I like Foursquare. I do. Big fan. And it seemed off to a great start, but I can’t help but notice that even with impressive growth,  its sails aren’t quite as taut as they were a year ago. Checking-in to places isn’t as fun as it used to be. Chasing mayorships has become somewhat pointless. Not to mention that most of us have run out of interesting badges to earn and collect.

Granted, Foursquare did announce a bunch of new badges this month, mostly geared towards institutions of higher learning. This emphasis on university partnerships (and its associated under-30 demo) is a good start, but slow-moving and fairly limited. Ski resorts are also getting some attention, as are several major brands. And it is worth mentioning that Foursquare has been releasing a slow trickle of hobby/interest badges like Yoga Masters, Handmade Hero, DIY, and Black History Month. These are encouraging signs, as more badges (new badges) will help drive adoption and participation. And yes, with enough funding to last through 2011, Foursquare will make payroll and continue to push towards growth. (The service expects to almost double its reach by June with 10 million users.) Its net growth in 2010 was also impressive (measured in new accounts): 3,400%, with more than 380 million check-ins (for an average of just over a million check-ins per day).

Note: If you are interested in Foursquare’s growth statistics, check out their fly 2010 infographic here.

But here is the problem: While those numbers are nice, I can’t help but sense that many of my peers are losing interest. Some have even jumped over to other services like Gowalla, whose broader selection of badges has helped keep users interested and entertained. And then there is the question of revenue (which, even in this sequel to the first internet bubble, is kind of an important component of any business).  Sooner or later, companies have to find themselves in the black, pay back investors, and turn a profit.

I could be wrong, but it seems that aside from being carried by its own marketing momentum, Foursquare is in danger of falling short of the market dominance it will need to ensure its own survival, profitability and longevity. Just as there can’t be two Facebooks (MySpace used to be a big deal) or two Twitters (remember Plurk?), Foursquare can’t really afford to engineer a stalemate with competing services like Places or Gowalla. Whomever scales the fastest, whomever recruits the most users and figures out its revenue model first will win this race. Unfortunately, my beloved Foursquare seems to be on a different timetable altogether, and that worries me. From a recent story in Information Week:

To differentiate itself from its larger competitors, to continue its growth, and to add to its coffers, Foursquare plans to forge more partnerships with local businesses and artists, as well as offer recommendations such as where to eat a meal, see a concert, or attend a show. In addition, Foursquare hopes to attract more musicians so fans will have the opportunity to follow their activities online, he said at the music-focused event.

“I’d love to get a lot more artists onto Foursquare, that’s an easy one,”  said [Foursquare co-founder Naveen Selvadurai] in an interview. “Getting a lot of artists onto the system and seeing the world through their eyes is a very powerful thing. What better way to engage with people you admire than something like [Foursquare]? I hope in a year’s time that we’ll be able to do that with a lot more artists. That’s something I find immensely exciting and very valuable.”

Foursquare also is developing tools to further help local businesses, in addition to its existing national client base such as PepsiCo and Zagat Survey, tap the social media site for advertising, loyalty programs, and other incentives, said Selvadurai. And the company continues to develop the concept of Foursquare itself, he said.

 

What I don’t see anywhere yet is a plan to accelerate adoption and develop a solid revenue model. I don’t yet see the clutch strategy. So… why don’t we look at a simple little idea that could be plugged into Foursquare’s current business model – an idea that would get things rolling a little faster for my favorite little smartphone app – and perhaps more importantly: a solution that would help me and other marketing folks sell all of our clients on the virtues of incorporating Foursquare into their marketing and business development programs.

Okay, so here is how simple the idea is:

Step 1 – Build a badge store (actually more like a badge marketplace) where companies looking for ways to incorporate Foursquare into their marketing programs can partner with designers to create their own unique custom badges.

Step 2 – Allow these companies to plug their new badges and marketing programs into Foursquare’s account management dashboard. Create different levels of management and reporting service, from free to enterprise-class, to give different types of customers and programs the flexibility they need.

Let’s run through how this would work:

1. Company XYZ creates an account, visits the badge store, identifies a designer it wants to work with, and orders a custom badge. Once the order is placed, Foursquare’s badge store collects its cut (illustrated below as 30%). The designer collects his cut (illustrated below as 70%). Badge prices are determined by market forces, so a badge could realistically fall anywhere between $50 to $500 depending on the designer. (Foursquare could set minimums like Amazon, to keep the marketplace viable.)

See what happened here? Several things:

  • Foursquare just generated revenue.
  • Graphic designers have found a new way to generate revenue and gain exposure. (Yes, there is an affiliate element to this.)
  • Foursquare didn’t have to hire and pay in-house designers. All they had to build was a design engine and a marketplace.
  • The badge store eliminates Foursquare’s design capacity problem.
  • Companies of all sizes (not just major brands) can now begin to take full advantage of Foursquare on their own schedule.

Still with me? Okay…

2. When Company XYZ registers its badge with Foursquare through the marketplace it can select from a variety of campaign and program management dashboards if it is new to the badge store, or add the badge to an existing account:

New badge creation and registration
Selection of back-end Foursquare services

In this step, Foursquare gets a chance to generate revenue a second time, through monthly subscriptions to premium back-end management and analytics products.

Company XYZ selects the type of dashboard, management and reporting that seems most adequate for its new badge and the marketing/loyalty/rewards program it aims to build for it. The free service would be helpful for small businesses but obviously limited in its capabilities. Gold would be a full suite of enterprise-level tools for brands with large footprints and complex databases –  like McDonald’s, Delta Airlines, Best Buy, Target and Barnes & Noble, for example. Bronze and silver could be anything in between. Company XYZ can upgrade or downgrade at any time, based on its needs.

3. Equipped with custom badges, custom rewards programs and management tools, Company XYZ can now roll out its new badge with all the fanfare it deserves:

Business adoption + Cool Factor + Value to consumers = Consumer adoption.

 

To recap the basic intertwined mechanisms that make this all work:

Custom badges + back-end tools = Accelerated business adoption.

Business adoption + Cool Factor + Value to consumers = Accelerated consumer adoption.

Consumer adoption + Competition + Ease of Enrollment = Accelerated business adoption (again).

As the cycle then repeats itself, it begins to scale:

Consumer adoption + business adoption = momentum

 

That’s basically it. It’s pretty simple, but that is the beauty of it: Businesses just need to be motivated to adopt and use Foursquare. Likewise, consumers need to be motivated to do the same. No new badges or rewards programs for consumers = no motivation to participate. No access to custom badges and user-friendly campaign management tools = barrier of entry for most businesses.  This is a compounded problem that threatens to stall Foursquare’s growth. The service shouldn’t be shooting for 10 million users by June. It should be looking at 20+ million by now.

The solution: Create a mechanism that eliminates barriers of entry. One that will drive business adoption and the creation of new badges, which in turn will drive consumer participation. The more businesses participate, the more consumers participate. The more consumers participate, the more the business long tail will be motivated to check out the badge store and test Foursquare. That is the basic adoption acceleration engine.

The revenue side of the solution:

Foursquare skims a % off custom badge orders through the badge store (similar to Amazon’s KDP program).

Foursquare also charges a monthly fee for premium analytics and management tools.

Authorized designers generate revenue through the sale of custom badge design on the badge store.

Companies enrolled in the program can track the ROI of their Foursquare-enhanced campaigns and programs with Foursquare analytics (the point of the investment being to drive more business by either acquiring new customers through foursquare, increasing the frequency of participating customers’ visits to a store, or developing customers over time to increase their average purchase volume).

Simple. Effective. Worth a try.

Nothing against creating badges for universities, hobbies and artists. That still needs to happen. But this might be a nice way to speed things up and outpace the competition. It could also potentially eliminate the need for any further funding well ahead of schedule. Something to think about.

Cheers,

Olivier.