Foursquare, please don’t become the next company to write a blog post on why you had to sadly wind down.
Let’s face it, Foursquare is struggling. While some might sing the praises of the latest “strategic partnership” with Microsoft, this is really just a last ditch effort to jumpstart monetization for a company which is saddled with a declining, but still unreasonably high valuation, is bleeding talent, and is led by a visionary founder who just can’t seem to come to grips with the fact that he is running out of time.
Yes, they have finally realized that no one really cares about “checking-in.” They have built a very pleasant user experience within the app, and have an amazing set of developer tools, used by some of the largest companies in the world. Unfortunately, this has not amounted to finding true product-market fit or a sustainable business model.
Instead, they have been forced to cobble together one-off deals — like the Microsoft investment — to show even the slightest bit of revenue, while continuing to tow the line around the promise of building the “location layer for the internet.”
Ultimately, this monetization pipe-dream can only last so long and, going forward, will not be enough to justify further funding for a company that was very publicly put on notice by being forced to raise a convertible debt round in early 2013.
Where does that leave us? Foursquare needs a soft landing soon. Yes, this might not be the $1B exit or IPO that was once thought possible, and some of the later stage investors might take a loss on their investment, but what they have built is valuable and should not be lost.
So, who should make the acquisition? A strong case can be made for:
- Google, which could use Foursquare to push forward initiatives like its MMOG, Ingress, or breathe new life into Google+.
- Facebook, which has struggled to gain momentum with Places and is increasingly “crafting new apps to support the diverse ways people want to connect and share” through Creative Labs.
- Apple, whose mapping efforts have been a total fail to-date.
- Microsoft, which needs to find any way to make itself relevant again (although this begs the question why they didn’t just acquire Foursquare now — maybe they think they can get better price within a year….).
- Square or Paypal, which could use Foursquare’s data and user base to increase the value proposition of their payment platforms for both merchants and consumers.
However, there is one company that stands to gain the most out of an acquisition of Foursquare: American Express*.
The opportunity and benefits for AmEx:
- Consumer Facing Applications. While AmEx is great at a lot of things, it does not possess a core competency around creating consumer facing apps and online experiences. Integrating Foursquare into the AmEx platform, while allowing them to run independently, much like Instagram and Tumblr do at Facebook and Yahoo, respectively, would put AmEx in a perfect position to stay ahead of the curve as mobile banking, and the mobile trend in general, continue to gain steam.
- Familiarity. A relationship already exists. Further work could easily be done to bolster integrations such as Amex Sync and efforts like OPEN Forum.
- Talent. There is an enormous land-grab happening now for talented engineers, developers, and designers. Acquiring Foursquare would provide AmEx with an immediate injection of proven talent in each of these disciplines; the opportunity to learn, first-hand, from an agile organizational structure; and the ability to more easily attract top talent that would otherwise not consider working at a traditional legacy corporation.
- Clean Data (and more of it). AmEx obviously has access to an enormous amount of customer data. However, historically, it has not done a great job of using this data in ways which provide unique benefits to the consumers or merchants that use its service. An acquisition of Foursquare would allow AmEx to easily jump into the recommendation game (imagine the ability for AmEx to surface in-network merchants), quickly supercharge loyalty programs for merchants, further segment and target user base for a more personalized experience, and even enhance membership reward options for all customers.
- A Cardless Future. As the payment space becomes ever more crowded, and organizations and platforms like Square, Paypal, Amazon, Apple, Dwolla, and even Bitcoin, continue to scale and offer consumers a plethora of new payment options, AmEx needs to think very carefully about how to stay relevant in a world where the physical credit card is quickly disappearing. The addition of Foursquare could jumpstart work on an “Amex Wallet,” and offer merchants a more targeted way to interact with their customers — potentially helping to justify the high transaction fees associated with the AmEx network.
The time is now to capitalize on this opportunity. Foursquare is at a crossroads, but will absolutely be an amazing addition to any company that ultimately owns the dataset it possesses.
While this would clearly be a win for AmEx, an acquisition of this kind would also be a beneficial outcome for Foursquare as well. An enormous amount of wealth would be created for many of the Foursquare employees and investors (much of which would hopefully be reinvested in the NYC startup ecosystem), and the constant media attention/scrutiny would disappear overnight — allowing them to focus solely on building the best product and experience possible. Further, Foursquare would have instant access to tens of millions of potential new users, and would have the distinction of being part of one of the most valuable and admired brands in the world.
I hope both Foursquare and American Express strongly consider this chance to form a partnership that could be so mutually beneficial.
*American Express is currently a client of Undercurrent.
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