A lot of people are debating Foursquare’s valuation after they announced a new 41 million dollar round. It’s long term mission and value is something way more than whatever you could come up with today. I think it’s a moot point: Foursquare is a priceless company. Here’s why:
“What Google built to drive you to what you want in the online virtual world, Foursquare is building in the offline real world.”
Offline commerce is still bigger
We love to talk about online and e-commerce, especially with the meteoric rise of companies such as Fab.com and being able to buy anything with Amazon. Online commerce is only 5% of commerce, when compared to offline commerce and spending aka the other 95%. No one has dominated building a technology to help people find a way to spend the remaining 95% of dollars offline and I think Foursquare is it.
Legendary companies drive traffic
Google became a monster because it worked as hard as possible to take you away from Google.com to another site on the Internet. Amazon is the number 2 spender on Google’s adwords in order to drive online traffic. Foursquare is doing exactly what Google did for online commerce, just in offline commerce – driving more “foot traffic”. Only difference is that Foursquare is doing it in a market that is 19x the size of online commerce.
Foursquare’s strategy of becoming the location layer for the Internet is also a similar strategy to what Google did by being the search layer and putting its search boxes on third party sites all across the Internet. It’s places data is used in apps like Instagram. Its location layer strategy in getting inside of third party apps for data is no different than what Google did with site search many years ago.
The checkin is the Trojan horse, discovery is the war inside the gates
Everyone categorizes Foursquare as a checkin company. I get the image portrayed by the public that not everyone wants to checkin and they’re right. Not everyone wanted to or wants to create video, but that worked out well for YouTube. UGC and content sites need a 1% of critical mass in order to create content and data. The first few years, the checkin let Foursquare collect billions of points of data to create the ultimate discovery service and driver of offline foot traffic. This is obvious in their new release. The checkin was the trojan horse and now Foursquare is using local discovery as the way to dominate the war behind the gates.
Foursquare is the leader
Remember Facebook Places or Gowalla? Nope. You have to believe that if software is eating the world, then there will be software that does for online foot traffic what Google does to drive online drive. If you were to make a bet in the space, you would want to bet on the leader and that hands down leader is Foursquare.
I may look back on this post in a few years and be completely wrong, but that’s the beauty of our business. It’s a risky bet, but I believe in the product and in the team. My gut says they’ll pull it off.
PS – YellowPages, the original driver of traffic for offline commerce, is estimated to do 22 billion in revenue in 2015. Think on that for a second. 2015. Yellow Pages. Still going to do 22 billion in revenue.
Disclosure: We share some similar investors. I have no inside knowledge about the company or have any deep personal connections into the management team. I just love the company and the product beyond belief.