Foursquare: How to combine a social network with mobile services and create a location-based marketing company?

As many other social networks, the information generated by the community members is the main asset of the company that stands behind. Once segmented and filtered, this valuable information is offered to the real customers of the firm: other companies that want to reach that critical mass in order to perform targeted advertisement and promotions.

However, Foursquare introduced a new ingredient into the formula: mobility services that allow them to offer targeted location-based marketing services.
The potential of a mature Foursquare community could bring very interesting value added services for traditional stores and business –venues- that rely in foot traffic. It is not difficult to understand how a traditional store with a relevant presence in Foursquare community could benefit from the positive network externalities created by the members of the community, increasing their traffic of potential customers into their premises.

Foursquare is now focused on increasing the number of members and their activity beyond the early adopters. In order to boost the participation and content entry from its members, the firm presents this activity in the form of a game based on a “scoring points” system. In return, users get relevance and attention inside the community, something always attractive for our human egos. Additionally, one can also benefit from the comments and opinions made for others.

So far, Foursquare does not seem concerned by premises that already started to make money leveraging the community without paying for it, at the end of the day, this helps to growth and promote the community. But I think that in the future, Foursquare will try to capture part of the value of this step of the value chain, and will charge these venues for services like “featured of the week”, top ranked categories, etc …

In my opinion, whether they are successful or not will depend on their ability to rapidly growth the community, as the first mover advantage is crucial for such a business model. However, I do not know to what extent their financial position and cash availability will be strong enough. External investors or an acquisition by a financially stronger company could be also part of the plan.

Hello World

Hello all,

I am currently engaged in an International Executive MBA at IE. In this blog I will publish some contents of the Information Systems course.

I hope you find them interesting ...

Josep Mingorance