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Sunday, November 29, 2009

Foursquare may bounce social media into money-making mode

David Kadavy steps into Noble Tree Coffee & Tea in Lincoln Park and clicks "check in" on his iPhone's Foursquare application.

His phone tells him six other people have also checked in, and it provides tiny pictures of them. The Foursquare application automatically updates his Twitter account -- his 1,035 followers now know where to find him along with those half-dozen others.

The bearded 30-year-old Kadavy, a freelance Web designer and foodie (he has a "tweet what you eat" site) is playing an increasingly popular game that experts believe has a shot at turning social media into a money-making enterprise.

Playing Foursquare involves exploring restaurants, pubs and coffee shops in major metro areas. The payoff for playing can range from special deals or freebies at eating and drinking establishments to scoring points, Boy Scout-like badges and "mayorships," essentially bragging rights for hanging out at particular locations.

"Foursquare, the thing that's unique about it is that it has the opportunity to monetize restaurants, locations and activities that people would do -- a little bit better than Facebook or Twitter does," said Michael J. Lis, owner of Speck Media, a Chicago marketing firm.

Lis said he includes Foursquare when his firm designs social media strategies for clients that include Fortune 500 and smaller companies. "They're moving forward really fast."

Foursquare's users have been increasing by 45 to 50 percent each month, according to the New York-based company. It boasts 100,000 users internationally and 5,000 in Chicago, where it's been up for eight months. It's already in cities from New York to Hong Kong and just last week doubled its base to more than 100 cities.

Ever since Twitter established itself among the world's top social media sites in 2007, entrepreneurs have been trying to figure out how to turn the social media craze into a revenue stream.

Foursquare is among a handful of upstart companies that have tapped into the combination of social media and a user's geographic location along with the fact that mobile phone game players seem increasingly open to meeting up with people they get to know online. Some tech bloggers call Foursquare the next Twitter, but Foursquare bills itself as a complement to Twitter -- a way to take the connections and personas people create online and move those experiences into the real world.

"The coolest thing for me about Foursquare is that it turns life into a little game," said Jeff Siarto, a 25-year-old Web developer who lives in Chicago's Theater District. "Where can I go to get the most points? How did that person check in so many places? Ten more points, and I've got another badge. It's a real-life board game."

Keeping users entertained will be its ongoing challenge, according to Flurry, a mobile applications analytics company in San Francisco. It classifies Foursquare in its "location based social network" category.

"To keep users engaged, the company running the service has to frequently add new features, devising new ways to allow users to interact and remain entertained," said Peter Farago, Flurry's vice president of marketing.

Flurry estimates that out of every 100 new users, fewer than 10 will remain active on these systems two months later. The reason: There are fewer opportunities to launch the application than say, Facebook, because users have to actually be somewhere in real life in order to have a reason to use it.

Foursquare said that it is seeing user retention between 30 and 60 percent.

A year ago Foursquare, which 33-year-old co-founder Dennis Crowley named after the classic playground game, was little more than an idea sketched out on his kitchen table.

But it has emerged in only eight months as the hottest of its kind, surpassing competitors (stamp your digital passport and earn rewards at the places that you visit), (discover what's happening in your neighborhood) and (pinch, tap and drag an interactive map to find your friends and what they're doing), according to, which estimates site traffic based on the daily browsing activity of over 2 million U.S. Internet users.

Before mobile applications became the norm, Crowley in 2004 founded, where users "checked in" their location and transmitted that information to friends via a text-message system. Google bought Dodgeball in 2005 and replaced it in March with a service called Google Latitude.

Crowley, who said he didn't want to see the Dodgeball concept die, co-founded Foursquare in March with Naveen Selvadurai, the developer of such iPhone apps as WWJD, a sort of magic 8 ball where users you ask Jesus what he would do, and Drunk Dialer, which challenges users to dial when the numbers move around. In August, angel investors pumped $1.35 million into development of Foursquare, which counts many former Dodgeball users among its players.

Foursquare is focused on getting as many businesses as possible to add discounts and other promotions to Foursquare, said Tristan Walker, who is in charge of business development and is a second-year student at Stanford Business School.

So far, about 200 venues, as diverse as bars and frames shops, have promotions offering discounts and other perks to Foursquare users in the system. Later, those businesses will be asked to pay to include their promotions, Walker said. In New York and San Francisco, where Foursquare's popularity is high, "mayors" drink free at their favorite bars and loyal customers get discounts. Crowley said they did not know exactly when they would switch to a pay-to-play platform for promotions. He said a lot of those details are still being worked out.

Foursquare users say the application is to face-to-face social interaction what Twitter and Facebook are to keeping friends up to date on what you're doing.

"I probably don't call and have phone conversations with people as much as I did because I already know what they did on Twitter. I'm in constant contact with them." said 26-year-old Ryan Graves, owner of Renliv LLC, a Web development and Internet consulting firm. "Now, with Foursquare, you don't need to tell me where you're going."

The other day, for example, Graves said he couldn't reach friends by phone or text messages. So he jumped on Foursquare and learned they had checked in at Halligan's in Lincoln Park. He just went there and met them.

Graves is such a Foursquare fan that he said he's persuaded 15 businesses to start promotions on it.

One of those is Piece, a Wicker Park restaurant and brewery that offers a second pint free for its mayor. "Our mayor has been in to take care of his second beer," said manager Eloise Karlatiras.

At this point, she said, the promotion is an experiment. Whether they would pay to promote in the application, she said, remains to be seen.

"I think it really all depends on what kinds of results we can see at the testing phase," Karlatiras said. "Most social media is free, so I think it all depends on what kind of draw we see."

Karlatiras said she knows Foursquare is popular in New York and San Francisco but said it hasn't gotten much traction in Chicago.

The more people and businesses using Foursquare, the more useful it becomes. A person who checks in at a gym also gets a list of other businesses that are nearby and learns that a smoothie shop down the block has a special offer if you check in. Other information is crowd-sourced. Don't know what to order? Don't worry; Foursquare users leave "tips."

"It's not like, 'Oh, I went here and the service was awesome and there were nice tablecloths,' " said Crowley, Foursquare's co-founder. "It's like, 'Go here, order the milkshake and dip your fries in it.' "

Andy Angelos, 26-year-old co-founder of Get Talked About, an online marketing firm, said the best thing about Foursquare is that it's fun. He was also at Noble Tree Coffee & Tea with Kadavy where the two co-work with a group called Jelly, made up of independent business owners and entrepreneurs.

"Why do people play Boggle, Trivial Pursuit or strategy games?" Angelos asked. "They provide a way to interact with friends and family through a common, seemingly pointless purpose."

Illustrating that point, Kadavy showed off via iPhone the Boy Scout-like badges he has earned playing Foursquare -- the "Newbie" badge, the "Bender" and "Crunked" badges. "I went to four different places in one night. I guess it assumes I was drinking," Kadavy said.

He thought about it for a minute.

"Yeah, I think I remember that night."


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