The Twittersphere is buzzing with rumors that Yahoo Inc. (Nasdaq: YHOO) is considering shelling out $100 million for Foursquare, the hot startup du jour that offers location-based services.
Foursquare, which launched just last year, was born after Dodgeball, an earlier location-based social network provider, was sold to Google (Nasdaq: GOOG). It has only raised $1.35 million in venture money. Less than a month ago, the word was that Foursquare was going to raise $10 million at a $40 million valuation. That number jumped to a whopping $80 million in a matter of weeks, and now the company's value is hovering at $100 million.
Foursquare is still relatively tiny. I've seen reports from various sources that suggest the company has grown from 50,000 users to anywhere between 200,000 to 600,000 users currently, or perhaps even higher. While that's a big swing factor, penetration is still low compared to large social networks.
People seem to have a love/hate relationship with services like Foursquare and Gowalla, its main rival. Sentiments range from, "Why would I give up my location to the world?" to "Dude -- the soup is killer at this bistro."
Check out social comedian Loren Feldman's perspective on why you shouldn't use Foursquare. And others like Louis Gray say it's just boring. Regardless, if Foursquare can get a valuation of $80 million or $100 million inside of a year, it's party time.
What's driving this valuation? People believe that location-based services are the next geo-advertising opportunity. And the big VCs are lining up to chase the Foursquare deal. Guys like Accel, Andreesen, Khosla, and other big names covet a hot property to get them into the location game. As Silicon Angle blogger John Furrier pointed out in his blog, this is how Silicon Valley works. Small company innovates, a company in the Valley fast follows, and the VCs start chasing the ideas, pumping up the price.
VCs don't care that at some point the big social media sites will all incorporate some form of location-based service (many do already -- e.g., Google). Indeed, they like that fact. As I pointed out in an earlier post on Twitter's valuation, VCs will happily put in $10 million for a $100 million valuation, especially if they can get a senior liquidation preference, meaning they get their money out first and can only lose money if the valuation deflates to under $10 million.
But why would Yahoo, a troubled Web company with a mixed track record on acquisitions, want to pay $100 million for Foursquare? It probably wouldn't, even though Carol Bartz would look very hip acquiring Foursquare. Maybe she could change her title to "Mayor." Although if the deal didn't work out, she'd surely be ousted.
Enticing as that would be, this is more likely a ploy by Foursquare's money people to drive up the company's valuation even further.
The reaction to the possible deal on Twitter last night was mostly negative:
"Foursquare would immediately become uncool"
"Noooooooooooooooooooooooooooo"
"Bad idea"
"Buying Foursquare will not save Yahoo"
"Will get lost in the shuffle"
"If Yahoo is buying Foursquare I won't use it anymore, I'll switch to gowalla"
With this many naysayers, maybe a contrarian play does make sense. Location is hot. Mobile advertising has huge potential. Yahoo has a void to fill. And what's $100 million for a less-than- one-year-old startup?
After all -- it is 1999, isn't it?
— David Vellante spent 15 years at IDC and is a founder of The Wikibon Project. He can be reached on Twitter at @dvellante.
Take a look at Foursquare's privacy policy. It's not bad as privacy policies go but there are definitely some loopholes that are somewhat beyond the control of your privacy settings.
That's a riot. I remember the first time one of my blog posts hit the Digg home page. Our site was innundated with traffic - like tens of thousands of visitors in a very short timeframe. The hosting company said it was like a denial of service attack.
I think it's not really fair to say that it would be an invasion of your privacy. If you're offering the information voluntarily, then it's not an invasion, and it's not privacy.
I don't 4SQ-friend people I don't know, and I don't usually tweet or otherwise publicly share updates. The only people who see where I am, at least in real time, are my friends, and that's only if they set their phones to send them updates about my check-ins, and I doubt any of them do that. Although, who knows... it doesn't bother me if they do. And 4SQ also allows you to check-in "off the grid," so that you get credit for it in the system, but nobody can tell where you are.
I think it's fun to check in at places I frequent, see if there are any tips about that place in the system, see if there are any other 4SQ users there at the time, see if I actually go there more than anyone else, etc.
But some business are starting to offer incentives to customers who check in there a lot, and others are using 4SQ to advertise to customers who check in at nearby locations. And this is just the tip of the iceberg.
As for how many businesses have a presence in 4SQ... well, I live in NYC, which, being a place full of people who work in online media and other technology, is one of the biggest centers of 4SQ use, so my sampling is admittedly biased. That being said, the answer to your question is that in my experience, 100% of locations are registered on 4SQ. Yes, that's right, 100%. And that includes many non-business locations such as parks and bridges, and also places that are not brick and mortar businesses, like office suites for publishers or advertising agencies.
4SQ has a huge, enthusiastic following. Like many other emerging platforms, it's seen as marginal by a lot of people, but that's going to change. Quickly.
As an enthusiastic user of Foirsquare, can you plese share with us what has incentived you to become a fan of forusquare? I'm still struggling to come to terms with what I stand to gain other than a few bragging rights and a masive invasion to my privacy. How many businesses have a presence in 4SQ?
I'm an enthusiastic user of Foursquare, and I have great confidence in its future and viability. I realize that many people don't understand its usefulness yet, but that's because it's in its early stages. Before long, it won't be just a game; users will be incentivized; and businesses will be incentivized to encourage it.
I absolutely think it's worth $100 million. But that doesn't mean that Yahoo is the right company to buy it. Really, a wise investor in 4SQ would just give them the funding they need and encourage them to go full steam ahead on the track they're already on. 4SQ is hardly floundering around looking for a model. They know what they're doing, despite the fact that many non-users clearly don't.
But could Yahoo be a more or less silent partner, a benevolent owner? They seem to have more or less done so with Flickr, which doesn't seem to have changed much since that acquisition. But Flickr was already doing what it was supposed to do. Foursquare needs to continue to grow and innovate and break new ground. I have never worked at Yahoo, but my gut tells me that it's not the kind of company where you get used to hearing "sounds great, let me know how it turns out."
You expressed so well the main rationale of Foursquare when you said:
"I would infer that this particular app is intended to sell advertising by pulling businesses in to try to attract customers when they are in the area. For the advertiser, it could then function like the coupon generators that appear right above a product in the supermarket".
Even though the consumer may get a few benefits like discounted prices and other bragging right, I believe the avrefage consumer stands to loose more in terms of safety than whatever benefits that can be gain from using the service.
But why is Yahoo even contemplating of buying Foursquare? Have they seen something ahead of the curve that we may not have seen yet?
Yes, I suppose someone could constantly update his/her status on Facebook with "I'm now at ---" or "Currently shopping at --," etc. Some people seen to use Twitter to broadcast their every move. Personally, I do not find it very interesting reading. Still for some reason, the most banal status updates -- like a remark on the weather, for example -- tend to draw more comments on Facebook than a remark with a real thought to it. I would infer that this particular app is intended to sell advertising by pulling businesses in to try to attract customers when they are in the area. For the advertiser, it could then function like the coupon generators that appear right above a product in the supermarket. If you can use the coupon right at the point of purchase, you are more inclined to buy the product than if you get a coupon at home, stuff it into your purse, and, possibly, forget about it when you are standing in front of the product.
It is a location based social networking site. Just like Facebook, you build your profile and then regularly post updates on the number of time you have been out of town. Here is an example of Foursquare profile
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I had the opportunity recently to meet with Jeff Kubacki the CIO of Kroll, a global risk management consulting firm and a unit of Marsh & McLennan Companies with more than 50 offices worldwide. Kubacki has been the CIO of Kroll for about three years and seems to have a good process for aligning IT strategy with business priorities.
At Twitter’s Chirp developer conference last week, the company confirmed that Twitter has more than 100 million registered users, 300,000 new users per day, and 180 million unique users per month. So I guess it’s inevitable that Twitter would finally start to “grow up.”
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