In a bid to boost revenue, Foursquare will now let brands that don't have a physical location advertise on its most prominent real estate: the app's home screen.
MasterCard is the first business without a brick-and-mortar presence to place an ad on Foursquare's home screen as part of a month-long campaign that wraps up on Dec. 20. While the function of ads in that placement had been to alert users to the presence of a business in their vicinity and drive in-store visits, MasterCard's campaign is more of a branding initiative.
People who tap on the ad -- which will be shown to Foursquare users nationwide -- will be taken to a page listing nearby restaurants that accept MasterCard. (The credit card company is currently donating a penny to cancer research when cardholders spend $10 or more on meals.)
For Foursquare, opening up the ad placement looks like an effort to entice larger brands who didn't have a use case for marketing on the app when its ad offering was aimed at restaurants and retailers.
The company made another stride in that direction this summer when it introduced ads that appear after a user checks in at a location. Captain Morgan was one of the early brands on board with ads that suggested that users who had checked in at certain bars, clubs and restaurants order a drink like a "Captain and cola."
Other brands to have tried post check-in ads are Oreo and Samsung. Foursquare's chief revenue officer Steven Rosenblatt said that the majority of the revenue the company has generated from non-merchant advertisers has so far been from that placement, though it's also done some data deals. (Ad Age previously reported that Foursquare was working with the ad-tech company Turn to mine its location-based data sets and let advertisers retarget its users on the web and on mobile devices.)
The upside for Foursquare in opening up its home screen to more types of advertisers is that it's the most visible real estate within the app, which presumably makes it more valuable. Advertisers pay Foursquare on a cost-per-action basis -- when a user taps on the ad, for example -- not at the impression level.
Mr. Rosenblatt said that ads on the home screen -- which debuted in May -- have fetched higher prices than other Foursquare inventory. The company's original ad unit that debuted in the summer of 2012 was promoted updates that appear in the "Explore" tab where a user can search for nearby specials and popular venues.
"People are willing to pay more because they see great results from it," he said.
What about scale?
Foursquare won't disclose its revenue, but a recent back-of-the-envelope calculation by Fast Company projected that it would bring in between $15 million and $20 million this year, up from $2 million last year.
What's also unknown is how many active users Foursquare actually has. It reports that it has 40 million registered users but doesn't disclose how many of them use the service on a monthly basis, which is the usage standard that both Facebook and Twitter employ.
MasterCard's VP-digital marketing JR Badian observed that the reach of home screen ads -- which should be seen by a large portion of Foursquare's U.S. user base for the current campaign -- is compelling. The company previously bought post check-in ads for a campaign this summer and saw high click-through rates; it's using them again in tandem with the home screen placement.
"We think [Foursquare] is pretty powerful even if the audience is smaller than some of the other social networks," he said.