Brands Try to Become 'Mayor' of Foursquare but Will They Pay for It?
NEW YORK (AdAge.com) -- Don't look now, but big brands are checking in on Foursquare. Pepsi, frozen-dessert chain Tasti D-Lite and cable network Bravo are all attempting to harness the power of the mobile game/social network.
The question is whether they'll pay for the privilege. Or whether Foursquare, which has 300,000 users now voluntarily "checking in" at locations, and broadcasting that to their followers, will transcend its current "it" status among the technorati and become a lasting consumer phenomenon -- and a marketing tool.
In December, Pepsi made a small bet on the startup as part of its Refresh Everything community-giving push. For every point earned in New York, Pepsi donated 4 cents to inner-city youth center Camp Interactive. After one week, New Yorkers on Foursquare earned 225,000 points, and nearly $10,000 for the organization.
It was a small deal with a big brand that generated little if any revenue for Foursquare. Still, it got Pepsi excited about the possibilities.
"From a broad strategy point of view, there's a huge potential with the ability to connect people to promotional experiences," said Bonin Bough, PepsiCo's global director of digital and social media. "We know where people are and can talk to them from a geo-located perspective -- that's a huge opportunity."
That's exciting, also, for Foursquare, which in this deal and others is starting to build the foundation of a revenue model on location-based marketing services. Foursquare is planning paid services for three tiers of businesses: small, privately owned stores and restaurants; brands with retail chains, such as Tasti D-Lite; and huge multinational marketers such as Pepsi.
For bigger brands, Foursquare is developing an analytics dashboard so businesses can track who's coming into their stores. Then, deals could be sold against impressions such as web ads, clicks such as search ads, or a completely new model: cost per check-in.
Moving beyond early adopters
But before it can do any of that, Foursquare must prove it can expand beyond early adopters and educate marketers on how to use the service in ways its fickle users won't hate.
"We've been hesitant to just shoot ad copy through our system," said Tristan Walker, Foursquare's head of business development. "Once we start to put in generic specials, we're just another channel to distribute promotions."
For now, marketers are availing themselves of Foursquare's free tools, and some are liking the results. Checking-in in the vicinity of a Tasti D-Lite shop? You may get served a coupon from the Tennessee-based chain, which is testing a free service from Foursquare called "specials nearby."
"Preliminary data is showing that this is driving foot traffic in stores," said B.J. Emerson, director-information and social technologies for the 50-store chain. "We'll most likely pursue this where we can measure effectiveness and return."
The company also launched a loyalty program that's synched with Foursquare and Twitter, so customers earn points for making purchases and for checking in. When visits are published to customers' Twitter stream, Tasti D-Lite gets in front of all their friends, and a customer earns extra points toward free dessert.
Using, not paying, Foursquare
Right now, Specials Nearby -- there are nearly 700 since Foursquare launched the feature in summer -- are free to businesses. So is the API off which Mr. Emerson built the loyalty program. Likewise, Foursquare's Bravo deal gives the company TV exposure, if not revenue.
"I think marketers will be interested in Foursquare, assuming the audience keeps growing," said David Berkowitz, director-emerging media at digital agency 360i. "The lasting value will be from the smaller deals Foursquare will find ways to monetize."
It's a difficult balance: Foursquare's ability to continue to grow depends on its users accepting at least a bit of marketing along with the badges, or honorifics, they earn, such as "mayor" (for most visits), "newbie," "bender" (for consecutive nights out) and, yes, even "douchebag" (for checking in at places like Barneys).
Zero to 300,000 isn't bad for an app that launched less than a year ago. It took more than three years for Twitter to reach its current fever pitch. But even as it grows, Foursquare will have to answer the same questions. Research firm Sysomos estimates that 5% of Twitter users generate 75% of activity.
Much will depend on whether it can maintain its cool. "The X-factor appeal of Foursquare is in its social currency," Mr. Berkowitz said. "Giving Foursquare users these badges for completing explicit tasks adds an element of surprise, like a scavenger hunt. And you can't ignore the bragging rights."