Crowley's rebuttal and more signs of life at Foursquare

By Michael Carney , written on March 23, 2015

From The News Desk

My email inbox and Twitter have been buzzing all morning with alerts from friends and colleagues about Dennis Crowley’s latest blog post on Foursquare, “Six Years In.” (For those of you who sent it through, thanks. For those who haven’t, rest assured, I’ve seen it.)

You may have read my recent assessment of what I called the "sad" evolution of Foursquare since it split off the Swarm check-in product in Summer 2014. Some took that post as an early obituary of Foursquare, the company. It certainly wasn’t rosy, but it was hardly meant as a prediction of death. Pointing out missed opportunities and a disappointed user community? Maybe.

What I hoped to convey was a nostalgia for an era gone by when Foursquare felt alive and like the home of a community with which I enjoyed engaging. It was also a cautionary tale for entrepreneurs considering “unbundling” their platforms and an outline of some of the previously non-obvious challenges involved in such decisions. Maybe it was even a commentary on the risks of companies being the subject of enormous expectations too early in life.

To be perfectly clear, I still think Foursquare has value to users, to merchant and platform data partners, and to possible acquirers. I just don’t think the company is living up to its early billing as one of the greatest consumer companies of its era, or delivering on its promise to be the “location layer of the internet,” to borrow Crowley’s words. Perhaps most importantly, I don’t think the company is in a strong position to raise its next round of funding or facilitate an exit on terms that would be viewed as successful, given the company’s funding history and market expectations.

From that vantage point, I was thrilled to read Crowley’s update this morning, which I could only characterize as confident and optimistic. Good for him, and good for Foursquare. I would expect nothing less from a leader of his caliber. It was the same feeling of “well played, now prove it” that I got when I read Ev Williams’ rebuttal to Sarah Lacy’s takedown of the too-nice Twitter founder and his latest media venture, Medium. That doesn’t mean I don’t still believe Foursquare is in a difficult position.

I absolutely agree with Crowley’s assessment that Foursquare is sitting on some extremely valuable technology and data around real-time location and places. He writes:

“There’s a reason that we’re one of the only companies doing proactive and predictive local search and firing off contextual notifications — it’s hard. And we’re one of the few companies on the planet with the team, technology, and data to pull it off.”
Where I’m not sure I agree is with the notion that Foursquare no longer needs to have an active community of users engaging with the app – via checkins or otherwise – in order to retain and continue to grow that underlying value proposition. Foursquare’s core greatest asset is what Crowley describes as, “the world’s most accurate place database.” But that database is the result of millions of individual actions – checkins, tips, and photos – taken by end users daily in its app over the last six years. Judging by every bit of empirical and anecdotal evidence I can gather, this activity – particularly non-passive engagement – has dropped off precipitously since the Swarm-split. I may be wrong, but my gut tells me I’m not.

Foursquare has sought to automate much of this activity by keeping its app running in the background as its users explore the world. By pinging these mobile devices throughout the day, the company maps its users’ movements and destinations, recording the places they visit and with the goal of recommending new places nearby.

Putting aside any privacy concerns, my contention is that this passive engagement is not nearly as valuable as the active variety that earlier versions of the Foursquare platform encouraged. It’s one thing to know that I stopped into a particular restaurant for 65 minutes on a Tuesday afternoon. It’s another for me to open the app and leave a tip about what I liked and what I didn’t. It's also another for me to leave what previously functioned as a virtual invitation for fellow Foursquare friends to join me at this restaurant. I’ve always felt that the latter types of engagement are far more likely to happen when users are opening up the app for the majority of places they visit, not just the few and far between cases where their aim is to discover something new. Similarly, if users view Foursquare as a community – particularly one of offline friends – there is far more incentive to engage and contribute value in the form of location sharing and recommendations. And, to get tot he bottom line, more user engagement and richer date means more opportunities for Foursquare to monetize its platform, either through ads or licensing its data, or otherwise.

Foursquare may not feel it needs this sort of deliberate activity today. As Crowley noted, the company has already chronicled “65,000,000 places that exist in the world,” and collected 250,000,000 photos and 70,000,000 tips. But it’s not the first company to assemble places data, nor will it be the last. But places change, more often than you might think. Foursquare’s advantage has always been that it has the most current places database with information on the most popular and topical destinations. This has been the case because it encouraged frequent engagement from users. In a passive engagement model, this advantage begins to erode. And then Foursquare becomes more akin to Yelp on the local discovery front and to Locu (GoDaddy) or Factual* as a provider of generic platform data.

The occasion of Crowley’s latest blog post was a data partnership with Twitter that will see users of the 140 character social network facilitate their check-ins using Foursquare data and places. This, and similar partnerships with Microsoft, Pinterest, Waze, Flickr, Samsung, Citymapper, “and thousands of others,” per Crowley, should help the company augment some of the losses in active engagement among first-party users of its platform. Whether it will be enough to keep the company as a category leader remains to be seen.

Crowley told Fortune, in relation to today's announcement, "Local search monetizes so well, we can be a successful company with a fraction of the users that Twitter and Facebook has (sic)." But Foursquare investor and Andreessen Horowitz founder Ben Horowitz reminds readers in the same piece that the company has plenty of work left to do, saying, "They’re not a billion-dollar company yet. But I think they’ve got a lot of ways to get there.” That's been the bottom line with Foursquare for several years now: they're not quite there, yet, but they're close. Six years in, it's harder to get excited about "close."

As I said in my original post and in subsequent tweets to Crowley and others, I hope that Foursquare turns its existing assets into a sustainable and highly valuable business. It would be good for consumers, good for the global and New York the startup communities, and good for Crowley, the company's employees, and its investors. Foursquare has the building blocks. Whether the path the company has chosen to leverage those existing assets is the right one is up for debate.

To be sure, no one knows the real-time location and local discovery space better than Crowley at this stage – he’s been tackling this set of problems for more than a decade already – so there’s every possibility that I’m missing something. But, again, my gut tells me otherwise.

[*Disclosure: Michael Carney has accepted a position as an associate at Upfront Ventures that begins in April. Foursquare competitor Factual is an Upfront portfolio company. This post went through Pando’s usual editorial process.]

[Disclosure: Andreessen Horowitz (A16Z) is an investor in Foursquare, and A16Z partners Marc Andreessen, Jeff Jordan, and Chris Dixon are personal investors in Pando. Pando Investors SV Angel and Crunchfund are also investors in Foursquare.]