Foursquare passes 3m users, for how long will it resist acquisition?

By Shailendra Pandey

Foursquare, a mobile location based social networking application that works on the iPhone, Blackberry, Palm, Android and many other mobile devices has now over 3 million users, and has also announced the version 2.0 of its iPhone app. The Foursquare mobile app is based on the ‘Mobile Proof of Presence’ (MPOP) concept. It encourages users to ‘check-in’ by sharing real-time details of their location-based interactions with restaurants, venues and businesses on the Foursquare social network. In return, users are rewarded with special product promotions and freebies.

It is estimated that Foursquare is adding around 15,000 users daily and is experiencing over a million ‘check-ins’ every day. It’s a good example of an effective opt-in system where users are willing to share not just their location information, but also what products and services they are buying in that location.

Once a service based on MPOP concept is able to achieve a significant user base i.e. tens of millions of users actively using the service, it can build very useful metrics for brands and demonstrate incremental traffic at point-of-purchase. Such a platform will then become very attractive for brands and advertisers to run their campaigns and deliver ads and coupons to users on their mobile phones based on their location information.

We are now seeing increasing number of companies such as Foursquare, Where, Loopt, WeReward, and Gowalla that have developed solutions to enable mobile location or presence based advertising to users. Successful companies in this space are becoming very attractive acquisition targets for big players such as Google, Yahoo, Microsoft, Facebook and Nokia. These big players have been on the acquisition trail for companies that seamlessly integrate with their own platforms to ensure they have that end-to-end ad-serving solution.

Few months ago, there was speculation that Foursquare will be acquired by Yahoo for $100m. Facebook and Microsoft were also interested in acquiring the company. Yahoo has since then acquired Koprol; a social networking service with features similar to Foursquare and Twitter, and Facebook has snapped up Nextstop; a user-generated travel recommendation site.

Dennis Crowley is the co-founder of Foursquare. Earlier he also founded Dodgeball, one of the first mobile social services in the US, which he sold to Google in 2005. It is reasonable to assume that he will consider offers for Foursquare if the price is right, but it seems there’s higher possibility he’ll wait for a couple of years and let Foursquare reach its true potential. A few months ago, he said “Foursquare is only 10 per cent of what it needs to be”, and going by that statement, he probably wants to wait until the company is worth at least a billion dollars.