Why the Merchant API Is Key to Foursquare's Future | Street Fight

Why the Merchant API Is Key to Foursquare’s Future

Why the Merchant API Is Key to Foursquare’s Future

Last week, Foursquare updated its business page, adding case studies for merchants and use studies for brands, and generally improving the user experience. Since updating its merchant platform in the spring, the location-based social networking company has quietly launched an offensive to create a viable B2B component in their business, laying the groundwork for future monetization.

CEO Dennis Crowley spoke pointedly about Foursquare’s monetization roadmap in an interview with Bloomberg in August, saying: “We designed our products to connect merchants with users, and to connect users to merchants. The majority of the revenue generated by the company would come from the tools which we offer these local merchants.”

Foursquare’s big play will undoubtedly center on providing local marketing tools to small and medium-sized businesses. And while the company’s product roadmap is well developed, distribution and CRM models remains unclear.

Until recently, Foursquare seemed poised to invest heavily in its merchant dashboard as the primary distribution channel for tools like specials as well as check-in analytics. It is unclear when. or even if, there was a strategy shift at the company, but in mid-July the company quietly opened the merchant API to select partners. In doing so, Foursquare appears to have recognized the implicit danger in maintaining and scaling relationships with small and medium-sized businesses — namely, the massive sales and support staff needed.

In moving away from a branded, single-channel approach like the merchant dashboard, the company appears to be favoring an integrated model that allows third-party platforms to build the Foursquare toolbox into their service via the merchant API.

“Foursquare represents one metric for [merchants] to take a quick pulse of how their business is doing,” Foursquare’s director of business development Eric Friedman explained in a recent interview with Street Fight. “And if a merchant uses an integrated dashboard from another service provider, that’s okay with us.”

In moving away from a branded, single-channel approach like the merchant dashboard, the company appears to be favoring an integrated model that allows third-party platforms to build the Foursquare toolbox into their service via the merchant API.

Foursquare has kept the merchant API close to the vest. Friedman declined to comment on developer initiatives outside of their launch partners: the listings management platform Yext, American Express’ Clickable-powered local marketing solution YourBuzz, and AOL’s hyperlocal media play, Patch.

Yext, which closed a $10 million series D round in June, allows small business to edit their listings on sites like Yelp and Superpages through a single platform.  CEO Howard Lerman tells Street Fight that users will soon be able to access and edit the Foursquare suite from Yext’s web-based dashboard.

“I think what they have done with the Merchant API is very smart,” Lerman explained to Street Fight. “They have made it possible for third-party services with deep SMB relationships to update their information on behalf of their clients, rather than running a closed system like Google.”

The API is also being built into American Express’ YourBuzz product, which provides small business owners with the tools to monitor their digital presence on social media outlets like Twitter, Facebook, and now Foursquare. Powered by digital marketing solutions company Clickable, the YourBuzz application is one of a handful of small business tools that Amex has created as part of their Open campaign. “Its an opportunity for Foursquare to gain access to a customer set that would not readily be available to them otherwise,” Clickable’s director of business development Maxine Friedman said. “The power of American Express’ marketing is equally attractive to them as well.”

As for Patch, the specifics of its integration with Foursquare are less clear. The AOL subsidiary issued the following comment on the matter: “We view business owners as some of our most powerful users, and as such we want to connect them with the most relevant tools for their success.  Our partnership with Foursquare aligns perfectly with that goal. Like Patch, Foursquare empowers business owners digitally; between the data Foursquare can provide their customers and small business owners and Patch’s power to serve our users community by community, we are jointly poised to offer small business owners a unique way to connect with their most relevant customers in real time.”

It’s unclear how the apparent move from a proprietary dashboard to an API ecosystem will affect the company’s revenue model, but as it stands it looks like Foursquare will monetize these partnerships when — as the company is known to say — “the product is right.” While all parties stress that there has been no formal conversation about monetization, Lerman, for one, didn’t seem to mind, saying: “It is available for free, now. Whether it will remain that way, we don’t know.”

Monetization is not the only issue at stake here for Foursquare. As checking-in becomes commonplace among early adopters and the concept of sharing one’s location becomes more and more accepted, the company needs to create a sustainable system of value generation which goes beyond gamification and social-generated content.

Gowalla, Foursquare’s biggest competitor in the geo-social space, announced a major restructuring of its business last week that includes a big bet on travel. Through partnerships with National Geographic, Disney and others, the company is effectively syndicating curated location-centric content from trusted brands in a geo-social environment.

If Foursquare can create a viable distribution and CRM model for its merchant tools, the company may be able to achieve the degree of merchant-user interaction which could be a real enough value proposition for the mainstream user.