The Check-In Mayor Loses Its Title
Many of us may remember Foursquare as the social networking app where you competed against friends by checking into restaurants, venues, and stores to earn points and badges. To some, the ultimate goal was to become “mayor” of a certain location, and to others, the app was a fun game to play with friends with the added benefit of receiving “specials” at certain establishments. The app quickly generated buzz among young, city dwellers and college students, reaching over 5 million users by December 2010 since its launch in 2009 . The founders attribute much of the app’s success to its search and discovery function (akin to that of Yelp) as well as its competitive and social nature which encouraged friends to join the network . However, as location-based online services became ubiquitous – Twitter and Facebook both began allowing users to include location data with posts and Yelp added the ability to check-in to locations – Foursquare’s differentiation to consumers and value to investors began to shrink .
The Evolution of a Data Company
As the app landscape intensified, Foursquare knew it needed a radical transformation to remain viable leading the company to split into two apps: Foursquare – an exploration and discovery tool and “a true Yelp-killer” – and Swarm – a check-in based social networking app . The CEO, Dennis Crowley, knew that at its core, Foresquare was a location-based data company that had amassed years of users’ traffic patterns based on (1) Foursquare’s “cutting-edge” technology called Pilgrim* that pinpoints a user’s exact location and (2) its extensive database of over 60 million establishments around the world . By splitting the apps, Foursquare could focus on using its massive data collection to cater to users in a more personalized way, including providing targeted recommendations on Foursquare and sharing locations on Swarm. While the apps each served a different purpose to distinct user segments, both relied on Foursquare’s foundation of capturing user data that could be used for monetization going forward.
Foursquare’s Data Brings in the Money
As Foursquare’s business model evolved, the company began focusing on monetization through several mechanisms beginning with traditional advertising and shifting toward enterprise sales.
- Business Advertising / Pinpoint: Early on, Foursquare incorporated ads into its app, which provided businesses with a hyper-targeted audience based on location . This service has evolved into Pinpoint which helps advertisers “identify, reach, and measure audiences based on where they go in the real world” .
- Location Intelligence / Places API: Back in 2009, Foursquare opened its API (application program interface) to allow third-party developers to build apps on top of the company’s location and mapping services . Flash forward to today where Foursquare can charge software developers for this API which provides businesses with accurate point-of-interest data . Customers such as Microsoft, pay Foursquare a licensing fee to use its location data to power its Bing search engine and Cortana, while others, like Apple, Uber, Twitter, and Pinterest, rely on its point-of-interest intelligence to power their software   .
- Place Insights: Probably most exciting is Foursquare’s foray into predictive analytics based on its wealth of consumer foot-traffic data. Place Insights is targeted toward Sales, Finance, Real Estate, and Retail to help companies determine patterns in consumer behaviors based on where they’ve been . In a blog post, Foursquare alluded to the power of its foot-traffic data by predicting Chipotle’s drop in sales and Apple’s sales revenue  . While this data is inherently useful for companies in determining site selection, I think the opportunity to use Place Insights as alternative data for investment firms is tremendous.
Uncertain Road Ahead
While Foursquare has made strides in leveraging its data to transform its business, the company will undoubtedly face challenges as it seeks to grow revenues to prove it’s worth more than its ~$325 million valuation . For Foursquare’s data to remain valuable, it needs to maintain and grow its user base to have the most reliable and complete picture of consumer foot-traffic patterns. This user growth is predicated on an investment in marketing to ensure that consumers understand its value proposition, one that is different than its historical value. In addition, Foursquare will need to differentiate itself from competitors like Facebook and Google as a valuable source of accurate location intelligence. Finally, Foursquare has an enormous opportunity to innovate its product offering based on its location intelligence, such as partnering with weight loss services to track gym usage.
The potential for Foursquare is tremendous, but it’s up to them to capitalize on it.
* “Foursquare’s ‘Pilgrim’ location-guessing engine factors in everything from your GPS signal, to cell tower triangulation, to the number of bars you have, to the Wi-Fi networks nearby” to map out location patterns with a high degree of accuracy and precision. 
 Piskorski, Mikolaj Jan, Thomas R. Eisenmann, Jeffrey J. Bussgang, and David Chen. “foursquare.” Harvard Business School Case 711-418, January 2010. (Revised March 2013.)
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 Foursquare, “What is Pinpoint?” Vimeo, January 2016, https://vimeo.com/147509561, accessed November 2016.
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 MacMillan, Douglas and Lisa Fleisher, “Foursquare to Begin Charging Fees,” The Wall Street Journal, June 2014, http://www.wsj.com/articles/foursquare-labs-to-begin-charging-fees-1403820982, accessed November 2016.
 Warren, Tom, “Microsoft’s Cortana now integrates Foursquare results,” The Verge, July 2016, http://www.theverge.com/2014/7/29/5947479/cortana-foursquare-integration-windows-phone-8-1, accessed November 2016.
 Panzarino, Matthew, “Foursquare Gets $45M and a New CEO to Build Out Enterprise Business,” TechCrunch, January 2016, https://techcrunch.com/2016/01/14/foursquare-gets-45m-and-a-new-ceo-to-build-out-enterprise-business/, accessed November 2016.
 Turner, Matt, “An unlikely source predicted Chipotle’s disastrous quarter, and it says a lot about the future of investing,” Business Insider, April 2016, http://www.businessinsider.com/foursquare-data-predicted-chipotle-results-2016-4, accessed November 2016.
 Glueck, Jeff, “Foursquare’s Prediction: Apple Will Sell 13-15 Million iPhones This Weekend,” Medium, September 2015, https://medium.com/foursquare-direct/foursquare-s-prediction-apple-will-sell-13-15-million-iphones-this-weekend-d7aca59a67d8#.oa6xiayf4, accessed November 2016.