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Foursquare Gets $41M Investment




iPhone FoursquareNo matter who you are $41 million is nothing to sneeze at. I am not a friend of Foursquare’s founder Dennis Crowley but I wonder if he checked in at the bank recently with a smiley face.

Foursquare has been falling off the radar a bit as has the entire check-in model. There is value in certain areas but as far as a universal activity that everyone on the Internet seems to have the urge to do, it’s safe to say ‘not so much’.

Businessweek reports on the investment and gives a feeling of the sentiment around the company

When Dennis Crowley debuted Foursquare, his location-based social media app, at South by Southwest in 2009, he got rave reviews. The tech blog Mashable called Foursquare the “breakout mobile app” of the event. VentureBeat called it “the next Twitter.” At this year’s SXSW, Crowley, 36, had to remind people his company still exists.

Foursquare brought in just $2 million in revenue last year, according to a person familiar with its finances who declined to be identified because the company is private. A January report by PrivCo, a research firm specializing in private companies, predicted the company would die by the end of the year. On March 17, venture capitalist and Yelp (YELP) board member Keith Rabois tweeted that Foursquare’s only hope was a buyout.

As it turns out, Foursquare has other options. In early April the company got $41 million from private equity fund Silver Lake Partners and venture capital firms Andreessen Horowitz, Union Square Ventures, O’Reilly AlphaTech Ventures, and Spark Capital.

The valuation of $600 million has kept some investors away but the general feeling is that now Foursquare has bought some time to make something happen.

Let’s be brutally honest here. How many of you, our readers, are using Foursquare? How many of you once used the service but have lost interest? How many of you are interested in adding yet another layer or service to an increasingly crowded social media space?

While the company tries to paint a picture of the fact that their growth has been so slow is actually a good thing as compared to the fate of the Groupons of the world, it still seems like a hard sell.

Foursquare has the data to predict where people want to go based on their friends’ behavior, as well as the tools to record whether they actually went to the store that sent them an ad, and if so, how much they spent. It’s a seductive combination for mobile advertisers, and early results suggest that it’s working. When someone gets sent an ad from a nearby coffee shop after searching for a latte on Foursquare, between 3 percent and 5 percent of the time she’ll click on the ad or visit the shop within 72 hours, according to Steven Rosenblatt, Foursquare’s chief revenue officer. That compares with an average click-through rate of less than 1 percent for all mobile ads, according to ad network Chitika.

OK so they have the data. But will they have the users? What value will marketers place on that data and how much will they pay, if anything, to be a part of Foursquare?

Let’s face it, if after close to 4 years (and a ridiculous amount of hype at the start of their run) they are only generating $2 million in revenue there is either something very wrong or something that is completely untapped. Those investing in Foursquare are leaning towards the untapped potential while others may think that it just doesn’t have any legs.

What’s your take?

  • http://www.facebook.com/people/Steve-Birkett/100001154480901 Steve Birkett

    For me, the value in Foursquare lies in its custom recommendations when I’m in a new spot, which by and large have been excellent and something I can’t get from Google and Yelp so easily. The check-in/gamification model is old hat, but seeing the check-in as a step on the road to building a user profile & serving up customized, hyper-local recommendations? There’s a lot of potential there and Foursquare has a jump on its competitors, which I hope it uses wisely.

    • FrankReed

      Hopefully they are going to use $41m of ‘wisdom’ to do exactly what you suggest, Steve. Should be interesting to watch

  • http://www.orbitalalliance.com/ Orbital Alliance

    I use FourSquare on a regular basis. They had numerous promotions previously with AMEX where I have probably received over $100 in credits on my accounts for checking in and using AMEX. I also have had great success with it at restaurants and with certain other checkins to save money or receive offers.

    It has provided some guidance in regards to finding recommendations, but it hasnt been that effective for me.

    Really, the only time I use it is for deals or when visiting new places.

  • http://www.facebook.com/cynthia.boris Cynthia Boris

    I was never a big Foursquare user – mostly because I don’t leave the house all that often! LOL. But I used to see the check in notices pop up on Twitter all the time and I don’t anymore. I think the novelty has worn off, which means the company has to dig in and be useful if they want to keep the doors open. They’ve made changes to the system and from the other comments on this post, it appears that they’re reaching a key audience. Will it be enough to keep them going for years to come? Who knows? In ten years, we all could have GPS chips in our arm that will eliminate the need for a mobile check-in service.