After
long focusing on growth at the expense of monetization, Foursquare appears to be making some smart moves as it moves toward actually making money. The latest, and most significant to date, is its
effort to partner with major deal sites including LivingSocial, Gilt City, zozi and BuyWithMe. True, no Groupon, but the company is in talks with the social buying giant as well, according to a Wall Street Journal story today.
The key thing is, Foursquare will earn
a share of revenues from deals it sells for partners, though the exact split hasn't been disclosed. If it can leverage the information-sharing dynamic of its geo-location service to sell deals to
its 10 million users, it would have a steady if small revenue stream. Teaming up with existing players in the daily deal space -- instead of trying to build up its own extensive sales force -- also
makes sense.
Further, rivals like Loopt have already teamed up with Groupon to distribute
deals, and Groupon has launched its own mobile app for presenting people with deals on the go. So, at the very least, Foursquare needs to keep up with its competitors in providing special offers,
regardless of the source. The collaboration with daily deal sites also follows closely on Foursquare's recent partnership with American Express offering deals to users who check in at certain
national retailers and New York restaurants.
That deal doesn't include a revenue cut for Foursquare for now, but it points the way toward future arrangements with AmEx or other
high-profile marketing partners that will provide payment to Foursquare in exchange for its participation. The company announced last week that it has signed up 500,000 businesses, an impressive total. So
far, though, it doesn't receive a cut of special deals it sells through those relationships.
However, by forging alliances with a variety of partners -- from deal sites to card companies
to small businesses -- Foursquare can hedge against the risks of any one revenue stream while maximizing the potential for increased sales. With a fresh $50 million in venture backing, Foursquare
isn't about to go under for lack of revenue. But it's time for the company to prove that check-ins can lead to more than virtual rewards for everyone involved.
Keep in mind that
while Foursquare was started only two years ago, it's a successor to Dodgeball, the prior location-based service started by Dennis Crowley in 2000 and later bought by Google before being shut down
in 2009. That's more than a decade to show a business model can be successfully harnessed to the social location app.