Foursquare Introduces Ads For Small Businesses

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FoursquareWithin the startup world, there’s been a quiet emigration away from small business market, with companies — mainly those in ad tech — pivoting to sunnier (read: brand-funded) pastures. But for local consumer plays with big funding, companies like the closely-watched Foursquare, the little guy is still their golden ticket. And this morning the company rolled out its flagship small business advertising product, capping a two-year effort to solve the company’s toughest challenge yet: making money.

With the new product, which the company has been piloting in New York since May, local businesses will be able to buy ads that surface in the search results pages or home screen of its popular mobile app. The ad creation process is simple (bordering on restrictive), a stark contrast to cornucopia of targeting and customization options available in other ad products like Google AdWords. That simplicity was intentional, according to Noah Weiss, the former Google Search product manager whom Foursquare poached to head up the local ad product in 2011.

“There’s a reason why the yellow pages is still a billion-dollar business: you just call someone up on the phone, pay for a fixed price for a fixed slot, and tell them what text to include in it. It’s not a powerful advertising medium, but its a simple one,” Weiss told Street FIght in an interview. “So we looked out our Explore product, which helps people find the best places to go in a personalized way, and inverted the technology, so we could use that technology to find the local customers who are most likely to go to a [given] local business.”

One area where the company has streamlined the workflow is in content creation. The new ad product allows advertisers to draw from the content generated by users over the past four years, selecting an image of their business, or even a comment or tip, posted by a user, to feature in the ad itself. Google rolled out a similar feature last week, which allows advertisers to feature comments from Google Plus users, highlighting their real name and photo. PaperG, a local ad creation tool for publishers, has offered similar functionality for a number of years, allowing users to pull content from their websites, social media, or Yelp reviews into ads.

These efficiencies undoubtedly help improve the user experience, but the strength, and uniqueness, of Foursquare’s advertising product still stems from the feature that caught consumers attention in the spring of 2009: the check-in. The feature gives the company a unique opportunity to tell advertisers whether a user, who saw an ad, came in days or weeks later, all without rewriting the privacy policy or asking users, or advertisers, to change their behavior. Just as the company was seemingly winding down its trademark feature, the ad product gives the check-in a renewed role, serving as a attribution tool as well as data collection tactic for advertisers. “Every time a check-in happened, that’s potentially someone who saw an ad,” Weiss quipped.

What the check-in also allows, is for the company to tell advertisers who a user is, in addition to when they come into a store. Foursquare is still testing the feature internally, but eventually, Weiss says the product will be able to tell advertisers whether users who clicked on an ad, and later check-in, were first-time visitors or returning customers, and potentially price ads for each group separately.

While the check-in has found a second wind as a conversion tool, Foursquare, both as an consumer property and ad medium, is inching closer to becoming a more passive (and implicitly more private) service. Last week, the company rolled out a real-time recommendations feature, which automatically recognizes whether a user is at a given venue, and surfaces recommendations about what to eat or drink from past tips and comments. And that technology — the ability to identify when a user is in a place and surface content relevant to the user before he or she makes a search — may have its most material impact on the company’s revenue stream.

“The writing is one the wall for us, where there’s going to be huge explosion of activity on Foursquare with this tech that allows us to very accurately know when you’ve stopped in at a place, and we have a degree of confidence,” said Weiss, referring to the company’s predictive search feature. “In a couple of months this might be a different conversation, but for now we’re seeing how it rolls out, and then see how it plays out on the merchant and attribution side. “

Although the company has repositioned itself as a local search company over the past year, the future of the firm, and the bulk of its revenue-making potential, might not come from traditional search ads. The shift toward predictive search will allow the company, and others in the space, to target user much earlier in the path to purchase, reaching users when they’re just considering lunch rather than when they are already looking up a favorite spot.

Steven Jacobs is Street Fight’s deputy editor.