FourSquare Worth 125 Million Dollars?

Posted: April 18th, 2010 | Author: Julio Hernandez-Miyares | Filed under: Mobile, Startup |

Of two minds when I read the press about the apparent bidding up of Foursquare , a barely 1 year old New York City startup in the Location based products arena. Of course, as a principal in my own mobile based startup Jittr , it gives me that added inducement to keep on plugging away long hours and potentially breakout in the same manor. I am a heavy user of Foursquare, being the proud mayor of 10 establishments and growing. On the other, incredulity sets in. Where is the inherent value that would drive such an inflated valuation? Given the names such as Yahoo or even Google that are apparently interested (and throw in AOL though restricted from acquisitions over $100 Million for the moment), big companies with to much money $$$ and time on their hands come to mind.

Here is the essense of Foursquare. It is a Location based gaming platform where one “checks in” to establishments one visits, say your regular early morning visit to Starbucks and score points for visits depending on varying factors such as how many in one day, how widely widely distributed over the course of the day. Enough visits to one establishment over time has the potential to reward you with the Mayorship of that establishment Badge. Of course it is not a solitary game as you are competing against all other active games who may be checking into the same places you are.
The well done integration with the large social networking sites such as Twitter and Facebook provide the vehicle to be constantly broadcasting to a much wider audience your whereabouts and your game scores and achievements including Mayorships and “Badges” procured.

I personally use Foursquare primarily from my iPhone but from time to time from my Android powered Droid phone. It is meant to be a smartphone accessed application though it has a relatively austere Website.
From a technology point of view, it is quite simple, leveraging the GPS that all smartphones now provide to surface coordinates (latitude and Longitude) which drives a Web Service search to establishments/places nearby from which you can then choose the actual one you are visiting. If the list of nearby venues does not include the one you are at , you can add it via the application and then check it. All of the above usually can happen during the short time you are on line picking up a cup of coffee at your neighborhood Starbucks or Dunkin Donuts. I strongly suspect they have licensed a feed of venues from one of the few listings aggregators ie InfoUSA, Axion plus they provide the ability of adding your own venue. This broadens the venue pool to those non retail locations such as Parks, subway stations, your own home. For instance, I am the mayor of Jittr Headquarters and I have regularly checked in at the 68th street number 6 subway station in Manhattan which is next to Hunter College in New York City.

These large companies that are ostensibly interested in Foursquare would have the wherewithal to develop their own application with identical functionality in little time measured in 2 months at most. Since they already probably license the same data (save for those individually added places) the incremental costs of licensing content would be negligible at most and since they already possess Social networking products, you can assume the right integration would bring with it the necessary pool of potential users immediately. Though Foursquare is the leader in this location based gaming at the moment and I have heard of about 1 million registered users, that still pales in comparison to Twitter’s (50 million registered users) or Facebook’s (half a billion) making the space still open as no one has a significant user base that gives it the momentum of true breakout and uncatchable leader.

Then why the inflated values being talked up in the Trade Press? I will go into that after a word from our sponsors…