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

4/12/13Follow @curtwoodward

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deliver customers and make the register ring. With a super-powerful computer in many people’s pockets, the ability to unlock all that value looks like it’s within reach.

But that could also prove to be a mirage. It’s happened before with the local business market, several times over just in the Internet age.

One of the better investor-bloggers out there, Chris DeVore of Seattle-based Founder’s Co-op, speaks from experience when he lays out the generational and cultural reasons why entrepreneurs should dodge small and medium-sized businesses.

In short, DeVore says, most local business owners are too consumed with the nuts and bolts of running a restaurant or dry cleaner and can’t bother with your newfangled smartphone app or advertising network. That means it takes a massive sales force to sign them up, and even then they tend to go out of business a lot.

As a consumer of Foursquare’s local search product, I also worry about this problem. It means that wealthier, more stable advertisers could dominate as the company makes search its main focus. I need a “local discovery” app to seek out new, interesting, truly local places, especially when I’m somewhere unfamiliar. But those little guys aren’t going to bring home the bacon for Foursquare’s financiers, who could start getting impatient in the next few years.

That’s not to say making Foursquare into a lasting business is hopeless. But it’s been harder to crack this nut than many people might have thought, Crowley and company included—otherwise, there wouldn’t have been this multimillion-dollar loan and a huge shift toward competing with some of the biggest names in tech.

“How this all plays out is anyone’s guess, but I like where Google and Foursquare stand best of all right now,” says Fred Wilson of Union Square Ventures, a Foursquare investor.

“Google has awesome place data but misses the social/personal piece. Facebook has awesome social/personal data but misses the place/geo piece. Apple sort of misses both right now but with enough investment, they can get there,” Wilson says. “Yelp is more of a directory and has very little social data. They are at the most risk from Google since their strength is Google’s strength. Foursquare has both awesome place data (and 40,000 apps that use their place API) and awesome social data.”

But what about the small companies? Can startups being developed in Foursquare’s wake make it too, if the leader is having such a hard time? In Boston, Block Avenue CEO Tony Longo says yes—and he thinks there’s still another wave of opportunity for entrepreneurs at the local level.

Of all the local data feeds that Block Avenue pulls together, Longo says, Foursquare’s is clearly the best. And that means Foursquare can become, as Crowley has sold it, “the location layer for the Internet,” a platform company that opens the door for follow-on companies that use its data in new ways.

“I’m betting on the space with myself personally, with this company,” Longo says. “I think it’s just starting, and I think this is the year.”

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.