This year’s SXSWi did not herald the next Big Thing in tech, as some guessed it wouldn’t, but it wasn’t always this way. In 2010, a year when people were a bit more optimistic about the new new thing, Foursquare was the boss. First appearing in 2009, by 2010 it came into its own as the mayor of the location wars with its app based around checking into places and then sharing that information with your friends.
Fast forward to today, and the picture has changed. Foursquare’s chief competitor Gowalla has gone to Facebook and is making products like Nearby to challenge Foursquare’s dominance in social location. People are starting to focus more on how consumer apps may make returns.
Foursquare has had its share of changes
And Foursquare has had its share of changes, too. Key people at Foursquare have stepped back from the company, some starting new ventures. The company has faced (unconfirmed) reports it is running out of cash — estimated to have a burn rate of $2 million and only $2 million in revenue last year, and (again unconfirmed) reports saying it has had trouble raising its next round of financing amid claims of a too-high valuation and question marks over its business prospects.
One part of the problem appears to be that check-ins, the cornerstone of Foursquare’s early growth and its traditionally main source of data points, are no longer what they used to be. A year ago CEO Dennis Crowley said Foursquare was noticing more people using Foursquare but not checking in. In fact, as the company has doubled its user base to 30 million people in the last year, growth of check-ins appears to be flat: today, Crowley says Foursquare sees 5 million check-ins per day, but that’s also what the company said a year ago. For some, the novelty may have worn off of game-play elements, like getting badges and points — part of a wider trend for challenges in app gamification.
Location is, funnily enough, a moving target.
And yet, there is another story going on here, too.
We are now hearing from more than one source that Foursquare is finally close to closing a Series D round at a valuation that may not, after all, be less than its last C round in June 2011, when it raised $50 million at a $600 million pre-money valuation. The company has to date raised $71.4 million from investors that include Union Square Ventures, Andreessen Horowitz, Spark Capital, CrunchFund* and more.
To be sure, we’ve been hearing stories of a D round for a few months now, and if its C round was anything to go by, Foursquare will try to keep things quiet until they have some actual news to share. But however that information finally comes out, it seems the bottom line is this: Foursquare’s backers are not going to let it die, and Foursquare has set out on a mission to prove all the haters wrong.
The mayor of social location?
Foursquare has been trying to move with its moving target. Because it started noticing people using the app but not checking in more than a year ago, it has acted accordingly, shifting its service into taking advantage of all the data that it has already amassed, and continues to amass, to position itself as a location-based search engine. Its aim is to couple this with a mobile commerce play — not in the area of payments (not yet at least) but in bringing would-be consumers into places where those payments will be made, and encouraging them to buy stuff.
Of course, if Foursquare was breaking new ground with its check-in service back in the day, then the area where it is playing now is more dug up than a freshly plowed field. That is to say, there are a ton of companies coming at the idea of charting user location via mobile, and what to do with it once you have that information, including Yelp (thought of as what Foursquare seems to resemble more and more), Google, Facebook, Groupon, Square, Instagram and more. You could even argue that just about most information apps, and quite a lot of others, are potential competitors.
But this hasn’t been necessarily bad news for Foursquare. By way of its API, used by some 40,000 developers at the moment, it powers search in a wide range of third-party apps, including Evernote, Uber, Flickr and Jawbone.
On the commerce side, recent deals to offer discounts to MasterCard and Visa cardholders with participating merchants being one way that Foursquare can earn commissions. (All the same, it still has a hurdle in rolling out its dashboard to smaller merchants beyond the bigger national retailers that have signed on.)
Foursquare remains in jeopardy of losing some of its credibility among its most loyal users
On the consumer side, a deal with BlackBerry to pre-install Foursquare on BB10 devices is one advance for the company in its elusive goal of easier device integration. This is one area where Foursquare would like to do more in the future, judging by the 30 or so meetings Crowley says he had during Mobile World Congress in Barcelona. That’s because, in the quest to continue sourcing new data, Foursquare is always trying to make its check-ins into a more automated process, or “a machine that generates check-ins and then uses that data to create the recommendations,” in the words of Crowley. (At least one new player, Jolla, seems very receptive to the idea of a Foursquare phone.)
And yet, and yet… while it’s moving ahead in all these areas, Foursquare remains in jeopardy of losing some of its credibility among its most loyal users. One — who has asked to remain anonymous — told me this when I asked him to tell me why he decided to delete the Foursquare app from his phone:
I’ve been a heavy 4sq user for a bit more than two years now. I’ve enthusiastically evangelized the product and the company. But, today I decided that it was time to stop and deleted the app from my Android.
4sq has changed from the product I started using. It has started out centered on check-ins. They did a great job of creating a game-like system that encouraged you to “score” points…But that has changed. The app has gradually been evolving to subtly de-emphasize check-ins and instead look more like a local search product… The incentive for me to use it has gone, along with the game element. I had added a lot of new places to 4sq and a number of tips. I’m not going to do that anymore.
I understand why they’re doing this – the existing product didn’t have an obvious monetization strategy beyond maybe ads and sponsorship…I wish they had thought about how they could harness their existing users to help them create and curate their recommendations product…They never, for example, gave you points for adding new places, photographs or tips. That would have been an obvious way to use their “players” to build out the content for the new system. I will be very interested to see if they can accomplish this “pivot”, but right now it will be without me as a user.
The key will be to either figure out how to bring those skeptics, and more, back to its core service, or come up with many other ways of growing Foursquare to make up or surpass the difference. I caught up with Crowley recently and asked him about some of the recent changes and what lies ahead. That interview is here.
*Disclosure: TechCrunch founder and current columnist Michael Arrington is a general partner at CrunchFund.