The Passive Check In: Is This Foursquare's Hail Mary Pass?
Amid much criticism, Foursquare is mounting an offense that has many in the startup world sitting up and taking notice.
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In mid-August, Dennis Crowley showed up late to a meeting at the Foursquare office with cake for his employees. Not just any cake, but the Dreaming Princess cake from the Little Cupcake Bakery a few blocks away. He didn't buy it for a birthday party or a celebration; he bought it because Foursquare told him to.
While in line that morning at the bakeshop, Crowley's phone had buzzed. "People here talk about Oreo cheesecake, banana pudding, and dreaming princess," the alert read. This is a location-based recommendation, also known as passive interaction, and it's Foursquare's newest feature.
Foursquare has been known to its users mainly as a check-in app, until now. This new location-recommendation feature could be what helps Foursquare emerge from its somewhat uncertain position in the tech world and join the ranks of Instagram, Twitter, Facebook and others.
Instead of having to check-in at each location to see tips and reviews from Foursquare, the app will automatically, or "passively," give users recommendations based on their current location and past preferences. This new feature has already started rolling out on Android and will be available to all users, about 40 million in total, by the end of 2013.
"The plan all-along has been to make the phone listen, and then Foursquare will be smart enough to know what to push to users," says Crowley, 37. "Instead of pulling data out of Foursquare, it wants to be able to push back to people. That's what turns us from a product that has maybe 40 million people signed up, to something that hundreds of millions of people around the world could potentially use."
To Crowley, this new feature is a long-time goal that is finally being realized. He's known in the tech community as a confident, casual figure, usually donning jeans and converse, and the Foursquare office reflects this style. The dining room features wooden communal picnic tables and beer on tap. The conference rooms are themed off of badges that can be earned on the app, like "Swarm" and "Shutterbug."
The new feature will be moving away from badges and points, however. Currently, users technically still need to actively update their locations, or "check in," with Foursquare to see tips and recommendations. This information is then shared with the user's friends, like a Facebook update for your whereabouts. Eventually, the app will offer passive notices that will pop-up on a user's phone when he or she is nearby a bar or restaurant that Foursquare thinks will be of interest.
The data for the new feature is pulled from Foursquare's already existing 4 billion check ins and about 32 million reviews and what's known on the platform as "tips" from users left at bars, stores, restaurants and more, worldwide.
The revamp at Foursquare may have come just in time. Doomsday calls have been dogging the company for months. At the start of the year, a story from Business Insider cited a PrivCo analyst whose prognosis for the company had it failing before the year's end. The analyst even characterized the company's fate as a "death spiral." Forbes ran a similar article in 2012.
What's more, Foursquare, which has been venture backed for some time, began having trouble attracting venture capital. In April, the company managed to raise $41 million in debt financing. Though obviously helpful, the move was considered unusual for a growing, venture-backed technology company. While it's unknown why investors decided to go the convertible debt route, in a liquidation scenario, debt holders would be paid out before equity holders. So the investment is viewed as slightly safer.
"Convertible debt at this later stage sends a signal that [Foursquare's] business model is still not proven enough, and they still need to work on it and significantly ratchet it up," says Ari Ginsberg, professor of Entrepreneurship and Management at New York University's Stern School of Business. But he noted that this may have been Foursquare's best option at the time -- else it fork over a greater percentage of the company's equity due to a potentially reduced valuation.
"It would have been far worse to have to bite the bullet of valuation," adds Ginsberg. "If they landed at a lower valuation they would have done far more damage."
Still, Crowley remains confident. "I'm actually really happy with the way the financing came together… The debt instrument was the one that seemed to make the most sense at the time," he says. "It enabled us to keep growing the company."
It's also helped him focus on Foursquare's passive-engagement feature. One of the biggest challenges with building the new capability is accuracy, Crowley notes. Making sure that alerts are timed right is vital to avoiding the pestering users who don't want to feel bombarded by the app.
"It's hard for people to understand how special Foursquare is, with the data assets and with the fact that we're building stuff that's never been done before. I think people need to be reminded of that," says Crowley. "We're defining the rules for how this is going to work five to six years from now."
Long-time Foursquare investor, Fred Wilson of Union Square Ventures would also remind people that the company's massive data stores and people-mapping features are nothing to sneeze at.
"It's not really about the check in anymore. It's about "maps with people in them,'" Wilson told PandoDaily in an interview this past summer. "And you don't get "maps with people in them' from Google, and you don't get "maps with people in them' from Apple, and you don't get "maps with people in them' from Nokia. You get "maps with people in them' from Foursquare."