thing would be to start getting subscription fees from users. We’ve seen a few social networks, e.g. schoolmates (the Russian version of Facebook), who started selling subscriptions. The amount is very marginal, but considering the growing number of users it might be a good idea. The mentioned network started selling on top additional possibilities, like blocking comments, million of smileys, etc. In fact Facebook is thinking of starting subscriptions as well. But that’s not what I would go for. It’s risky in the sense that it can limit the growth of the customers.
The second option I thought about is advertising, but not in terms of putting ads, but in terms of cross selling. Like Amazon makes recommendations to users, Foursquare does the same by recommending nearby places to it’s users and it could also recommend places that the users might like. I believe that Foursquare can get paid by the companies to get their names out more often.
The third option I see is getting paid by the companies for selling user profiles and behavioural patterns, and that’s probably the one that I would go for. Foursquare already has partnerships with a few “Big Names” and makes some money out of it. The potential market for this type of business is very large including “Big Names” at one end of the spectrum and small owner-run businesses on the other.
Foursquare came up with the right idea at the right time and there’s a big potential in it. The rumors that Yahoo wants to buy it for around $125m can as well be true. With such a fast growing user base and huge potential market, it’s not surprising to me. However, I am somewhat conscious of the competition. The main competitor at the moment is Gowalla and it kind of does the same thing but is not as popular as Foursquare. The problem with this type of social networks is that once the one gets more popular, people are going to subscribe to the one to which their friends are subscribed to. Therefore I don’t see much threat in Gowalla. However, there is one important thing that has to be taken into account and that’s Facebook. Currently Facebook has a much larger user base and they decided to launch geolocation features shortly. If Facebook is successful in its launch, incorporates all the important elements from Foursquare and enters into a direct competition with Foursquare, for the above mentioned reasons, I don’t believe that Foursquare will be worth the money it’s worth now.
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Charge users? Not a chance. That would preclude the development of the network. Advertising, definitely, but not the type you are thinking: you seem to anchored in the "old way" of doing advertising... no "get paid by the companies to get their names out more often", that would be like a lie: companies get cited when people go to them, not when they pay more. You can use advertising for coupons, for loyalty, for referrals, but that's the way it should be (advertising produced by the users, so to speak), not in the old way!
ReplyDeleteIn this analysis, from my perspective, you are missing the really juicy part.