Location

Microsoft and American Express are reportedly competing to make a strategic investment in Foursquare, the former check-in star hoping to become the “location layer for the Internet.”

It’s clear how Foursquare, which is said to be in talks with other companies and investors who participated in the $41 million round it raised in April, might benefit from such investments. Foursquare CEO Dennis Crowley wants to prove that the service, which began as a highly gamified check-in service launched at SXSW, “isn’t a toy” and that it’s “going to change the way we interact with the real world,” and that’s going to require capital.

Microsoft’s interest in the deal, however, probably goes far beyond the desire to own equity in a startup that made just $2 million in 2012. Instead, it would likely invest, because Microsoft recognizes location-based data’s increasing importance to modern computing.

It would hardly be the first company to have such a realization.

Google has been focusing on location-based data via its products — Google Now and an ever-changing Google Maps key among them — as well as its intent to acquire Waze, a social mapping startup, for $1.1 billion. Apple introduced its own, admittedly-flawed mapping product in 2012 and has been rumored to be partnering with Foursquare since last December.

Now it’s Microsoft’s turn. The company has been hard at work on improving the entire Bing suite, which includes Bing Maps, and making it an integral aspect of the company instead of an also-ran software suite. Investing in, or partnering with, Foursquare could allow Microsoft to better compete with Apple and Google as location-based data becomes more important to the way people use their smartphones, tablets, and the Web.

Bing Maps is frustratingly limited right now. For example, I just did a search for Grimaldi’s, a famous pizzeria that both Google Maps and Apple’s mapping service found, and got nothing. Another search for a local restaurant worked fine in Google Maps, but the only result in Bing Maps was for a seemingly-random location in Italy.

And those are just simple searches. What if you wanted to learn more about the restaurant? Google Maps displays a Zagat score and short reviews for many locations; Apple has partnered with Yelp to bring a similar feature to its mapping service. Bing Maps provides a phone number — assuming it finds what you’re looking for, anyway.

Foursquare’s location data might help mitigate those problems. (It certainly couldn’t make them any worse.) Foursquare doesn’t just know where many restaurants, landmarks, and attractions are — it also knows how often people check-in to them, which might be a better quality gauge than a befuddling review or unchanging point-rating.

Perhaps Foursquare could, at the very least, help Bing Maps differentiate between its ass and a hole in the ground.

[Image via Flatrate.com]