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How Foursquare Can Steal Local from Twitter

Foursquare, a hyperlocal where-to-go app for smartphones, announced they'd be opening business accounts earlier this week, potentially beating Twitter to a rich revenue model. But Dennis Crowley, Foursquare's founder, says he's not charging businesses to run promotions using Foursquare—at least not yet. "We don't have any near term plans to charge," he says, "but it's possible for the future. At this point, we're just excited that people are using it this way."

Foursquare encourages you to visit local businesses by keeping you apprised of specials, and it tracks how often you visit places nearby. Some businesses have been unofficially rewarding repeat customers—when someone shows them their iPhone, proving they've visited 10 times, for example, a bartender doles out a free drink. Foursquare for Business will make the process official.

"We saw venues posting things on their Twitter accounts—some kind of discount for regular customers," says Crowley. "So we reached out and asked what kind of specific promotions they'd want to run. We're really just formalizing the process."

As Foursquare for Business takes off, the three-person company will begin exploring ways to do sponsored promotions. "There are a whole bunch of different monetization possibilities," says Crowley. "A company like Coke or Starbucks could have batches of events, and attending them 'unlocks' rewards."

To get businesses involved, Crowley is encouraging users to act like a crowdsourced sales force. "Most businesses find out about [Foursqare] because some wise-ass user makes some comment like, 'I'm the mayor of this place, I should get a free drink." ("Mayor" is the Foursquare designation for a business' most frequent visitor.) "Our users then come back and tell us which businesses are interested." After that, Crowley says, he reaches out to the business to set up a relationship.

"There's a real lack of localized tools for attracting customers," Crowley says of the small-biz mobile landscape. "And there aren't a lot of tools for bar owners and restaurants." Should Foursquare use its head start to rope in local ad dollars, they might grow even faster than planned; right now the app works in 22 cities around the world, with Canadian and European cities in the works.