If Cost Per Check-In Was A Reality, Foursquare Would Be $40 Million Richer

Cost per impression advertising has been around since the days of Mad Men. The Internet Age ushered in banner ads and pop-ups. Google first introduced us to cost per click-throughs. However in the world of advertising, consumers bore easily with the various forms of push and pull advertising they are barraged with every day, particularly on the Internet where it's difficult to escape it.

With online ad agencies like Google AdMob and Apple's Quattro Wireless focusing seriously on mobile platforms as the next major boon for advertising, is it time for a new advertising model? In a February post titled, "Cost Per Check-in: Has Foursquare Initiated A New Ad Model?" I speculated on an obvious one. In recent months, location-based social networks have introduced us to a new dynamic called check-ins.

Foursquare and Gowalla have spent a lot of time building their 'check-in' functionality with game-like features such as leader-boards and mayoral-ships to make this type of social behavior sustainable. While Foursquare has struck partnership deals with TV networks, metro transportation systems and newspapers, their ad model still appears to be in a stalled position.

Cost per check-in could be the answer. With a heavy focus on restaurants and bars, and loyalty programs that now have the technology to monitor customer traffic, it makes all the sense in the world for Foursquare to assess each eating and drinking establishment a small fee for each check-in. Differing from the click-through model that only directs an online user to visit a Web site, check-ins actually get real "live" bodies to walk through a restaurant's door where they are more than likely going to spend money, solving the age-old return-on-investment (ROI) issue that a brand requires on an ad spend.

Today, @harryh, one of Foursquare's developers sent out this tweet lauding Foursquare's latest milestone of reaching their 40 millionth check-in.

So to the point of this blog, the math is very simple. if Foursquare was to have employed a cost per check-in cost model from day-one at a just $1 per check-in, they could have been $40 million richer today.

Of course, we all know that new social networks, programs, tools and apps have  to scale significantly before they can begin a monetization program, and start charging. So my speculative math is probably unrealistic.

However, now that the groundwork has been laid, and Foursquare has reached its first 1 millionth user base-line, I think the time is right to consider such a model. If not, others networks may. With Facebook's announcement last week to initiate their own location-based social app (see "Facebook & McDonald's App Tests Foursquare-like Location-based Social Networking") it is only a matter of time before the big boys start playing hard-ball with start-ups like Foursquare.

Without a viable ad model like cost per check-in, Foursquare could end up stalling in the shadows of the behemoth Facebook - or, alternatively have to consider an acquisition as a means for survival.

May 11, 2010
by Anonymous

Very Interesting

Thanks for this article!

Jul 10, 2010
by Anonymous

Why would a business want to

Why would a business want to pay for ppl that visit them AND THEN check-in. No reason to believe 4sq drove the check-ins at a particular venue. My friends tell me to meet them somewhere. I show up and check-in. That bar is going to pay foursquare? I promise you that will never happen.

HOWEVER, if I check-in at that same bar and see a special promotion button that directs me to a nearby venue, that advertiser would be happy to pay a small fee to know that i've seen their promo. That's the business model as it stands now. Anyone disagree?

Mar 8, 2011
by Anonymous

I dont see how enabing

I dont see how enabing people to check-in will help establishments like bars and restaurants. Would I go to one over another because I can check-in? Probably not. If FourSquare is charging the owner of the establishment, why would they pay for this? There is no control over who or how many people check-in and there is no incentive to support the business.