Cost Per Check-in: Has Foursquare Initiated A New Ad Model?

We know about ad deals based on impressions and  we are familiar with banner ads and pop-ups. Google Adsense opened us up to cost per click-throughs. But as social networking moves from the desktop to mobile devices are we ready to engage in a brand new business model Cost Per Check-in? And will local establishments and brands be willing to pay for it?

As social networks services like Twitter search for ways to monetize, Foursquare, the location-based social network has been successful in expanding on the buzz it started in 2009 - namely check-ins. Check-ins are the game-like component of Foursquare that incents users to check-in to local establishments like restaurants and bars to gain points on a leader board and earn "mayoral" bragging rights. Becoming a mayor basically means you are the "top dog" patron - the user with the most visitations.

The ramifications of this model is a virtual gold-mine in the making. Hotels have been actively involved with loyalty programs since the early 1980s, and restaurants have followed suit over the years. However, while we are familiar with accumulating 'frequent diner' collateral from a number of restaurants in the past, it was a cumbersome chore to keep track of all of them. The onus fell on the users and their bulging wallets or purses to organize and store all the loyalty cards, only to lose them or forget them at home when you needed them. However with mobile devices and smartphones, we now have the technology that can monitors all such programs and transactions with the ease of a couple of clicks.

As a result of the geolocation feature built-in to the Foursquare model and the ability of our smartphones' GPS systems to tag our where-abouts, restaurants and bars have the opportunity to promote their facilities at little to no cost. Why? Because to date, Foursquare has not charged any of these establishments for the service.

Similar to its forebearer Twitter, Foursquare knows they have to scale their user base to a critical mass level before they can show value to a restaurant (or a brand) and begin to charge for their service. Today, its been announced they have reached the milestone of 300,000. This according to a Sparxoo study by Ethan Lyon puts them at the 'Early Adopter' stage, the juncture just before they jump to the their 'Early Majority' phase of their life cycle.

Adoption Curve:

According to the study, Foursquare's initial followers were 'Innovators' or what some have called the 'tragically hip urban hipsters.'  Three years ago, Twitter attracted a similar demographic before its 'Early Adopters' moved to its 'Early Majority' stage.

However where Twitter falls short in approaching this market themselves, it's just slightly behind the curve in offering the right kind of geolocation component. This left the door wide open for Foursquare to strike deals with franchised brands like Tasti D-Lite and their "young, hip Pecan Preline Crunchy customers," as Ethan Lyon describes them. In my previous blog, titled, "Tasti D-Lite Loyalty Program Needs Geolocation To Sell Product," I detailed how Twitter did not address tweets that needed to target followers based on location. For instance, when a Twitter user tweets out a deal he has just received from this dessert company, it will be sent to one's entire following, instead of a distinct grouping within one's geographic radius.

On the flip side, when this same communication is sent out to one's followers on Foursquare, it can be limited to a 3-4 block territory. This allows those users and their Foursquare followers to benefit from a special deal or coupon offering within a short walking distance.

To this end, according to an Ad Age report, Foursquare is planning its first-time 'paid' services for three tiers of businesses: small, privately owned stores and restaurants, brands with retail chains, such as Tasti D-Lite and at its highest level - huge, multinational marketers such as Pepsi.

This is where 'Cost Per Check-In' might play a role. While checking into a Tasti D-Lite shop today, a user might be awarded a coupon from the Tennessee-based chain. This is the service  Foursquare calls "Specials Nearby."  However, it doesn't take a rocket science to think about the possibilities if  Foursquare were to charge for each check-in, or number of check-ins after a certain quota is reached. The analytics are already built into the system, and it is certainly showing Tasti D-Lite that it can drive traffic.

So why haven't they done so?

The fine line that Foursquare treads at this point in time is to determine whether it can consistently grow - whether that growth will be moderate or exponential - but more importantly, if it can maintain its 'cool' appeal. According to David Berkowitz, director emerging media at digital agency 360i, "The X-factor appeal of Foursquare is in its social currency." As long as that appeal can sustain the long-haul, I think monetization is right around the corner. And I also think that a greater collaboration deal with Twitter is imminent. A joint deal between these two social networking entities make a lot of sense and would synergistically provide the users of both camps, more bang for the buck, then if they were to choose to compete with one another.

As I've stated previously, 2010 is the year of "geolocation." And geo-tagging is what is going to finally capture that illusive dollar revenue that Twitter and Foursquare have not been able to capture for themselves, - but instead have provided for its partners. By mid-year, I see a paradigm shift when they harness the "hand that feeds" and start taking a piece of that pie (or Pecan Praline) for themselves.

'Cost Per Check-in' could be the first step in that lucrative direction!

Feb 5, 2010
by Anonymous

4sq revenure from check-in or advertising

Interesting. I think the service has to become more valuable before people will be willing to pay for it. We are starting to see that trend now, but from the consumer side it's still a game. I think the revenue model will have to come from the advertising.