Foursquare Draws Potential Investors

At Foursquare, rapid growth and increased profits are leading to a potential strategic investment in the company. While Foursquare failed to meet initial predictions for its potential success, a new advertising strategy has proven the company’s business plan to be viable. Drawing in significantly more revenue, this new advertising approach has led venture capitalists, technology giant Microsoft, and financial corporation American Express to consider investing in Foursquare. While a deal is uncertain, Foursquare would offer major benefits to both Microsoft and American Express in terms of expanding their social media integration.

The New Advertising Approach

In 2011, investors gave Foursquare a value of $600 million. Unfortunately, up until now, Foursquare has failed to deliver on predictions of their success, bringing in only $2 million for sales in 2012. The company was able to continue testing their business model by raising $41 million in investments in April, and with a new, widely popular advertising strategy, Foursquare is on track to surpass their goals for sales for 2013. This new advertising method allow brands to target users after they have checked into a location, and they are drawing three times the profits that Foursquare predicted.

With their new advertising strategy, Foursquare is also seeing increased user engagement. While most mobile ads have an engagement rate below 1%, ads that appear after a user checks in to a location are clicked on or saved an average of over 15% of the time. Only 50-100 Foursquare advertisers will be able to buy these ads during the next three months, but they will become available to all by the end of 2013. Foursquare now has about 6 million daily users, and they are hoping to increase that number with updates to both iOS and Android apps as well as a new app for Windows 8 phones. This allows users to check themselves and friends into a location.

The Potential Investors

With potential investments from venture capitalists, Microsoft, and American Express, Foursquare’s choice of investor will bring very different results. Venture capitalist investments would turn Foursquare’s holdings into equity. Investments from Microsoft or American Express would bring new social media benefits to these companies. Microsoft has thus far been surpassed by other companies when it comes to social media and mobile, and the acquisition of Foursquare would increase their competitive edge in that department. In contrast, American Express would invest in Foursquare to rise above other credit card companies by integrating their marketing and loyalty programs with social media.

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