A Start-Up Matures, Working With AmEx
When the New York start-up Foursquare Labs made its debut in 2009, it quickly began popularizing the idea of “checking in,” or using a cellphone application to tell friends that you are at a particular restaurant, bar or park.
Then Facebook and Google borrowed the concept — and even the term check in. Analysts and users alike wondered if those Internet giants would squash Foursquare like a bug.
Thus far, it seems, Foursquare is holding its ground. The company said this week that it had hit 10 million registered users, though it would not say how many of those are active.
And on Thursday, Foursquare plans to introduce its largest partnership to date: a national deal with American Express to offer discounts to cardholders when they check in on their cellphone at certain shops and restaurants.
Foursquare users are accustomed to receiving awards in the form of coupons and digital merit badges. But more substantial deals like those being offered to American Express cardholders may bring Foursquare and other location-based services further into the mainstream.
These services have been slower to catch on among people who do not live in dense urban areas like Manhattan, where encounters with friends are often just a cab ride away.
In May, the Pew Research Center found that only 4 percent of American adults use such services to share their location. Companies like Foursquare are turning to deals as a way to make their offerings more appealing to those who may not want to meet up after work for a drink but would be interested in getting a deep discount on sneakers.
“In 2010, it was all about the check in,” said Noah Elkin, a mobile industry analyst with eMarketer, an advertising and marketing firm. “Now, it’s about checking out.”
Although Foursquare will not be receiving any revenue from the American Express deal, it says the promotion will help legitimize the company’s approach and will help attract other, more lucrative partnerships.
To start, American Express will offer deals at Sports Authority and the clothing retailer H&M, along with a few restaurants in New York, like Union Square Cafe and the barbecue joint Blue Smoke. For example, shoppers who spend $75 at H&M will receive a $10 credit to their American Express accounts. Those who spend $50 at Sports Authority will get a $20 reward.
Edward P. Gilligan, vice chairman of American Express, said the national rollout came after a test run in March at the South by Southwest music and technology conference. On average, those in the program spent 20 percent more than American Express cardholders who did not have access to the special deals, Mr. Gilligan said.
“We’ve always done marketing with merchants to make offers to our card members, like send offers through direct mail, put information about sales on the Internet,” he said. “But those response rates tend to be low.”
The test version of the Foursquare tie-up brought a “higher response rate than anything else we’re doing,” Mr. Gilligan said.
American Express also hopes that by pairing with a start-up that appeals to the hip and technologically skilled, it can appeal to a younger crowd.
“We don’t tend to skew under 35,” said Mr. Gilligan. “We hope this will help us stay relevant to younger customers.”
He said the company elected to team up with Foursquare instead of Google or Facebook because Foursquare already has a widely accepted loyalty system that rewards heavy users.
American Express may work with other companies in the future, Mr. Gilligan said, although he said he was confident that Foursquare would be the company’s focus for awhile. “The whole point is for us to find our customers where they are already active,” he said.
Dennis Crowley, the chief executive and one of the founders of Foursquare, attributed its continued momentum to its singular focus on location. “When people think about Facebook, they think about it as a place to send their friends messages or post updates, not necessarily as a place to check in,” he said. “We’re associated with one thing, location, and that really helps.”
He also said that the American Express partnership was a sign that Foursquare, which now has roughly $21 million from investors and more than 60 employees, was maturing. “We started out offering coupons for Tasti D-Lite and other smaller deals, and now we’re introducing deals to the millions that use American Express,” he said.
Foursquare is growing faster than similar start-ups. Gowalla, another check-in service based in Austin, Tex., has about one million users, whileLoopt, a rival mobile location service, has more than five million.
Google says its Latitude service has 10 million users who were active in the last 30 days, though that includes people who used it on PCs.
Malorie Lucich, a spokeswoman at Facebook, declined to say how its location-based service, called Places, was faring. In the past, the company has said that more than 250 million people were using its mobile application, though it has not offered specifics about the location service.
Analysts say the ability of such services to offer shoppers customized deals will become more valuable as the daily deal and coupon market becomes ever more cluttered.
“If you look at LivingSocial and Groupon, they put out a lot of offers, but they are random,” said Madeline K. Aufseeser, a senior analyst at the Aite Group, a research and advisory firm focused on the financial services industry. “You might be a man and constantly getting offers from beauty services you don’t want.”
Partnerships like the American Express one, she said, will appeal to merchants because the pitches are aimed at those who will actually use them. In addition, businesses that work with Foursquare and American Express will be able to abandon paper coupons or even the need to scan their phone’s screen at a terminal. The rewards will be tallied behind the scenes with each swipe and tap.
“There’s a whole new industry evolving around delivering more sophisticated, geographic-based offers,” she said. “It’s only going to get a lot more powerful.”