Digital

Foursquare needs to decide how to conquer local before investor interest cools

@denschaal

Nov 21, 2012 11:59 am

Skift Take

Foursquare is walking a fine line between user engagement and commercialization, and its fate is dependent on this balancing act.

— Dennis Schaal

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Foursquare’s day of reckoning could be approaching as it doubles down on various efforts to increase its revenue from the free service while investors, possibly suffering from dot-com and mobile fatigue — have been reluctant to pitch in for an upcoming funding round.

The check-in service as of late has been tilting toward local search for restaurants and other businesses, competing with the likes of Yelp and Google, and has raised more than $71 million to date.

But venture capitalists’ office doors have not been swinging wide open in recent weeks, especially in the wake of Facebook’s post-IPO woes, as Foursquare attempts to raise $50 million in an upcoming funding round, The Wall Street Journal reports.

“Potential investors aren’t convinced the company is moving quickly enough to make money and are concerned that the use of its free service—which helps people find and alert others to their presence at places like bars and restaurants—is starting to slow, the people said,” according to The Wall Street Journal story.

Is the bloom off the rose?

With a global user base of 25 million, Foursquare reportedly is on pace to attract some $2 million in revenue in 2012 — and that’s hardly a commercial scorecard to boast about.

In a monetization bid, Foursquare has been sticking intrusive, full-screen-size restaurant ads into the Explorer tab of its mobile apps.

This week Foursquare debuted “Recently Opened” ads from local businesses in its updated iPhone app, in a move that mirrors Twitter’s promoted tweets, in some respects.

Foursquare reportedly has been experimenting with targeting coupon offers at its users. With 2.5 billion check-ins and counting, Foursquare is a Fort Knox of mobile user data, but the growth of its membership base may be slowing, and the company runs the risk of alienating users with the commercial onslaught.

So many questions in search of a business model

There are more questions than answers about Foursquare’s prospects, and potential investors are first in line these days expressing their doubts.

  • Is targeted advertising enough of a differentiator from the likes of Facebook, Twitter and Groupon?
  • Is Foursquare’s global expansion running into a wall?
  • Will users be turned off by all the advertising?
  • If Foursquare opts to license its content to travel and other companies, is the content good enough?
  • Can Foursquare alter its strategy and turn into a travel company, and if it did, would it run into the same user-engagement problem that plagued a host of travel inspiration sites before they bit the dust?

Some of these questions about Foursquare’s hoped-for business model will have to be answered sooner rather than later.

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