McClure: Hundreds Of Millions Of Dollars For The Web’s Foursquares [Video]

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Angel investor, Dave McClure, kicked up some dust this month with his post, “Check-Ins Are Coupons. Game Mechanics Are Bullshit.” His thesis: location based services (LBS) will have to offer real economic incentives if they ever hope to be a mainstream success. Foursquare, with some one million users, is signing up 10,000 to 20,000 new members each day— not too shabby, but it’s certainly no Facebook (try +400 million users). If you need a visual analogy, that’s the equivalent of weighing a male guinea pig (approximately 2 lbs.) against an adult grizzly bear.

McClure predicts that Foursquare, Gowalla and others will have to pony up roughly $5 to $10 per user and $50 to $100 per offline business to bulk up fast. But he’s not condemning the sector, in fact he’s quite bullish. Very bullish. McClure says the location based services market should be worth north of $20 billion and the best LBS could realize valuations of several hundred million dollars based on the potential of the market. All of a sudden, Yahoo!’s rumored $125 million offer to Foursquare sounds downright quaint.

He predicts that it will take two to five years for an LBS to reach a critical mass of users and small businesses. “It’s no small task to sign up a lot of businesses large or small in 50 metros across the country,” McClure says. That will take years for many people….The advantage in those situations is going to go to the larger brands, more recognized brands, like Google, Apple and Facebook and maybe Twitter.” Speaking of Facebook, McClure still sees Zuckerberg’s portal as the ultimate LBS winner, whether that’s through a hefty acquisition or in-house products.

I don’t fully agree with McClure’s conclusions. For example, I don’t think Foursquare, Gowalla, etc., will have to shell out $5+ per head (and $50+ per offline business) to solidify their user base— there is an obvious incentive for offline businesses to get into the LBS game and voluntarily offer users coupons. However, I do think Facebook is the most logical, future king of LBS (barring the fact that they are unfashionably late to the party) because of their huge installed base and high level of user engagement. It’s theirs for the taking, if they want it.

See my full video with McClure above.

Image Source: Flickr/bivoir

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