Foursquare’s New Cash, New Focus: Why Local is So Damn Hard

4/12/13Follow @curtwoodward

Back in 2009, with the smartphone revolution just taking off, savvy app-makers started playing around with ways to use the iPhone’s GPS features, tracking where users are in real time. The sharpest among them, it turned out, wound up building little games that encouraged people to “check in” at places they visited in the real world.

In the tech world time-warp, that was eons ago. Today, Foursquare is the undisputed champion of the location-based app world—and it’s still not clear what that that crown is worth, exactly.

The private New York-based company is in the headlines for a new $41 million loan to fuel its next phase of growth, putting its total private investment haul at more than $100 million.

Foursquare also has unveiled a new version of its service, which more emphatically changes its focus from social check-in game to local search engine, putting it in a head-to-head competition with mighty Google.

As CEO Dennis Crowley told Bloomberg Businessweek, the new money gives Foursquare some time “to prove that there’s a real business here.” Businessweek also reported that today, the business brings in about $2 million in annual revenue.

That’s not chump change, especially if you consider Foursquare’s assertions that it hasn’t spent any money on advertising, has a tiny sales staff, and actually blocks some big accounts from buying ads on its service. But at this point, it’s not anything to write home about. So the question remains: Why has making money been so tough?

It’s one of the more vexing problems of this era in innovation, and as we’ve pointed out before, everyone from the biggest tech companies to the newest startups is looking for the answer.

Facebook, for example, has tried repeatedly to crack the nut in local discovery, including buying out Foursquare’s vanquished runner-up, Gowalla. Google has tried too, adding social and review data to its baseline maps application, along with separate apps.

Startups all over the country have also attacked the market, with some of them being acquired. Aside from Gowalla, we’ve seen PayPal buying Boston’s Where and Yahoo snapping up the small team at Seattle’s Alike.

Still more small companies are at it. Boston’s Spindle, founded by Microsoft veterans, is focusing on social media to help set apart its app for finding interesting places and events. Boulder, CO-based Tagwhat also is looking to social media to find discounts for users of its app, called Feed.

Another Boston startup, Block Avenue, has been adding a wider array of information on neighborhoods—including Foursquare’s—to give users a deep view of what’s going on near them, from social events to recent crimes.

The reason there’s so much focus on this particular area is pretty simple. Local businesses represent a huge, mostly untapped market for digital advertisers who can … Next Page »

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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  • http://www.facebook.com/allen.rice.16 Allen Rice

    Interesting! Good info – Learned a few things here. Trying to start up a small local business in a small place of billings montana, fixing iPads iPhones etc.. not a new or novel idea by any means, but like this article says.. hopefully a niche left at the local level.