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Can foursquare’s mobile monetization strategy compete against Facebook, Google?

July 27, 2012

A Promoted Update from Old Navy

Foursquare is taking a big step toward monetizing its mobile presence via new ads called Promoted Updates. However, will it be enough for the company to compete against the likes of Facebook and Google who increasingly have their eyes on mobile and location-based services?

This week, foursquare introduced Promoted Updates, which appear in a user’s Explore Tab and showcase special offers and events at nearby businesses. Twenty merchants have already signed up to send promoted offers to foursquare users, including Best Buy, Gap, JCPenney, Lowe’s, Old Navy and Walgreens.

“People use foursquare to find things to do around them and save money,” said Noah Weiss, product manager at foursquare, New York. “Our new promotions will make it easier to find timely updates and valuable specials nearby.

“The promoted updates and specials that a user sees will be highly targeted and enhance their foursquare experience, and with these tools, foursquare is doing for real world companies what Google AdWords did for online brands,” he said.

Nearby offers
Promoted Updates work similarly to ads on Google. For example, when users search for “laptops” in the Explore section, they might see a promoted special about a weekend deal at a nearby computer store.

Users will see promoted offers from places on their foursquare lists, places a friend has been to or liked as well as places that seem appropriate given the time of day or the neighborhood users are in.

Recent promoted offers include one from The Standard Miami for half off drinks. Old Navy is offering a check-in special of $15 off an in-store purchase of $75 or more.

A JCPenney promoted offer is letting users check-in as a way to support the USO, with the retailer donating $2 for every new customer that checks in and $1 for repeat check-ins.

The competition
Despite foursquare’s strength as an early innovator in the location-based services arena, the company could find its efforts dwarfed by the likes of Google and Facebook, who have their sites on this area as well.

“The challenge is that they’re up against some very large players with deeper pockets, a significantly larger client base and a massive audience,” said Marc Poirier, co-founder and chief marketing officer of Acquisio, Brossard, Canada.

“Google owns Android and Motorola, location-based advertising for them is simply a matter of extending their current AdWords offering to let advertisers create campaigns that will trigger alerts for any Android phone owner that happens to be in the right vicinity,” he said.

Google, through its mobile payments solution Google Wallet, can also close the loop completely and get revenue right back into the AdWords campaign, allowing advertisers to measure the impact of their offline efforts.

Facebook’s mobile audience is significantly larger than foursquare’s and the signs are that its initial efforts in mobile advertising are beginning to pay off. Additionally, Facebook offers marketers the ability to target users based on additional criteria besides location.

“Facebook mobile ads are gathering click-through rates up to ten times higher than the desktop version of Facebook ads, and their data can be used to target users not only because they are close to a vicinity but also to refine that effort by leveraging demographic data as well as user’s “Likes” and interests,” Mr. Poirier said.

With foursquare’s ability to continue to innovate in this space and the growing interest in location-based services may make it a target for acquisition. Google, Microsoft and Yahoo are all looking to accelerate their pace in location-based services and have the deep pockets to make such an acquisition.

“Foursquare is uniquely positioned to deliver an unmatched experience to both users and merchants with these new tools because our Promoted Updates leverage user behavior that is native to the foursquare experience,” foursquare’s Mr. Weiss said.  “We are able to tie Promoted Updates deals and offers directly to user behavior and proximity in a way that no other platform can replicate.”

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