If you are in the mobile industry and you've never heard of Foursquare, there is something wrong with the way you keep up to date on new trends. Indeed, Foursquare is one of the most hyped social location services, enabling users to "check-in" to locations in the real world from pubs, bars and restaurants (through to any conceivable location) – sharing them with updates on social sites like Twitter or Facebook, wrapping points and benefiting from potential discounts. Foursquare recently announced it had passed the 1M users mark. The rate of growth is indeed quite strong, bearing in mind the company had just 170,000 users at the end of 2009. According to TechCrunch, Yahoo! was rumored to have made an offer above $80M to acquire the start-up! I am not a financial analyst, but let's say $100M for just 1M users seems high at first sight. So what makes it so valuable and why is foursquare being perceived as the new Twitter? Here are a few thoughts:
– First of all, foursquare is not the only one in town but is probably the one with the most active PR team. It struck some interesting deals with Metro newspapers, with TV channel Bravo, with Vodafone in the UK (on-deck and via SMS promotion) and more recently with even the Financial Times, if we believe business insiders. What makes it quite successful is its entertainment-centric approach. It is quite addictive as it is primarily an interactive game. There are others (not only Gowalla) such as MyTown (a sort of a real-world monopoly), which passed the 2 million active users mark a few days ago!
– There are plenty of other innovative start-ups that are positioning themselves at the convergence of 3 hot trends: mobile, social and location. Brightkite, Rummble (in the UK, probably around 250,000 users), Tellmewhere (over 700,000 users), MobiLuck (with around 650,000 members in India and created a few years ago, by the way) or more recently Plyce. Yelp is another well-known name in the game and is starting to localize its approach. They all have different positionings and there are plenty of new names coming in.
– Blue chips are around the corner. Nokia has already made a couple of acquisitions in that space (from Plazes to Dopplr) and sums up the concept better than anyone else via its CEO: "Imagine what can happen when we mash up social networking and your location, when your device knows where you are, where your friends are and what they are doing. Your social location, or SoLo, will become your here-and-now-identity.” (This was back in December 2008 at Nokia World). Needless to say, there's also Google Buzz and the fact that Google Location has just announced it has passed the 3M active users mark. Facebook and others will join as well at some point.
– It's the business model, stupid! These high valuations tend to prove there is more to it than pure mobile advertising revenues (still small in absolute value). For the most mobile or game-centric ones, there are potential revenue streams based on virtual item sales. For others, I think they all show the potential of mobile in the long run: bridging the real and digital worlds. These players can build a valuable database (the most popular destinations in each city? an offline social graph – which people are often in the same place at the same time?) and offer ad targeting within the application, based on users’ location histories or based on users’ social graphs. There are or there will be concerns over privacy. As such, it is a double-edged sword — it can offer tangible benefits through super-personalized marketing but may also be seen as too intrusive. In the long term, mobile will tie its localization capabilities to social computing and will increasingly offer the potential to connect the digital benefits of the part-time PC-based Internet out into the real world.
I see the potential value and how digital consumers are changing their behaviors quickly, but I am still missing the quick revenue opportunity, as far as mobile advertising and mobile commerce are concerned. Am I missing something? I guess you either totally understand why I am not a financial analyst but an industry analyst or on the contrary, you agree with me that there are some stratospheric levels of hype. Bear with me one second. I do believe location and social are 2 key trends reshaping mobile and I do believe these companies are particularly innovative and interesting to look at. I'd just be curious to hear more about your thoughts on these emerging business models and how quickly they could develop.