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Rather Than Share Your Location, Foursquare Wants to Suggest One

Source: foursquare.com

Two years ago, Foursquare was the star of the New York start-up scene. Celebrities and major brands embraced its mobile app, and companies like Facebook and Yahoo were eager to buy it.

Foursquare’s founders turned down those offers, convinced of its potential as an independent company. Since then, the buzz around Foursquare has cooled and growth has slowed, leaving it in the position of having to prove that its decision was the right one.

On Thursday, the company is expected to announce an overhaul of its application — one that Dennis Crowley, the chief executive and one of the founders, says is the truest vision of Foursquare, turning it into a recommendation service that could rival sites like Yelp.

But Foursquare must contend with the short attention span of mobile app users. Its efforts show how hard it can be nowadays for start-ups to sustain their early momentum and chart a course to mass-market success in such a rapidly changing industry.

“The nature of this game is that there is another idea or technology around the corner,” said Susan Etlinger, an analyst at the Altimeter Group who advises companies on how best to use technology. “Companies capture the public imagination. They become the center of attention. But it is very difficult to continue to offer an intriguing and valuable enough service for people.”

At its core, Foursquare lets people share their locations with friends, with spontaneous social gatherings in mind or just for sharing’s sake. There are game elements, too, like points for “checking in” at a new restaurant. That DNA will not change in the new version. But the focus is shifting to an “explore” button that gives users suggestions on where to go, based on information like the time of day, the popularity of nearby places and past check-ins.

For example, someone who habitually checks into bakeries will see more places in that category than someone who prefers barbecue joints.

“People still think about us in terms of points and badges, which still works as a way to bring on new users,” Mr. Crowley said. “But the bigger point is to take the rich data we have about how people interact with their location and turn it into recommendations.”

Mr. Crowley said that since 2009 the company had collected more than two billion pieces of data about where its 20 million users like to go and when. It can use that data to offer insights about particular venues, like letting a user know if a favorite restaurant seems less busy than usual, and therefore more appealing for dinner that night.

“This is our first stab at what we think you’ll find interesting,” Mr. Crowley said.

Foursquare has yet to generate any significant income, and Mr. Crowley would not offer specifics on how the emphasis on recommendations might help it do so. It is not hard, however, to imagine that merchants could pay to be highlighted among the recommendations.

Much is riding on the success of the new approach. The number of active Foursquare users grew 750 percent in the year ended in April 2011 and 135 percent through this April — still strong growth, but far from the exponential rates of other social services like Instagram. Roughly one million new users are signing up each month.

The company says its app’s basic check-in function has become less popular, with users more often just looking to see what their friends are doing, or searching for information about bars and restaurants.

“Foursquare had a hook that drew people in, but it needs to go beyond being a feature to being part of the fabric of the consumer experience,” said Ray Valdes, an analyst with Gartner who covers mobile and the social Web.

As the company has matured, it has also lost employees, including Tristan Walker, the head of business development; Chrysanthe Tenentes, the company’s first community manager; and most notably, Naveen Selvadurai, its other co-founder.

Mr. Selvadurai left Foursquare in early May, saying on his personal blog that he wanted to do something new.

Mr. Crowley maintains that the departures were part of the normal growing pains for a start-up expanding from a handful of employees in 2010 to 120 now, and offices in New York, San Francisco and London.

Mr. Selvadurai was pushed out so that more experienced executives could shape the future of the business, according to a person close to the company who asked not to be identified because the person was not authorized to speak about the turnovers.

Foursquare also faces fiercer rivals than it did a few years ago. The local advertising and deals market has heated up as Facebook, Google, Twitter, Yelp and even Groupon have begun to focus more heavily on location-based offerings. The redesign places Foursquare much more squarely in competition with those big names, making it all the more crucial that the company hit its mark.

Ms. Etlinger of Altimeter notes that so far no competitors have really managed to take the wind out of Foursquare’s sails. And many of Foursquare’s early competitors, including Loopt, Gowalla, Whrrl, Brightkite and Hot Potato, have disappeared, either folding their businesses or shutting after being acquired.

Mr. Crowley was reluctant to put a date on when the private company would turn on features that could generate profits, saying the start-up had “two to three years worth of runway,” meaning it has $72 million in venture capital in the bank and does not have to worry for now.

Foursquare has been flexing its ability to use its data for the benefit of corporate partners. American Express, for example, lets cardholders tie their accounts to Foursquare and redeem coupons and points at some stores and restaurants when they check in and pay with the card.

Mr. Crowley said those kinds of collaborations were just the start, pointing to potential tie-ins with car navigation systems and new kinds of mobile devices.

“We’re primed to take advantage of the next technology that matters,” he said. “What if we can be the data layer that powers all of those services?”

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