Add this to the interesting-but-never-going-to-happen suggestion box for Foursquare: ditch the consumer business altogether. Nihal Mehta, a New York-based entrepreneur-turned-investor, thinks that Foursquare might find a bigger business by bailing on its local search ambition to put its algorithm to work as an attribution product for mobile advertising.
Mehta admits that it’s likely not going to happen. Dennis Crowley, a friend, isn’t a an ad tech guy — but Mehta is. The 37-year-old has spent the better part of a decade investing in and building mobile startups in New York. Last year, he stepped down as chief executive of LocalResponse, a social targeting firm which he started in 2005 and where he still serves as chairman, in order to shift his focus from operations to investment.
Today, Mehta heads up Eniac Ventures, an early-stage investment fund which he started with a few college friends that counts Airbnb and SoundCloud among others in its portfolio. Later this month, the company will host the M1 Summit, an event bringing together some top brands to talk about mobile. Street Fight caught up with Mehta to talk about the state of mobile tech, the future of Foursquare, and where he’s looking to find the next billion dollar company in mobile.
You know the team at Foursquare fairly well. What’s your initial reaction to their decision to split the app into two?
It’s definitely really bold. I give Dennis [Crowley] a ton of credit for continuing to raise capital, continuing to grow the company, and continuing to throw long passes. But the jury is still out on the decision. Personally, I don’t think I’m going to use both apps — Swarm and Foursquare — in combination more than I use Foursquare today.
Unfortunately, they’re probably going to lose users that were still checking in and seeing where their friends are, and playing the game. But maybe they made a calculated decision that they didn’t want those users anymore; that the other piece of the business — the search product — was growing so much faster that they were going to leave that separate. My prediction is that in a year that only one [of the apps] is going to prevail, and that they’ll probably shut down Swarm and just focus on the Yelp killer.
One of the advantages of separating the apps is to allow the company to create more innovative, passive data collection techniques. But it’s something that has sort of been on the horizon for a while. From an investor perspective, do you still buy the passive data collection pitch?
It’s a very big opportunity, and I don’t think the creepy factor is much of concern to consumers. When Foursquare launched Panda last year — the algorithm that allows them to provide recommendations passively when you walk into a restaurant — consumers did not find that creepy. Google does that very effectively with Google Now. It’s a matter of being significantly more useful to the consumer than being creepy
However, what makes this particularly interesting is that the technology can solve one of the holy grails opens one of the holy grails of mobile advertising. 99.9 percent of consumers see digital ads, but they don’t click on them, right? But those ads influence them, and if a consumer sees an ad for Target, they don’t click on it, but 30 days later, they’re inside a Target, right? Who can connect the two? Who can create that attribution that ad somehow had some influence in this consumer’s decision making, whether it conscious or subconscious, to actually go into a Target, right?
So do you think Foursquare could build a big business by pivoting away from the consumer side of the equation?
In the market today, there’s existing players — Nomi, RetailNext, Shopkick — that are trying to install devices inside the retailer environment to connect the loop, but I fundamentally believe that’s just not scalable. Google is on hundreds of millions of devices, billions of devices, or hundreds of millions, high hundreds of millions, and they have amazing reach. But from a technological perspective, there’s only two companies that are in a position to do this: Google, with Google Now and Foursquare with their passive location detection technology.
I think there’s a really interesting B2B business there, and I think probably Google will capitalize on it first because everybody’s still trying to measure brand budgets on mobile. But I know that Dennis is not a B2B guy. He’s a consumer guy. So I think it’s going to be hard for him to even consider that shift.
Two years ago, you made a personal investment in Uber and Eniac counts Airbnb as portfolio company. Could you talk about what you saw in Uber two years ago, and why these marketplaces have suddenly become so popular?
In general, I’m just excited to invest in mobile companies that I use multiple times on a daily basis. At that time they had not scaled to the extent they are today. I never realized this company would be at the place they are today. They had a lot of issues with local laws and regulations and it was a huge question mark if they could succeed in making it past all of the red tape.
Airbnb is facing the same types of issue in New York. But like any major revolution there’s going to be significant disruption. When companies get big enough and they have issues with the law, that’s usually a good sign. It means they’re doing something that hasn’t done before. With the new round of funding, the company is larger than most large hotel conglomerates. I firmly believe they’re going to continue to execute, continue to do well — and even the markets that they are legal in, it’s enough of a business for them — and it’s going to start chipping away at the other markets to allow them to operate in.
There’s been a lot of talk about wearables recently, and I know that’s an industry you’re watching closely.
When Steve Jobs rolled out the iPad, people critics wondered, “Who’s going to want that?” And now it’s a hundred-billion-dollar industry. I think wearables are going to be more significant than that, and they’re just waiting on that form factor that’s going to make it go mass market. What the iPod did to MP3 players, or what iPhone did to smartphones, something is going to do to the wearable market.
It’s probably going to be a smartwatch. I know a lot of investors in the valley are very bullish on this, and I think this is going to be one of the next huge trend. There’s a very real potential for a hundred-billion-dollar-plus industry to grow very quickly, certainly within the next five years. I think we’ll probably see a killer form factor towards the end of this year.
Steven Jacobs is Street Fight’s deputy editor.