Foursquare CEO Dennis Crowley: “The Daily Deal Companies Are Version 1.0″

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In Part II of my TCTV interview with Foursquare CEO Dennis Crowley, we get down to brass tacks: How will Foursquare make money? (In Part I, we talked about Radar, Siri, and how mobile interfaces are changing). Foursquare is already experimenting by partnering with various daily deal companies, including Groupon, to show nearby local deals to Foursquare users. But Foursquare is ultimately taking a different approach. “”The daily deal companies are version 1.0 of great things you can build with the Internet that help local merchants drive foot traffic into the door. What we are doing with Foursquare is version 2.”

Groupon is great at driving lots of customers into stores, he acknowledges, “but there is always a question of whether they are repeat customers.” Foursquare is focused more on loyalty—identifying loyal customers and rewarding them (with Mayor and Check-in specials). Crowley thinks the bigger opportunity is to give local merchants the data to segment their customers. People who check in a lot are loyal, those who don’t check in any longer are lost (and maybe there are ways to bring them back), and people checking into similar places in the vicinity are good potential prospects.

“The best thing about Groupon and Livingsocial is they taught an army of merchants that there are better tools,” says Crowley. “We know we are going to be very good at helping merchants identify their best customers and building the tools that drive new customers into the business.” With Radar and Explore, Foursquare is starting to recommend places to go. I asked Crowley if there would ever be paid recommendations popping up in Foursquare. It is not something he is planning, but he did not rule it out.

Of course, Groupon is also trying to come up with ways to reward loyalty and not just first-time visits. I pressed Crowley on what many see as Foursquare’s biggest weakness. There is no way to tell whether people who check in actually buy anything. Foursquare needs a way to close the redemption loop between an offer and a purchase. “We have thought of different ways to get involved in the payment process,” says Crowley. One way is to strike more deals with credit card companies like its AmEx deal, which offers check-in specials redeemed at purchase by swiping your credit card. Foursquare is working on getting some of that transaction data so that it can help merchants determine which promotions work and which ones don’t.

(Watch Part I of this interview as well).