I remember seeing Dennis Crowley at SXSW in 2009 shortly after he had finished a panel on location services. He was on the phone and giddy that they had just reached 3,000 users. Two years and more than 7 million users later, foursquare’s latest pivot is its most important.
Foursquare 3.0 is the most efficient way to get recommendations for places to go in a city. The new release hits many of the themes that I’ve covered in my series on local search, especially user and merchant engagement and the importance of recommendations. (See How the battle for local search will be won for an overview.)
Lately, foursquare has been afflicted by a form of reverse network effects. It’s become so popular among some segments that the game elements of foursquare weren’t appealing to many users. Most people don’t want to play games that they will suck at. When you check in somewhere and see that you’ll need 28 more visits to become mayor, there’s less incentive to participate. (See this discussion of two-sided markets.) In my research, I found that the average number of check ins per unique user at businesses was 1.56. Given that some places require 12 or more checkins in 60 days to become mayor, that’s a clear indicator that repeat checkin activity is being driven by a very small number of people.
Foursquare added a new “Explore” tab that provides recommendations of nearby businesses. Recommendations provide a real incentive to use foursquare even if you have no shot at becoming mayor. Foursquare will filter through thousands of local businesses to identify those that you might be interested in. (See my post on recommendation engines.) Much like Google’s Hotpot, recommendations come from a number of different sources:
- Your friends. If you have friends on foursquare, you’ll see tips that they’ve left at businesses. Because you can friend or follow organizations, this can also show you “expert” recommendations.
- A place graph. Places will be suggested based on other places that you’ve been.
- Popular places on foursquare.
- Preferred categories.
- Time of day.
It is really easy to scroll through the recommendations. Unlike Yelp and Hotpot, you don’t have to flip back and forth among pages. Unlike Hotpot, non-recommended places aren’t mixed into this list.
Are the recommendations perfect? No. Recommendations never are. I’ve gotten plenty of bad recommendations when talking to friends or hotel concierges. But they sure beat scrolling through an undifferentiated list with no guidance at all.
There are two areas for improvement:
The explore view doesn’t incorporate pictures. This will be an increasingly important part of local search. Visuals are a critical element of how people make decisions, especially when it comes to restaurants and nightlife.
With the new recommendations, foursquare would benefit from a much broader social graph. Many people are stricter about who they will become friends with in foursquare because of its real-time nature. But they really don’t care if other friends, co-workers and acquaintances see tips from visits in the past. In my case, I’ve only friended half of the potential Facebook friends on foursquare. These additional people would dramatically improve coverage of social recommendations.
Deals are an important part of the new app. Although foursquare deals have been around for nearly two years, they get a big makeover in Foursquare 3.0. The new application makes specials more prominent in the user interface. A big challenge with the old specials was that mayor deals were out of reach for many consumers and didn’t provide an incentive for trial. See my post, Maximizing the value of deals on Facebook and foursquare.
Four new deal structures allow for better serving both end user and business needs:
- Flash specials. These are the equivalent of door busters. Once activated, the first X people who check in can claim the deal. These are also especially well suited for use as yield management tools. Slow night at the bar? Offer a special for one night only.
- Friends specials. Check in with a set number of friends to get the deal. These promote behaviors that are important for foursquare’s growth. They serve as both user acquisition tools and product improvement tools. The more friends that you have actively using the platform, the more useful the recommendations become.
- Swarm specials. These kick in after a certain number of foursquare users check in at a place. These could be important for future friend discovery tools.
- Newbie specials. These specials allow businesses to incent trial by new customers. Because they are tied to a relatively persistent identity, they can be much more generous than paper coupons (which might be abused by unscrupulous customers).
As important as a deal platform is, having actual deals is critical. Foursquare is launching the new platform with deals from Barnes & Noble, H&M, Toys R Us, Arby’s, Coffee Bean, H&M, Sports Authority, Whole Foods, Chili’s and Radio Shack.
There’s no word on notification regarding specials. Foursquare currently requires users to actively seek them out within the app. Being able to get alerts of new specials (especially flash specials) will be important.
Foursquare claims more than 250,000 businesses on its platform. This is quite a bit less than the 4 million businesses claimed by Google Places. 5% of businesses I looked at had claimed their foursquare presence, compared with 61% on Google and Yelp.
Best is yet to come
As much as I like foursquare 3.0, there is a lot of opportunity left. The biggest of this is collecting more data to make better, more intelligent recommendations. Foursquare will be launching a new partnership with American Express at SXSW. The initial scope is limited to special offers for AMEX cardholders.
AMEX has the absolute best data of any company in America on where a large portion of the population transacts. Consider these pieces:
- Many businesses set up a merchant account ahead of time, so they know when a business is going to open.
- They can estimate hours of operation with reasonable accuracy. (Based on swipe data.)
- They know the average purchase amount.
- They know the mix of locals vs. out-of-towners.
- They know the mix of personal cards vs. corporate cards.
- They know if a business goes out of business. (The swipes stop happening.)
- They know which businesses people return to and which they don’t. (Implicit quality rating.)
All of this data could be fed into a recommendation engine like foursquare’s.
With the way AMEX issues secondary cards, it would be possible to create a card that would automatically check you in on foursquare when you swipe your card. (While protecting your privacy on other purchases.)
At the extreme, you could have a co-branded foursquare card designed around social features. These could include automatic check ins, cardmember specials and a rewards program based on purchase and check in activity.
Sound crazy? Maybe. But back in the mid 2000s, AMEX launched city-centric cards for New York (IN:NYC) and Los Angeles (IN:LA) in a bid to attract younger customers. These cards weren’t successful and are no longer available.
But back then, foursquare didn’t exist.
Part 1: Local search is starting to get more social
Part 2: How the battle for local search will be won
Part 3: Google Hotpot a strong competitor to Yelp
Part 4: Statistics on business and consumer engagement in local search
Part 5: Foursquare 3.0 takes mobile ball to a whole new level
- Google Hotpot takes a stand in Portland – An analysis of Google’s extensive marketing spending in Portland.
- More foursquare coverage.