Can Subway Ads Bring Mainstream Users to Foursquare?
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Foursquare has come a long way since CEO Dennis Crowley appeared on the cover of Wired UK as “the new king of social media,” donning an actual crown. That was 2010, the year the check-in app was so hot that venture firms were fighting to invest. Foursquare’s valuation swelled to $600 million. Feeling threatened, Facebook acquired Foursquare’s only competitor of note, Gowalla, and unveiled its own Foursquare killer, Places.
Then, in 2011, the check-in died. (So the tech blogs declared.) “Mainstream users felt like the idea of sharing your location with friends felt like a hipster millennial game that might not apply to them,” Jeff Glueck, Foursquare’s COO, tells Fortune.
In 2012, Foursquare admitted as much. The company rolled out a major redesign of its namesake mobile application to shift focus from badges and mayorships to “Explore,” its restaurant and bar recommendations. Explore worked but it wasn’t a huge hit and it arrived too late. Once a hot consumer app loses its heat, it may as well be dead. Consumer tech is like culture in that way—fans are fickle and it’s hard revive a fashionable brand that’s slipped out of relevance.
But it would be unwise to dismiss Foursquare. As venture capitalists like to say, startups fail because they run out of money or the founder gives up. Right now, Foursquare has plenty of cash—$50 million in the bank, the company says—and founder Dennis Crowley, unlike many failed entrepreneurs, is doggedly, irrationally, defy-the-odds determined to make his company a success.
Crowley is the only founder I’m aware of that has built a company (Dodgeball), sold it, and then set out to build the exact same company again. That’s why, rather than take lucrative offers from Yahoo or Facebook, he chose to the continue the difficult slog of building a social media app into a real money-making company.
It has not been easy. As a restaurant recommendation app, Foursquare competes with Yelp, a formidable incumbent. Crowley used to tout the fact that Yelp was built for the platform of the past—desktop computers—and Foursquare, which has always been mobile-first, is native to the platform of the future. But ad spending, upon which Foursquare depends, did not move to mobile platforms as quickly as user attention did. Exacerbating the challenge: Foursquare and Yelp’s potential advertisers, local restaurants and bars, are typically slow to adapt to new platforms. Foursquare has had to fight for every ad dollar.
In order to really dazzle advertisers, the company must cross over to the mainstream, expanding beyond the enthusiast group that served it so well in its early days. To do that, Foursquare must recapture some of its early buzz and get users excited again. Earlier this year, in a bid to end the constant confusion over whether Foursquare is a check-in app or a recommendation app, the company split its product in two. It launched Swarm, an app dedicated to the check-ins and location sharing of individual people. Then it overhauled the original Foursquare app to provide extra-personalized recommendations for places.
The new strategy earned positive reviews from tech blogs and, because of bugs in the first version of the apps, mixed reviews in the App Store. More importantly, the strategy appears to be working from a business standpoint. Foursquare reportedly earned between $15 million and $20 million in 2013, with several hundred national brands and several thousand local businesses as clients. The company has 55 million registered users around the world. Foursquare would not disclose how many of those are active, but said that active users have increased by 54% over last year. (Notably, around half of usage originates on the desktop, despite the company’s roots as a mobile-first product. Revenue remains heavily weighted toward mobile.)
But that’s not enough, especially when you look at the $121.4 million in venture backing plus $41 million in debt that Foursquare has raised. Nor is it sufficient if you compare Foursquare’s user base to Instagram’s 200 million monthly active users or Yelp’s 138 million. For those reasons, Foursquare this week will launch its first advertising campaign to tell potential users what its new and improved recommendation engine can do. The message: With 60 million reviews and six billion check-ins, Foursquare learns what you like. It is the company’s first-ever ad campaign.
Foursquare has purchased ads in New York and Chicago and focused on out-of-home spots like bus stops, bike share stations, and subways. It’s “where the app actually lives,” Glueck says. Lately, it seems like venture-backed startups are the sole buyers of subway ads in New York. (Our apologies to Dr. Zizmor.) Glueck says web services like Seamless and Venmo reported success with their subway campaigns. “People have to see messages a high number of times before they start to remember them,” he says.
The new ad campaign is Foursquare’s bid to wipe out its early image as a check-in app for millennials—an ironic twist, since it’s the very thing that made it so hot to begin with. “We’re aiming to educate a broader set of the public who never tried it when it was associated with points and badges and mayorships and location sharing via check-ins,” Glueck says. “That was exciting to millions of people around the world, but it also was polarizing.”