Foursquare finally rolled out a self-service advertising product on Monday, after years of hesitant experimentation with ways of making money.
The new ads display suggestions for local businesses when users search within Foursquare’s mobile app, in a format similar to the search results it already displays.
Businesses will pay per action—saving an ad for later use, sharing it with a friend or checking in at the venue—with a minimum bid of $1.
Acting Like Google (In More Ways Than One)
You know who this reminds me of? Google. Okay, stop laughing.
I strongly doubt Foursquare will ever be a Google-sized enterprise—its long-term survival as an independent entity still remains in doubt. That’s not the analogy I’m making. Instead, it’s this: Now that Google is a multibillion-dollar company, it’s easy to forget its early missteps.
At one point, Larry Page and Sergey Brin thought they’d make money in enterprise search software. When Google first rolled out online ads, it charged flat rates. It took Google years after its founding to find the auction-based model that proved so successful.
Foursquare likewise fumbled its early attempts at advertising models. At one point, it thought it would charge businesses for displaying special deals when users checked in, founder Dennis Crowley recently told me.
“At one point, it’s what we thought [we’d do],” Crowley said. “But then it felt weird, we’re charging people to give stuff away?”
With its new ads, which any business with a credit card can sign up for and with prices based on a virtual auction, Foursquare is consciously imitating Google. It’s hard to argue with imitating success.
What Foursquare Must Do Next
With 1.5 million businesses signed up to manage their location information on Foursquare, it would be foolish if the company didn’t try to make some money off this base.
But ultimately, Foursquare needs to open up its advertising platform, which currently is only available directly through Foursquare’s website.
Google, Facebook and Twitter have all built ways for third-party developers to access their advertising platforms. One reason why marketers love this is that third-party tools let them manage campaigns across multiple services. For Foursquare, as an upstart, this is all the more necessary.
The good news for Foursquare is that it has extensive experience managing an application programming interface for consumer apps accessing its database of locations, used by Instagram, Uber, and other popular apps. It should not be hard for its developers to build a similar API for advertisers. Indeed, Foursquare already has some programmatic tools for merchants—just not any yet for its ads.
The other thing Foursquare has to figure out is a way to ignite growth and engagement. Since Foursquare only makes money when users search within it own mobile app, it does not benefit from the millions of Instagram users who tag photos with Foursquare locations, for example.
There is much Foursquare could do to boost usage. While Foursquare embraced Twitter early on, it has failed to make potential of Twitter Cards, for instance, a way of displaying rich previews of app activity. Right now, a Foursquare check-in broadcast on Twitter displays a lame come-on to download the app; it could instead provide details about a local business beloved by the Foursquare user tweeting her check-in, a far more compelling bit of information.
Foursquare has also quietly revamped its mobile app, adding real-time recommendations and a streamlined feed of friends’ check-ins. It is easier now to like a friend’s check-in, boosting interaction between existing users.
Yet what Foursquare really needs is to sign up millions more users. Some 40 million people have downloaded its app and the company reports that its users check in six million times a day. And Foursquare is spreading around the world, at least in the globe’s dense urban areas. Yet Foursquare has never given out a figure for daily or monthly active users.
Ultimately, without consumers, Foursquare cannot have a strong advertising business. The company’s best hope is that its new advertising product takes off with its existing businesses and provides enough cash to attract fresh investment—which the company can then apply to spreading Foursquare around the globe. It is a risky, high-stakes bet—but for me, that’s what makes the company so interesting right now.