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Summary:

With a big slug of cash infused by VCs, New York-based startup FourSquare is ready to build a brand new experience for its location-based social service, says CEO Dennis Crowley. It is an attempt to keep ahead of the copy cats and attract mainstream subscribers.

Foursquare finally announced that it’s raised $20 million in Series B funding, including money from Andreessen Horowitz, a fund that publicly walked away from the Foursquare investment because of all the attention. (Head fake, anyone?) The funding news has been the subject of speculation befitting the very public-private life of Paris Hilton rather than a tech startup. And I’m glad it’s out of the way, because now the focus should shift to important stuff. Important stuff that involves New York-based Foursquare going from 1.8 million subscribers to tens and then hundreds of millions of subscribers. Important stuff that involves Foursquare going from a product to a company.

As someone who is an unabashed fan of Foursquare and what it represents, I have to admit my usage of the service has been waning. The early thrill of checking in at different locations has vanished, replaced by indifference. And I am not alone in feeling that way. As the number of folks on Foursquare’s network have gone up, it has become virtually impossible to become the mayor of a location. The mayorship and special badges were the “rewards,” and a physical manifestation of the gaming philosophy behind Foursquare, making the service enjoyable in the process.

When I asked Foursquare founder Dennis Crowley about my lack of interest, he emailed me back saying that many of these issues will be addressed as he and his team of 27 are building what is essentially Foursquare 2.0. He didn’t want to go into details — he’s worried about being copied. The whole idea of check-ins (as we have written in the past), badges and mayorships have been copied ad nauseam. Don’t believe me? Take a look at Loopt’s LoopStar. (Robert Scoble recently came up with a list of things Foursquare could do in order to escape the attack of the copy-cats.)

Crowley wrote that he and his team are working on redoing the core game mechanics, aka  “what incentivizes me to check in.” Why is it taking so long to launch? “Because we’re growing so quickly that we have to address our technical scaling issues first,” he said. Crowley also alludes to these scaling issues in a blog post announcing the Series B funding:

We’re hoping to build a world-class engineering organization, based primarily in our headquarters in the New York City to help us develop the next generation of mobile + social + local products that will excite our users and provide unique value for local merchants. The new investment capital will also help fund the infrastructure needed to house our team (we’re finally getting a new office!) and support our growing audience of nearly 2m users.

Clearly, the new money is going to come in handy for Crowley to build an operational team, which in turn should help the company transition from being merely a product to becoming a company. As he builds a core team to handle the business issues, Crowley will have time to address what is the most important issue facing his young company: the transition from an early adopter service to one used by mainstream customers. Incentivizing early adopters is very different from the incentives for mass market users, as many sites dependent on network effects have learned in the past.

As Stacey Higginbotham put it in a post earlier this year:

Much like it took time for people to see use cases and value in Twitter, which was an entirely new means of communicating, it will take time and a display of beneficial results before folks will see the value in displaying their location rather than focusing on the loss of anonymity. Until that happens, many people, when faced with an unfamiliar friend request, will likely hit delete. And without that large network of strangers, then the idea of machine-mediated serendipity remains just that — an idea.

The good news is that Crowley and Co. now have the money to figure it all out.

Post and thumbnail photos courtesy of Flickr user schatz.

  1. How do we see this effecting Gowalla? I can see a Pownce / Twitter situation here, where Gowalla will play the part of Pownce (in being the service that I prefer, but the one that disappears).

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  2. Check-in is the tip of the iceberg, lots of untapped opportunity for Foursquare…

    Over the last couple of years much of Foursquare’s attention has been narrowly focused – on enabling individuals to disclose and share with others a relatively limited set of information. Check-in is the tip of the iceberg so Foursquare and other companies innovating at the intersection of mobile, local and social have tremendous potential. As they expand their efforts, there are two other key dimensions that represent significant opportunities: (i) making it easier for individuals visiting a place to use their mobile device to detect and connect (not just to other individuals but to networks and other nearby “assets”), and (ii) facilitating the use of mobile devices by visitors to discover information (including offers) in environments around them (see http://bit.ly/9yVYhl for an overview of this 3D – detect, discover, and disclose – framework).

    The mobile + local ecosystem is highly fragmented, as is the universe of places. It will be interesting to see how Foursquare, its competitors and establishments themselves prioritize and choose to pursue these opportunities. My sense is that mobile represents a largely untapped opportunity for “places” – broadly defined to include establishments and the many other locations that individuals visit during the course of a day – to enable, enhance and engage with their customers. There will be lots of experimentation, competition and innovation in this space over the next 18-36 months so stay tuned.
    Dr. Phil Hendrix, immr and GigaOm Pro analyst

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  3. “Worried about being copied” should have raised a zillion and one alarm bells at Andreesen Horowitz, but I guess not. In any case, their only defensible position will be existing users, a good sales force that knows how to close deals with sponsors/advertisers, and sticky sponsor/advertiser relationships. Period.

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  4. Om, like you – I got bored with Foursquare. I’m in Chicago, and with the number of people doing it in an urban area, you can’t become a Mayor, so it loses its appeal after a while.

    That’s the problem – more people = harder to attain “Mayorships”, therefore, it loses the fun.

    I honestly don’t see how they can make a profit off of Foursquare.

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  5. I think Nick has a point. I think Foursquare will need to make changes to deal with this, and small businesses too. If they only give rewards for one Mayor, and the Mayor has, for example, 47 check-ins, it would almost be a fulltime job to try and be Mayor of a place.

    Foursquare and businesses will need to create more incentives for badges maybe, and if you checkin 15 times or something, you gain VIP status. This might make you checkin a good amount of times, and if the VIP status incentive is good enough, you may keep coming back.

    But if Foursquare is currently being valued at US$95 mil, more than just a few people must think it has a great deal of commercial potential.

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  6. Hi,

    I’ve been thinking about this space since the 90′s and even wanted to work to commercialise the original Dodgeball!

    All they need to do is change the dynamics of Gameplay, where a single attaining of Mayorship isn’t the only incentive/value-point.

    There’s also the potential for implicit check-in/relations and mobile technology such as wi-fi, gps and bluetooth.

    It would be pretty cool imho if 4sq was to combine with the tech/biz. models of Layar + Letsbuyit/groupon + Skyhook + Bit.ly……………

    I think the initial route of the low-friction service has been an excellent one to get the traction for where they are now, like twitter, and expect the team to already have a road-map to add more meaningful value for normal consumers as the service matures; mindful, however, that the likes of twitter and facebook could equally well poll their mobile clients for LBS data combined with their developed sales-mechanisms and mobile handset/network relationships.

    So much potential, and a starting point that could be more revenue-generative and useful than twitter, quicker!

    Yours kindly,

    Shakir Razak

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  7. Foursquare could be huge — but it needs to play its cards right and pursue the right opportunities. If it does though, it could be a $10B valuation, nevermind $100M. Phil’s right to say that check-in is the tip of the iceberg, and Shakir’s right on Foursquare needing a roadmap. Location-based services is definitely a big part of this, but so is building a recommendation engine and deepening the social component in a way that’s compelling and not creepy.
    http://somethingventured.me/2010/07/02/what-foursquare-needs-to-do-to-become-huge/

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