Premium users or Ads – those two options have been the primary mainstay of web and mobile application developer/operators who are looking to monetize . A few have gone beyond the basics and have successfully captures a portion of the network effect value they co-create with their users. The creators of the popular mobile application Foursquare may be on the road to achieving free user monetization nirvana.

Foursquare was launched at South By Southwest Interactive (SXSWi) earlier this year, and aims to be part social network, part geolocator, and part metro area guidebook. For those who are iPhone/Web app savvy, it might be helpful to think of Foursquare as what you get if you crossed Yelp, Brightkite, and Facebook Vampires. The application is designed to provide users (gamers) with the ability to add friends, broadcast visits to locations to them, and pull up a list of frequented places others visit in your vicinity. Foursquare provides a competitive twist to city guides: users can compete to check in more often than friends to unlock badges (similar to cub scout badges), become the mayor of a location, and top the list of check-ins in a metro area.

The punchline? Friends provide better suggestions than static guidebooks, and the competition for social recognition keeps the information relevant, targeted, and fresh. For example, I’ve added a tip below indicating a particularly good drink at a local bar nearby my office. Another user by the name of Alexander F. provided a tip related to the New York Museum of Modern Art, writing: “Want a meditative place to work? On the 4th floor there is a ‘nook’ directly at the huge window front overlooking the sculpture garden.” Good stuff.

An example of a users achievements and suggestions summary

An example of a user's achievements and suggestions summary

At any given time, another player can “out-visit” another, becoming mayor of a location, which keeps the interest in checking in strong. There’s a natural tendency to check into the local TCBY for a frozen yogurt fix just to keep a mayor title, for example. The competitive achievement system is the addictive part of the game, and it is where both the challenge and the opportunity lie for Foursquare.

Challenges to Foursquare

For all the success, there are a number of challenges intrinsic to the game, driving some people like blogger Arsenio Santos away from playing. The challenges are roughly as follows:

1. The Grounding Effect. I recently left on a trip to China for roughly 2 1/2 weeks, which means I did not “check in” during the time (Foursquare is specific for metro areas in the U.S. until this month). Which means I’d likely lose my status. When you consider locations in Las Vegas, many of which are frequented by visitors from out-of-town, you’d imagine mayorships and achievements would be fleeting. It’s not much fun to be the mayor of the Bellagio hotel only to lose it a week later. Also, once a player is in another Foursquare metro area, the user effectively starts over as statistics are confined to specific metro areas walled off from one other. Thus success at Foursquare tends to require “grounding” a player to a specific metro area, penalizing frequent travelers.

2. Anti-Social Network? Arsenio Santos unintentionally grabbed hold of the mayor achievement at a local Peet’s coffee, and later on noticed the following Tweet scroll across the public twitter timeline:

“I’m sick of this @arsenio guy bouncing my mayorship of Peet’s. I guess I know where I’m going for coffee tomorrow…”

While Arsenio and the aggrieved former mayor of Peet’s developed a friendship, the introduction wasn’t based on the best of circumstances. While the competitive nature of the game might drive participation (especially with type A folks like your humble blogger), social relationships are driven by competition are an entirely different breed from those on Facebook, Linked in, Twitter, or other networks.

3. The Atomicity Effect I’m the mayor of my office (and likely the only person on Foursquare). Anyone who would join Foursquare who would like an achievement of their own would have to dethrone me, or could be more creative – they could set up a second floor area. Or become the mayor of the kitchen space. Foursquare allows users to enter in new areas, allowing a proliferation of areas, each with its own mayor. As areas become subdivided up, relevance (and thus interestingness) take a nose dive. I wouldn’t mind checking into the Bellagio hotel, but having to wade through a list of Bellagio locations would be annoying.

Business Use Cases (or How to Kill Two Birds with One Stone)

While Foursquare otherwise sounds like a bit of a timesink, there are some pertinent uses in a business context. The social network provides a low barrier-to-entry promotional locus for local businesses. Some venues have gone beyond simple listings and have begun to offer drink specials to those who check in on Foursquare (an inexpensive way to “buy” buzz advertising). Perhaps businesses can offer special perks to mayors of an establishment. Even more powerful, Foursquare can provide brick and mortar businesses with the kinds of visitation metrics online businesses have enjoyed for years.  Can this be done via Twitter? Certainly, but Twitter is not the optimal tool, since Twitter is not generally location aware, nor does it provide the achievement system to drive check in.

The bay area’s BART mass transit system sees value in Foursquare: Regular BART commuters will now be able to unlock a BART-themed badge, and also become eligible for $25 in promotional tickets that will be awarded randomly to Foursquare users who check-in at stations during the months of November, December, and January. The goal of course is to drive greater mass transit use: “A lot of BART riders are already having fun with this game,” said Timothy Moore, BART website manager. “We hope this partnership will encourage them to check out different stations and neighborhoods, and will show people who aren’t already BART riders some of the great things to do that are easy to get to on transit.”

But there’s a second and powerful benefit to Foursquare when a local business takes ownership of a location in Foursquare: there’s the ability to capture and bill for a portion of the value generated by Foursquare to be sure. However, the atomicity problem above is also solved in a rather graceful way – there’s only one official “21st Amendment bar in San Francisco” location which drives rewards and special offers if the management takes ownership of the listing. The spinoff location achievements become shallow and unsatisfying as a result, and tend to vanish into obscurity.

The grounding problem may also be gracefully mitigated via business ownership of Foursquare listings. Consider the fast food chains signing up (and paying a royalty) which in turn allows the chain to publish a top visitors list around the country. Becoming the top McDonalds Big Mac consumer in the world may be a dubious lead to a portly waistline, but is a location-independent achievement which addresses the Grounding Effect quite nicely. The McDonalds mayor thus has a chance to retain title while traveling, increasing engagement.

What Lies Ahead

Sell to Yelp? Who? Me?

Sell to Yelp? Who? Me?

If there is an exit strategy in place, Foursquare cofounder Dennnis Crowley is keeping mum about any plans. According to coverage on Jen Leggio’s terrific blog, Crowley has been quoted as saying “No official comment, but we’re not ready to do an acquisition this early. We had a real early exit with Dodgeball and it hurt the product.  There’s so much we can build and innovate on very quickly right now and I think we’re best doing that independently.” There’s also some question around Twitter’s upcoming geolocation capabilities, which would seem to compete directly with Foursquare’s core value prop.

Ultimately business use on Foursquare drives value to the social network, the businesses who drive foot traffic, and the users themselves. What’s most impressive is that Foursquare seems poised to introduce a monetization model which also blunts the Grounding Effect, the Atomicity effect, and the Anti Social effect. That’s the sort of nirvana achievement the web is all about.

Best of all, it’s fun.

This entry was published on October 23, 2009 at 3:56 PM. It’s filed under Uncategorized and tagged , . Bookmark the permalink. Follow any comments here with the RSS feed for this post.

One thought on “Foursquareonomics

  1. Pingback: Top 12 iPhone Apps You Need to Download Now « Eric Gonzalez

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