Historically, Foursquare has been better at helping its users find ways to spend their money than at making any of its own. It’s a state of affairs that can’t last much longer, and the local exploration service is hoping to change it with a new set of partnerships it’s announcing.
Starting today, Foursquare’s 30 million users will be able to sync their MasterCard and Visa credit and debit cards with the apps. Those who do so will receive targeted discounts from participating merchants, with Burger King and its 7,000-plus locations signed on as the pilot partner.
Foursquare Chief Revenue Officer Steven Rosenblatt (Click Image To Enlarge)
Steven Rosenblatt, who joined Foursquare last summer as its first chief revenue officer says.
“This is where you’re going to see merchants really realize the power of mobility.”
Rosenblatt, who came from Apple, joined the company just in time for the launch of its first major monetization product, Promoted Updates. They’re discount offers and other targeted messages served up to users via the app’s local discovery engine, Explore.
Foursquare' Promoted Update (Click Image To Enlarge)
The new Promoted Updates enables businesses to send promoted content to users. These updates will appear at the top in a prominent position in the “Explore” tab in Foursquare. That’s the section of the app that is for users to find businesses nearby. The Promoted Updates, like Google search ads, there is “intent” there while users are looking for a restaurant, bar or other business nearby, says Steven Rosenblatt, Foursquare’s chief revenue officer. Businesses pay on a “cost per action” performance basis for these ads. In some ways these updates are also like Twitter’s promoted Tweets.
While the privately-held startup doesn’t disclose revenues, Rosenblatt says merchants have been impressed with the results from Promoted Updates. The “action rate” for the ads is about 3%, with more than 50% of users who engage with a Promoted Update checking into the merchant’s location within 72 hours.
He says.
“We wanted to prove that we could drive people from the digital world to the physical world. That’s the thing marketers have been striving for forever and really never could prove it.”
Getting users to sync their credit cards is critical to the proving-it part, allowing Foursquare access to detailed purchase data that bolsters its claims to be an effective tool for vendors trying to drum up local busines. Rosenblatt says.
"One mass retailer recently told us for every dollar spent on Foursquare they drive $10 in ROI.”
The deals with Mastercard and Visa represent an extension of a partnership Foursquare has had since 2011 with American Express. But the AmEx deal was not revenue-generating, according to The New York Times. With the new partnerships, Foursquare will get paid on a cost-per-transaction basis.
That could add up to a real business, and not a moment too soon for the four-year-old company. Rosenblatt says.
“I can say we’re anticipating significant growth in 2013. Expect a lot from us this year.”
COMMENTARY: In a blog post dated January 29, 2011, I reported that foursquare had reached 6 million users, and that venture capital firm Andreeson Horowitz said that foursquare was worth $250 million, althougn the site had zero revenues.
In a blog post dated November 23, 2012, I reported that foursquare had generated only about $2 million in revenues for the year, and sought to raise another $50 million in venture capital, on top of the $20 million it raised in 2010 when it was valued at $95 million and a $50 million round it raised from Andreesen Horowitz in June 2011 at a valuation of $600 million when it hit 10 million users. Since then, the company’s valuation has reportedly increased to more than $700 million.
If you've been following my previous posts about foursquare, you already know that I don't think very much about foursquare, their CEO Dennis Crowley, or location-based social networks as a matter of record. In fact, I think the entire LBSN category is headed for a train wreck and said so much in a previous blog post dated April 13, 2011.
So when I heard that Foursquare was looking for additional investors, but had generated a paltry $2 million in revenues so far in 2012, I just had to chuckle. I don't know where foursquare came out with that valuation of $700 million, but if you do the math, this works out to 350 times revenues, which is a ridiculou number, when you consider that Facebook at the time of its IPO commanded a multiple of 26. No wonder investors are taking a close look at Foursquare or are very hesitant of investing in a company lacking a successful business model.
Courtesy of an article dated February 26, 2013 appearing in Forbes and an article dated July 25, 2012 appearing in Forbes
Comments