Foursquare owns location – simple!

I will start out by confessing that I’m not the biggest fan of Foursquare – I’m just not sure that it’s completely for me and maybe that’s because I don’t get out enough! But whether you are a personal fan of Foursquare or not, you can’t help but admire them as a business. They’ve managed to stake their claim on the social networking map. Just as Facebook owned connecting friends online, Youtube owned video and Twitter owned microblogging, Foursquare now well and truly owns location. With their recent news that they’ve accepted a new round of funding to the tune of $20 million, things are going pretty well over at Foursquare HQ and for co-founders Dennis Crowley and Naveen Selvadurai. So what is that they’ve done over the past year that has made them int the huge success that they are now?

Didn’t sell out

Foursquare is unique – it has its own personality and way of doing things, and it has always remembered that despite some attractive offers. Yahoo had approached Foursquare (among others)earlier this year, offering in the region of $80 million + but Foursquare kindly declined.This was absolutely the right decision and allowed them the business freedom to make their own choices and ultimately accept more strategic investment that was in their best interests. Accepting funding from Yahoo for example, would have ‘Yahoo-icised’ Foursquare and this would have majorly affected their loyal fanbase at a critical time when it was gaining new users rapidly. Any radical changes then and the invasion of a big brand could have seriously impacted the service.

Flexible for businesses

The great thing about Foursquare is that they’ve made it so attractive for businesses to use, whatever the size. If you’re a local coffee shop that wants to offer a discount for checkins, then you can. This is at no extra cost and you just have to use a bit of your savvy. For the business it’s so attractive – you get to reach a loyal community in a new way and gain some kudos points with your customers who are then going to tell everyone where they are. As I’ve said before, offering a free coffee isn’t going to transform your business, but it will allow you to reach a certain group that can be valuable and loyal.  And the fact is that it’s free, targeted marketing that pretty much anyone can do.

But here’s the clever thing that Foursquare has done, that clearly shows their route to monetisation. As well as offering the basic level of promotion to any sized business, they also offer brand partnerships to larger brands with a wider location base. This was explored by the New York Times earlier this year, with their promotion of the Olympics via Foursquare.  Foursquare really couldn’t have done this any better and to have such a clear and attractive route into monetisation while keeping a basic level for any sized business is commendable.

And much as Facebook and Twitter have managed to do, they’ve got brands to seek an association with their service. So you get high-profile campaigns from even unlikely sources such as Jimmy Choo, who recently ran their ‘Catch a Choo’ treasure hunt across Central London.

Incentivising the user

Foursquare have been incredibly clever in the consideration of the user and why they might want to use Foursquare. The fact is that it’s not all about checking in and telling people ‘I’m here’. They added 2 elements on top of that, to make it into more of a game. The mayor system and Foursquare badges are ingenious ways to engage the user. In the case of mayors, they found a way to literally get people using your service again and again to keep something that was theirs in the first place. The same can be said of badges, where some may come as a surprise (I have the ‘player please’ badge and I wasn’t even trying), but some are then sought after, such as the jet setter badge, which you can get by checking into 5 airports.

Learned from their mistakes

One of the greatest benefits Foursquare has that you just can’t buy, is that they’ve made some pretty serious mistakes before. Foursquare co-founder Dennis Crowley previously built the location based service Dodgeball, which sold to Google and subsequently folded. You can imagine that this experience would have majorly impacted the decision to decline funding from Yahoo et al. In the video below from Techcrunch, Denis Crowley also discusses how he realised a major downfall of Dodgeball was that it wasn’t much fun if you didn’t have a load of friends using it. He learned from this flaw and remedied it with Foursquare, introducing the gaming element. No matter how many of your friends use the service, you can still chase badges and mayorships to your hearts content.

Striking while the iron’s hot

The Foursquare team knew that location-based services were on their way up, Dodgeball was on its way out and they had to do something quick. Instead of months of strategy, planning, business plans, execution strategies and market research (I’m sure some of this was also done), they decided to just build the thing and get it out there. The benefit of moving so quickly was that they got to launch at SXSW. You couldn’t choose a more cool event to get your service out to the early adopters and tech elite of the social media world.

And what they also managed to achieve in doing this, was not leaving themselves enough time to mess around with it! Had they given themselves more time to develop, it might have gone through multiple conflicting design changes and iterations with all manner of fancy buttons added on. This is a valuable lesson for any new business starting out – stick to your core service, get that built quickly and well and then you can focus on marketing.

It’s encouraging to see new web services raising some serious money and executing such a thorough business strategy behind it. There a lot of lessons in there that can apply to many businesses. It may not be for me, but I’m sure there’s lots of exciting things to come from Foursquare over the next few months