Foursquare Partners Up
Start-up Foursquare Labs Inc. has a large user base and a $600 million valuation, but unlike social-media stars Zynga Inc. and LinkedIn Corp., it has a big hole on the revenue line. — Now, the service, which lets users announce their location to friends by …
Context & Ripple Effects
Foursquare arrives at this partnership from a fast fundraising arc: it was shopping for new financing in April 2011 and closed $50M at a $600M valuation just weeks before this deal. The open question both rounds left unanswered was the one the Journal flags directly — unlike Zynga or LinkedIn, Foursquare has scale on the user side but a hole on the revenue line.
Today's move is its first structural answer: per AllThingsD's pickup, Foursquare has signed five daily-deal sites, wiring third-party offers into a service whose core asset is knowing where users are right now. It is a monetization test run on the back of the valuation, not an extension of it.
First-order effects
- Five daily-deal sites immediately gain a location-aware distribution channel — their offers reach users at the moment and place of relevance, which email-blast deal models cannot do.
- Foursquare gets its first meaningful non-venture revenue line, converting check-in activity into a cut of partner deal flow.
Second-order effects
- Deal aggregators outside the founding five now have a reason to court Foursquare for distribution, shifting bargaining power toward whoever owns the location graph rather than the offer inventory.
- Rival check-in and local-discovery services face pressure to strike similar commerce partnerships or concede the 'check-in leads to purchase' use case to Foursquare.
Third-order effects
- If the partnership model holds, consumer location apps with large but unmonetized bases will be judged on commerce conversion rather than ad inventory — the same scale-versus-revenue question Zynga and LinkedIn answered differently.
- Local merchants would gain a second deal pipeline alongside the group-buying leaders, fragmenting daily-deal economics around distribution ownership.
The trend: Location-based social networks are converting real-time presence data into local-commerce distribution deals as their route to revenue, testing whether check-ins can carry a $600M valuation.