In January 2013, PrivCo, the research firm, said Foursquare would fail by the end of the year.
Granted, the year isn't over--but it's pretty clear PrivCo was wrong.
On Thursday, Bloomberg reported that Foursquare was "in talks with multiple large technology companies about a potential strategic investment." According to the report, Foursquare is now back on track to beat sales expectations by the end of the year, and the business development team has been successful in attracting several new advertisers to their "post-check-in product."
What is their "post-check-in product," you ask?
As TechCrunch explains, the new Foursquare "will ping phones with personalized recommendations based on a user's targeted physical location, without needing them to check in at all."
In a recent interview with Fast Company, co-founder and CEO Dennis Crowley explained this product is basically the holy grail of local discovery, and one that has the potential to turn Foursquare from a fun, though niche social check-in site, into a massive local data company.
Personalized recommendations may seem like a marginal step forward--a decent iteration on an otherwise underwhelming product--but I'm inclinded to believe there's a bigger story here. As writer Austin Carr put it, "If Google has built a $294 billion business based on your explicit searches, Foursquare's bet is that the data behind your implicit intent are just as lucrative."
If the new product is a hit, big tech companies will be champing at the bit. Plenty of firms have attempted to become the "local layer" of the Web, but no one's really succeeded. (Perhaps Yelp has come the closest, but the recommendation site is continually bogged down with allegations that users are manipulating reviews.) The new product may--finally--put Foursquare in a good position for a big exit.
The question becomes: Who could be the highest bidder?
Perhaps the obvious answer is Apple. Over the last several years, Apple has been building out its own local programs. Its most recent acquisition, Locationary, is basically a local data broker--a nice complement to the company's new iOs map (which it's surely trying to improve).
Foursquare could potentially turn Apple Maps into a more social product, one that would likely boost user engagement and be an attractive selling point to advertisers. As Romain Dillet says on TechCrunch:
Foursquare could replace everything related to Yelp in iOS. At the same time, Apple released Find My Friends a year ago. It has very few active users and bad ratings in the App Store. Apple could safely forget about Find My Friends if Foursquare becomes an Apple app...It remains to be seen whether Apple could be tempted by its talented team of 150 people in order to develop the product further. Foursquare data becomes even more valuable for the users as people check in and add other users as friends.
The other obvious answer is Google. Like Apple, Google has poured a ton of time and resources into developing its local products. Buying Foursquare's data could be a huge play for Google, especially if the company's data can translate into higher ad-revenue from local businesses that already advertise on Google.
Say you live in New York City and you like bowling. Google probably already knows this about you, based on various search indexes associated with your account. Right now, when you log in, you're likely going to see ads for bowling alleys in New York. The only problem is that when you're on your computer, you probably don't have plans to bowl. But with Foursquare's location data, Google would be able to sell your location data to its existing local bowling advertisers at a premium price, giving them access to you when you're on-the-go. That gives advertisers the chance to hit you with an ad at the right time--and place.
Also, let's not forget that Google recently purchased Waze for $1.1 billion, reaffirming the company's willigness to shell out large amounts of cash to boost its local division.
Marissa Mayer and Dennis Crowley are old buddies. Back in 2005, when Mayer was still at Google, she was in charge of the acquisition of Dodgeball, Crowley's first start-up.
Since taking the helm of Yahoo in 2012, Mayer has been almost exceedingly vocal about the company's need to make serious acquisitions to boost its mobille and local products, and align itself with a younger generation. Enter Foursquare.
In June, Kara Swisher of AllThingsD reported on comments made by Yahoo CFO Ken Goldman:
Goldman added that Yahoo would continue to do acquisitions, "to help basically accelerate our progress… and continue to see the velocity of products in the mobile space."
Of most interest is "localization of the space," especially in providing search and content to consumers.
Hey, Dennis Crowley of Foursquare, that sounds like you!
It also fits the rubric of a standard, Mayer-approved Yahoo acquisition. As Quartz put it:
Like Tumblr’s rabid fan base, Foursquare has something going for it that makes it uniquely valuable. That’s its location data, which it shares with companies like Instagram and sells to various advertisers. While Yahoo’s approach to making Tumblr pay for itself is to load the site up with ads, the approach would probably be different with Foursquare, which only has 33 million users. Yahoo could use Foursquare’s technology and data to beef up its web search, by offering people search results based on where they are. Or maybe Yahoo could just make Foursquare profitable through ads, since Yahoo, being bigger, can more easily negotiate deals with advertisers.
A Credit Card Company?
Foursquare has a long-standing relationship with American Express, a partnership forged in 2011 that gave discounts to card members that checked in at various stores.
Some see Foursquare's location data as valuable to advertisers and local retailers, but it coud also be just as lucrative to credit card companies, who collect transaction fees on each and every purchase that's made. As the VC Hunter Walk explains:
Your credit card company has a tremendous amount of data on where you, and the world, shops. Not purchases at the SKU level--they largely don’t know what you bought at West Elm or Cheesecake Factory--but they do know that you spend $350 at a furniture store and $75 at a casual food chain. Now extrapolate this over millions of customers. Using covisitation data they could recommend to me other establishments visited by folks with similar spending patterns. “Hunter, because you enjoy West Elm you might also like SF Modern Design located at 1000 State St.” This would be especially helpful when traveling.
But none of these credit card companies are (a) skilled at building consumer facing applications, (b) upstream of purchase decisions and (c) have place level data for retail establishments. Oh but wait, Foursquare has all of those. By combining with Foursquare, the credit card companies could finally justify and preserve their transaction fees (in the face of competition from other payment options) but working to drive demand to the local retailers. Today they do this in very non-scalable ways such as one-off marketing programs such as AmEx Small Business week.
[Update: Microsoft is rumored to have its eye on the company too. A Foursquare partnership would give Microsoft a strong foothold in the social and mobile sphere's, especially as it develops its own set of tablets and smartphones.]
This is the dark horse option--the bizarre scenario in which Foursquare's future involves an IPO or bankrupcy. Both are equally unlikely, but considering the company's raised north of $100 million, Crowley may not find any acquisition offer under $1 billion palatable for himself or investors.
What is certain, however, is that a company that was once perceived to be the next "highly-funded casualty" is very much alive.