Foursquare ‘Opens for Business’ as Questions Loom

Capping off a summer-long push to lay the groundwork for Foursquare’s financial future, CEO Dennis Crowley pitched the service to brand marketers at an Advertising Week event on Monday. “I know some [advertisers] have had trouble getting in touch with us in the past… but now, we’re pretty much open for business,” Crowley told IAB’s Randall Rothenberg on stage. It’s a fitting conclusion to what has been a critical period of maturation and redefinition for the company, as it looks to transition from startup heartthrob to standalone business.

Maybe the biggest part of this transition has been the redefinition of the service as a local search engine – a move that Crowley said came in response to a growing set of users that were consuming, rather than producing, content on the platform. Crowley compared Foursquare to Twitter in 2009, when the scale of content produced daily allowed the platform to shift from a focus on the number of users sending tweets to those consuming content.

Foursquare’s push into local discovery allows the company to shape that passive consumption into a familiar, and easily monetizable, model. And, like Twitter, Crowley and company have recognized a dangerous nuance in social networks: while social data may underlay the consumer product, a “like” or “follow” or “check-in” is a means, not an end, for advertisers.  “What I want” is still a better proxy for intent than “what my friends want.”

The purchase intent implicit in search is only half of what makes the model such a valuable asset for Google and others. The explicit question and answer dynamic of search gives companies an enormous opportunity to serve consumers with new information – whether paid or not – without interrupting the user experience. It’s this frictionless advertising that fueled Google’s growth, and what, Crowley says, Foursquare incubated since its launch.

“We started working on our ad model way back in 2009 and we weren’t charging for it; it was just content that was built into the platform,” said Crowley. “If you check-in, we’ll give you something for free. It’s not an ad unit for them, it’s just ‘hey, if I interact with this merchant, they’ll reward me for that’… It’s the best thing we have going on.”

However, there’s a contradiction in Crowley’s narrative that may pose a problem for the company. On the one hand, he describes a shift in usage from “creators” to “consumers” — the process that spawned the transition to search. On the other, he points to the check-in, and the symmetrical relationship between merchant and user that the company has harbored, as a differentiating asset for its advertising platform.

Essentially, it’s unclear whether the company views the check-in as a content creation tool used by a subset of power users (as is the case with reviews on Yelp) or as a signal of sorts, through which advertisers can reach consumers. The former may give Foursquare more leeway as it pushes into the mainstream, but it devalues a key action that underpins its proposition to advertisers.

Think of Pavlov’s experiments. Foursquare has taught users to salivate every time they check-in. But what happens when they stop blowing the whistle?

Steven Jacobs is Street Fight’s deputy editor.

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