It’s always a problem with these social media-type sites. Where’s the money? The model is usually one of building up a large base of users then either introducing advertising and/or selling it for a gazillion dollars to some big internet company (probably Google, or maybe Yahoo).
So far Foursquare, the social media location site, has relied largely on VC funding. Their only revenue has been in making deals with major brands, such as Conde Naste and Mark Jacobs, but they aren’t exactly raking in the cash. “Some are paid, some are exploratory,” as co-founder Dennis Crowley put it. So, we’re not talking large sums of money. This summer their business chief Tristan Walker said: “We could imagine something akin to a Google AdWords-like model, where merchants can have featured placement based on latitude and longitude, time of the day, or day of the week, we’re still exploring, and encouraging all retailers to get on our platform and help us find the product that we could actually charge for.”
The problem is that in spite of some successes with the likes of Starbucks and Dominos, the check-in offer is only known to just a few percent of people who use Foursquare. Why would retailers pay to be on something with such a tiny reach? In the meantime, Facebook Places is establishing itself. If anyone was going to benefit from brands paying for check-in offers it is likely to be Facebook.
Now, Foursquare are taking a new approach. Merchandising. I realise that it isn’t a serious long-term revenue model but hey, at least they can make some money now. They are selling badges and t-shirts of their famous icons which they hope their obsessive users will buy. In a way that makes sense. I’d previously blogged that Foursquare isn’t really social media at all. Yes it has those elements in the system, but when I look at how people use it, they don’t login to see what their friends are doing or make new ones. People use it largely to compete for mayor status and other badges. It’s not social media, it’s a game. Given that kind of engagement getting into the merchandising business is not a bad idea at all.
For those of you who can’t live without their Mayor’s T-Shirt, here’s the store.