SCVNGR, Battling Foursquare and Others, Looks to Stay “On Top of the World” After Facebook Fallout

8/24/10Follow @gthuang

“I’m the only person in location who’s happy today.”

That was Seth Priebatsch last Thursday. It was the morning after Facebook announced its new feature, Facebook Places, that lets people “check in” using their iPhone or iPad (or location-aware laptop) and share their location with their social network. The general consensus among tech observers is that location-based mobile startups like Foursquare, Gowalla, Booyah, and SCVNGR all have some adjustments to make, now that the 500-pound gorilla (with 500 million users) has put its foot down in their territory.

Priebatsch, 21, is the founder and head of Cambridge, MA-based SCVNGR, one of the darlings of the Boston mobile scene. So why is he happy? Because, he says, his company is based around “challenges” and “being the game layer on top of the world,” not around check-ins per se—meaning just a social network plus location. “Come on, Facebook was going to own that,” he says. “And now they do.”

A little background is in order here. SCVNGR started in 2008 out of DreamIT Ventures, the Philadelphia-based incubator and fund, as a text-message-based platform that corporations, associations, and nonprofits could use to set up interactive scavenger hunts and other on-site activities. The startup has since raised a couple rounds of venture funding from the likes of Highland Capital Partners, Google Ventures, and Bantam Group. It has also gone from five employees to about 60 in the past 15 months.

Paralleling the rise of Foursquare and other mobile check-in and rewards services, SCVNGR has evolved into a multi-pronged business that includes a relatively recent consumer-facing game, in which people can do challenges (some goofy, some not) at different locales. Consumers earn points for commenting, posting photos, or checking in with friends. They can also create their own challenges for others to do.

The company is also about to roll out a new online platform for small businesses to build rewards programs—players will be able to earn points and redeem them for things like a free coffee or burrito from local shops. The program will start with about 60 businesses in Boston, and then will look to expand to places like Philadelphia, Chicago, Los Angeles, San Francisco, and New York. “It’s insanely powerful for local businesses, but super easy to implement,” Priebatsch says.

But SCVNGR’s main revenues come from conventions, events, and tours that sign up with the company to build customized “quests” and “treks” as a way to drive interaction, engagement, and visibility for corporations, colleges, museums, city governments, and other institutions with deep pockets. SCVNGR has more than 1,000 of these paying customers, including big sports teams like the New England Patriots, universities such as MIT and Tufts (350 colleges and counting), and museums such as the Smithsonian Institution (75 in total).

That’s probably why Priebatsch isn’t too worried about Facebook just yet. More interesting, perhaps, is what will become of SCVNGR’s competition with Foursquare. We’ve been hearing a fair bit about this rivalry from tech observers in the past few months. While SCVNGR insists it is very different from Foursquare because of its game layer, people have tended to lump the companies together, or at least compare them more—especially since SCVNGR has entered the consumer loyalty and rewards sector.

Priebatsch doesn’t mince words when it comes to Foursquare and its competitors—particularly in the wake of Facebook’s announcement. “If your value proposition is the check-in, you’re in trouble,” he says. “SCVNGR eclipses Gowalla and Foursquare,” he continues. “We positioned ourselves from day one to be about the challenge, not the check-in. To be about a game engine that creates real value. That’s why I’m happy today.” (Priebatsch thinks Booyah and Yelp are in a better position than Foursquare and Gowalla, because they are focused on gaming and consumer reviews, respectively, not on check-ins.)

As for how the competitive landscape will evolve, Priebatsch thinks Foursquare and Gowalla will either “integrate with Facebook and fend off their destruction for a while,” or not integrate and have to leave the party, he says. In any case, “if they’re going to survive, they’re going to copy us.”

I took that to mean check-in and rewards services will need more sophisticated game layers to hang their hat on now. Which is all pretty provocative stuff—and refreshingly candid, coming from a young, local tech founder. “It’s all a game,” he says. “What’s a game without competition?”

But back to reality for a minute. In talking to techies from Boston to Seattle, I’ve heard mixed reviews about SCVNGR’s consumer product. The criticisms range from people saying they’re “not impressed” and that the game “has a really long way to go,” to people saying that its social check-in feature is “half baked.” Still—and this is probably more important in the long run—most people familiar with the company agree that SCVNGR has a strong business model (especially the part involving corporations and universities), has a good revenue stream, and is well funded. What’s more, it will learn from all this feedback. Bottom line: the startup is not going away anytime soon, and it has plenty of time to evolve into something bigger and more successful, as it figures out how to get more people to build on its platform and play its games.

“It could be a tremendous company. For every metric that I had, they’ve been exceeding performance,” says Rich Miner, a partner at Google Ventures, an investor in SCVNGR. As for how the company will retain its competitive edge in the coming months, he says, “I challenge anyone to try to keep up with Seth.”

For his part, Priebatsch says the keys to SCVNGR’s long-term success are to “increase the quality of the experience for institutions, cities, and businesses,” to provide “unique content in a fun game,” to boost “engagement and fun,” and, of course, to increase his customers’ sales.

All of this talk about building a game layer on top of the world made me wonder what the sector might look like in 10 years. Neither Priebatsch nor Miner would venture any specifics. But Priebatsch says offerings like SCVNGR, which tie into local companies and organizations, “will be a hell of a lot more sophisticated and pervasive. It’ll be consistent and unique at each business.”

Despite his youthful enthusiasm, it’s easy to forget that Priebatsch is only 21. He left Princeton University after his freshman year and says he has no plans to go back. He also notes that he walked into his first bar only a few weeks ago. “It was a sales call, and it was successful,” he says.

So, given the realities of today’s mobile market—where a company can only hope to have up to a six-month lead in technology—what makes SCVNGR think it can stay ahead of the pack of companies, sure to emerge, that are all trying to build mobile game layers on top of location?

“Because what’s next is even cooler,” Priebatsch says. “But I can’t tell you.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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