Foursquare Raises $41 Million, May Sell Check-In Data For Ad Targeting

Posted Apr 13, 2013

Foursquare seemed to have peaked between 2009 and 2010.  Today Foursquare is struggling to stay relevant and competes intensely against Facebook Places and Yelp.  Foursquare introduced ads within their search engine, but it has been disappointing since many people do not utilize the search built into the app.  The company has not been able to generate much revenue from mobile ads based on a user’s location as a result.  Foursquare generated around $2 million in total revenues last year according to sources with BusinessWeek.  In order to keep the company going, Foursquare raised $41 million from the private equity company Silver Lake Partners and venture capital companies Andreessen Horowitz, Union Square Ventures, O?Reilly AlphaTech Ventures, and Spark Capital.

A majority of this cash will be used as part of a multiyear loan from Silver Lake.  The rest of the money is convertible debt that can be exchanged for shares later on.  This means that Foursquare is taking on a huge risk since this is debt that was raised rather than equity stake.  The current valuation of Foursquare is unknown, but earlier investment rounds pegged the company at about $600 million.

?This allows us to get closer to being able to prove that there?s a real business here,? said Foursquare CEO Dennis Crowley in regards to the funding.  Foursquare never advertised their services as their growth has been through word-of-mouth.  The company works with over one million merchants, but the company allows only about 50 of them to buy ads.  These merchants include national chains like Walgreens and Starwood Hotels.

Starting this summer, Foursquare will start allowing merchants to buy ads and they plan to expand their sales team to about 40 people.  Foursquare will also update their app to highlight the search functionality since it was “buried” in their previous designs.  From there, users will see ads based on their location.  An example of it’s usage is if a user walks into a Best Buy, then Samsung may be able to send them an ad for a TV.

There are about 40,000 applications that used Foursquare’s API for their app instead of building their own location databases.  Foursquare has been able to collect data from Path, Vine, and Instagram.  Foursquare also has a revenue-sharing deal with Visa and MasterCard for people to upload their credit card information to get discounts on products and services.  Foursquare has seen about 3.5 billion check-ins so far on their mobile app.

There are also rumors that Foursquare may want to monetize and settle outstanding debts by selling the data behind the 3.5 billion check-ins for brands to create targeted ads, according to a report in AdAge.  “Foursquare is always looking at ways that could make our data more useful for advertisers and partners, while respecting the privacy of our user’s information,” the company said in a response.  Foursquare has around 33 million consumer users and 1.3 million business users, but it is unknown how many of them are still active.