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Foursquare is hot right now. The web is awash with doting media coverage of this New York-based start-up. “Foursquare tops Silicon Valley’s Most Wanted List” ran a recent headline in The Los Angeles Times, which noted the service now has one million users and is being courted by both Yahoo! and venture capital firms.

But, on the face of it, Foursquare is just another location-enhanced social networking service. Like Brightkite, Loopt, Pocket Life, Tonchidot and others, it basically enables you to use your smartphone to broadcast your location to friends, post a comment and read your contacts’ reviews of the places around you. Foursquare has generated more buzz than its peers by shrewdly tapping the craze for playing online games with your social network. Each time a Foursquare player uses their mobile phone to “check-in” to a location they score points, which can ultimately earn them virtual badges. The person who checks in the most in one particular location can become the local “mayor”.

I personally can’t see the appeal of these kinds of games – Farmville updates on Facebook just annoy me. Who cares how many virtual pigs or cows people have? Similarly, with Foursquare, why would I want to become a mayor of a coffee shop? Doesn’t that amount to an inane waste of time? And isn’t continually checking-in on Foursquare just going to compromise my privacy?

Yet, even for killjoys like me, using Foursquare (or its rivals) has benefits and, if handing out mayor badges helps Foursquare scale faster than its competitors, then the service could follow in the phenomenal footsteps of Facebook and Twitter.

Amazing brownies

To try Foursquare out, I checked-into the Royal Festival Hall in London and tapped on the “tips” tab. One tipster had written “the brownies here are amazing,” while another said: “There is free WiFi here, not many power sockets.” I was tempted to buy a brownie and jump online, but being awarded a “newbie” badge put me off sticking around.  Later, I tried to check-in again, but Foursquare disappointingly failed to recognise the Brockwell Lido cafe near my home in south London.

In any case, it is really the ability to see where friends and contacts are, rather than location reviews, that is going to have me using Foursquare regularly. I don’t have many Foursquare friends yet, but media reports reckon “everyone in the tech industry” is using the service, so, hopefully, I soon will. If it gains critical mass, this kind of location-aware social networking is likely to be pretty valuable in certain contexts, such as the GSMA Mobile World Congress and other events designed for serious business networking.

Real revenue potential

But for mobile social networking aficionados, such features are old-hat. Foursquare’s real innovation is using mostly virtual (i.e. very low cost) incentives to persuade people to keep checking-in voluntarily, which helps it sidestep privacy concerns. If the prospect of a mayorship persuades people to use Foursquare every time they move to a new place, the service clearly has the potential to earn significant revenues – retail, hospitality and entertainment companies, in particular, are going to find this kind of real-time information very useful. Presumably, Foursquare is also building up a valuable historical database of where people go and when, as well as the places they like.  

Moreover, there is going to be plenty of scope for location-based advertising, marketing and promotional offers as Foursquare becomes better-established. Although, like any social network, it is going to have to be careful to ensure the advertising doesn’t get intrusive or annoying and that people don’t feel their privacy has been (totally) compromised.

But does Foursquare have a sustainable competitive advantage? Can it scale faster than the many other mobile services and apps, some with an augmented reality element, which will tell you where your friends are and give you reviews of local establishments? Some of these services have access to much more location-based information than Foursquare. Google Goggles, for examples, taps into the Google search engine to inundate you with info about what is around you. Moreover, Facebook, which has more than 400 million users, is rumoured to be preparing to add Foursquare-style services to its repertoire.

Still, Foursquare has caught the right people’s imagination, partly through the competitive gaming element and partly by savvy viral marketing among tech commentators. Apparently Jack Dorsey, a co-founder of Twitter, is an investor, which must have given Foursquare kudos in certain circles, helping it strike partnership deals with big name brands, such as the Wall Street Journal.

Foursquare’s biggest challenge will be keeping the gaming element fresh and stimulating enough to ensure even longstanding users are checking-in regularly. Once people have tired of virtual badges, Foursquare needs to ensure it has a self-sustaining mass of users.  In the meantime, one incentive to keep checking in will be restaurants and cafes handing out real rewards, such as free coffee, to their Foursquare mayor. That is already happening and will surely help Foursquare maintain its media-fuelled momentum.

But I still don’t think Facebook, Twitter and Google will let this east coast upstart eat their lunch.


David Pringle

This article was first published on the GSMA’s Mobile Innovation Exchange. David moderates discussion forums on the site and is a freelance media and investor relations consultant.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members