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Social Media's New Mantra: Location, Location, Location


Fast-growing network Foursquare is luring potential buyers

Here's Dennis Crowley's ideal way to end the day: At 6 p.m., his iPhone alerts him to the evening's plans. It has already checked his friends' calendars and knows who's free tonight, so it suggests a restaurant they've all wanted to try. It notes when a table is available and informs him that three other friends are planning to hang out across the street so they can meet up later. And it all will happen—soon, he says—through Foursquare, the location-based mobile application and Web site Crowley co-founded with Naveen Selvadurai last year. "Every day, we tick off another couple of things that get us closer to being able to do that," says Crowley, 33.

Harnessing GPS-enabled mobile technology to let users broadcast their location is not a new idea. A service called Loopt has been offering friend-locating apps, and Google's (GOOG) Latitude feature on its maps can. Foursquare, a 20-person company that operates out of a crowded loft in New York's East Village, adds a game-like twist. Its 1 million-plus users earn badges by "checking in" at certain bars, restaurants, and other venues by pressing a button on the app upon arrival. A user can earn a "mayor" icon from a bar if he or she has checked in more than anyone else during the previous 60 days. The business model is simple: Generate as big a user base as possible and sell national brands and local merchants on the possibilities of marketing to people as they congregate—ready to eat, shop, or spend.

The service has certainly gotten buzz. On Apr. 16 (that's four times four—four squared), fans held "Foursquare" parties in more than 150 cities worldwide. The British soccer team Manchester City asked supporters to check-in en masse during the May 5 match at home against Tottenham Hotspur. More than 3,000 restaurants, bars, and other venues use Foursquare to attract customers with promotions.

Crowley says Foursquare is drawing interest from potential buyers in Silicon Valley, though he won't say who he's been talking to. Placing valuations on startups like Foursquare is famously difficult; their revenues are nascent, and the lasting impact of their technology is difficult to gauge. Tristan Walker, a Stanford MBA student moonlighting as Foursquare's head of business development, says the company brings in money from paid partnerships. PepsiCo (PEP), Zagat, and more than a dozen other brands have signed deals with Foursquare. Walker won't disclose terms or comment on whether Foursquare is profitable.

The key question is whether Foursquare's check-in twist is enough to build a sustainable business. Gowalla and Brightkite have built rival networks complete with their own check-in features, while established names like Twitter and Yelp also boast location-based tools.

At least some partners think Foursquare is unique among competitors. The cable television network Bravo (GE) launched its partnership with Foursquare in February. The more than 10,000 viewers who have been participating in Bravo's Foursquare promotion can "unlock" badges by checking in at locations linked to Bravo shows. (The venues range from restaurants favored by some of the celebrities on Top Chef to retailers popular with the women on Real Housewives.) Participants also get tips on what to do or buy at the locations and, in some cases, earn prizes for getting there first. "It's such a unique way to talk to our audience at a local level," says Ellen Stone, Bravo's senior vice-president for marketing.

Given the growing number of players now jumping into geo-location services, Crowley has heard the arguments that he should get out while he's ahead. "I view Foursquare as more of a feature that gets integrated into a larger service," says Michael Gartenberg, a partner with the research firm Altimeter Group in New York. "It's just a matter of time before the Facebooks and Twitters of the world start to offer check-in as a service." Gartenberg adds that he has stopped using Foursquare. "It was like a demanding girlfriend who wasn't giving me a whole lot in return," he says. "All I got to be was the mayor of the bagel shop."

Bonin Bough, PepsiCo's global director of digital and social media, says his company has been experimenting with Foursquare. Pepsi teamed up with the social network last December for a charity drive in New York. Every time someone checked in within the city limits, Pepsi donated 4 cents to a nonprofit called CampInteractive—to a maximum of $10,000. Bough says he was impressed with the user response on that campaign, and is intrigued with the way Foursquare's game aspect motivates people to go to events. Still, he's trying out other location-based services, including the company's own "Pepsi Loot" initiative that gives customers points for buying drinks in more than 200,000 restaurants. "It's a huge opportunity," he says. "But I don't think we'll know the winners for a while."

Crowley says he's too busy building his company to dwell on an exit strategy. "All this talk about valuations and exits is a distraction. We're doing interesting things. Users seem to love it." He's been down the startup road before: As a graduate student at New York University, Crowley developed a location-based text-messaging service called Dodgeball with Alex Rainert (now a Foursquare employee) that he sold to Google in 2005 for undisclosed terms. "We were there for two years, trying to make it bigger and get people excited about it," says Crowley. "We were like, 'Man, if they turn it off, we have to build another one.'"

The bottom line: Foursquare's location-based marketing is a "huge opportunity" that is sure to attract more competition.

Brady is senior editor at Bloomberg Businessweek in New York.

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