Foursquare: a cautionary tale
Yesterday at one of my International MBA classes at the IE Business School in Madrid we discussed the unhappy story of Foursquare and how difficult it can sometimes be to turn an interesting idea into a moneymaker on the internet.
Foursquare’s is a cautionary tale: in 2000, founders Dennis Crowley and Alex Rainert launch Dodgeball, a checkin, or location-based social networking provider for cellphones. Users texted their location to the service, which then notified them of the location of friends and interesting venues nearby. This was an idea ahead of its time, particularly in the pre-smartphone world without GPS, social networks or app stores. But despite the limitations and its appearance amid the dotcom fallout, Dodgeball attracted users in some 22 US cities, and was finally bought by Google in 2005.
But Google’s interest lay in mapping the then nascent social networks and in developing cellphone platforms, rather than investing in Dodgeball and getting people to use it.
As a result, the company was dispatched to the equivalent of a basement office, an experience Dodgeball’s founders described as extremely frustrating, and the company then cannibalized it to develop Google Latitude, which it in turn abandoned in 2013, adding it as a function to Google+. In 2007, Crowley and Rainert left Google, with the former taking advantage of California’s non-complete clause legal get-out to team up with Naveen Selvadurai to clone the idea. The result, now in a world where smartphones were equipped with GPS and app stores were spreading rapidly, was called Foursquare, and was an initial success.
But Foursquare didn’t make much money. In many ways the idea was a pioneer in terms of gamification, whereby users compete with friends to become mayors, top the leadership board and obtain badges, insignias awarded after accomplishing certain tasks. Foursquare’s popularity led the company to create the best collaborative map of the world that included all kinds of restaurants, bars, shops, etc, in many cases on the basis of recommendations and advice, along with many problems that were progressively ironed out by the owners or site managers. In New York, the city where the company was founded, there were any number of promotions and discounts linked to the app’s use, which suggested the makings of an interesting business model, but that the company was never able to extend to other places to the same degree.
Foursquare was even able to see off Facebook Places in 2010, which even went so far as to use a logo that indirectly referenced the company: a number four inside a square, but despite Facebook’s huge resources, it was never able to match Foursquare’s appeal, and it was shut down a year after its launch.
Meanwhile, Foursquare stumbled on, overcoming financing difficulties along the way, but never quite developing a business model that worked properly, although its API was used by more and more companies to provide one of the most up-to-date maps in the world. But the whole gamification thing was just about at the end of its lifespan, with many users admitting that they were bored with it and steadily relegating their activity to special occasions. Finally, after struggling to garner more financing, the company decided to transform Foursquare into a recommendation application, creating Swarm to continue to take over checkin duties.
The result, according to most analysts, was a nightmare. The new-look Foursquare, now without Naveen Selvadurai, entered an environment where it faced ferocious competition from companies backed by the big boys, and while its own users grew increasingly frustrated at not being able to make their own checkins, and in many cases responded by refusing to install Swarm or by not passing on their habits to a new app. Apps store users give Swarm a very low rating, opinions are devastating, it is unpopular, and the outcome of the decision to hive it of was clearly very, very mistaken.
In record time, Foursquare has managed to alienate a large proportion of its users, has been uninstalled from a great many smartphones, has suffered reduced activity, and is constantly criticized by analysts.
And the moral of the story? It isn’t easy to get people to use and stay with an app. If you have managed to do so, bear in mind the factors that could have contributed to this, and keep your eye on them. It would appear that Foursquare’s initial success and value proposition was based on a combination of gamification and recommendations; but on their own, they seem unable to stand up in their respective highly competitive markets. Achieving the fine balance between “if it ain’t broke don’t fix it” and the perceived need to “do” something is very difficult, particularly if you want a business model and use levels that make sense. It would seem that Foursquare has signally failed to achieve that balance.
(En español, aquí)
