Foursquare is an on-the-rise application that blends mobile, location awareness and a clever points system that’s an evolutionary leap for loyalty programs. Think coupons, but with rich data and gaming thrown in.
Dennis Crowley, co-founder of Foursquare and a speaker at the upcoming Where 2.0 conference, cut his teeth on location services at Dodgeball, a mobile/social company that was a bit ahead of its time. Google acquired Dodgeball in 2005 but shuttered it in 2009. Crowley used that early experience — the good and the bad — to shape Foursquare.
In the following interview, he digs into those Dodgeball lessons while also revealing Foursquare’s revenue plans and the “secret sauce” that drives the service.
Unlocking growth with local offers
Mac Slocum: Did Foursquare have a slow adoption pattern at the beginning and then hit a point where growth exploded?
Dennis Crowley: It was super slow. We launched in March  at South by Southwest and maybe picked up 2,500 users. It didn’t take off the way we wanted it to when people got back from South by Southwest, and I think a lot of it was because the product was half-baked.
Things improved in July when we got the iPhone version fixed a little bit and we started experimenting with the specials we’re doing with local businesses. Things like, if you’re the mayor, you get a free cup of coffee or a free slice of pizza. Once we started that, it helped tell our story better. December is when it really started to pick up. The growth curve is absurd right now.
MS: Who is the typical Foursquare user?
DC: We don’t have that in terms of metrics because we don’t collect age or income information. But I can make some generalizations about it, and I think people in the 24-35 age range represent the active user base. It’s younger and social and probably a little bit more urban. But it definitely extends into the suburbs. We see parents with kids using it to connect with other parents at playgrounds. We see high school students using it. We see college kids using it.
Allowing for adaptation
DC: Foursquare was launched almost as a response to Google turning off Dodgeball. Naveen [Selvadurai] and I wanted to build something to replace Dodgeball because there’s nothing else that really works like that. So the initial functionality was built around check-in: you know where people are, and we’ll be able to serve up recommendations.
But then we started thinking about the things you’d want to build on top of that platform. How about little bits of information? Tips about the place that I’m at? Or, let’s use game mechanics to push people to do things they normally wouldn’t do and encourage people to have more interesting experiences.
The game mechanics are the secret sauce. They keep people engaged long enough to see the interesting things that happen when they participate frequently. It’s kind of like with Twitter. If you drop someone in Twitter and don’t give them a reason to participate, they get bored of it really quickly. But, if you spend 10 days with Twitter, you fall in love with it. Foursquare is similar. Spend an afternoon with it, you’ll say: “This is awful. I get nothing out of it.” But as you start to get friends on it and as you check-in at different places, you realize complexities emerge. You see how people are using it and the content they’ve added. The game mechanics hold peoples’ hands through the first 10 to 20 days of the service.
Foursquare’s game mechanics
MS: Can you expand on the game mechanics? What aspects of Foursquare fall into that category?
DC: It’s anything that happens after the check-in. So many of these location services are just about the check-in. That’s the end of the story. But the candy in Foursquare is every time you check-in, you get a couple points for doing something. You can become the mayor of a place if you’ve been there more than anyone else. Or in an even rarer situation, you unlock a badge because you’ve hit certain things in a certain order, or you’ve unlocked a certain pattern of usage: I’ve been to five food trucks. I’ve been to five karaoke places. I’m out really late on a Wednesday night. Weird things like that.
I’m very inspired and motivated by Nike Plus. It’s not a game, but there’s game mechanics that make you run more. And I think Foursquare is going after the same thing. It’s not a game, but the mechanics encourage you to experience things you normally wouldn’t experience. I think we’re just starting to scratch the surface of that space.
MS: How have users changed Foursquare’s functionality?
We think of check-ins as you check-in at Yankee Stadium or you check-in at dinner. But then people use it to check-in to traffic, to check-in to the back of a cab. The playground is a good example. It’s not a use case we anticipated. Parents uses it to meet up with other parents with kids. I think that’s perfect. Use it whatever way you want.
MS: Are user expectations growing beyond the boundaries of what you think is manageable?
DC: I’m not so worried about the expectations because we have a really good idea of what we want to build. The thing is, we’re still a relatively small team. We’re dealing with scaling issues before we thought we’d have to. So, it’s fine. We have to tackle those issues at some point, but we’re really anxious to build because we have this great user base now. We want to push out all of these features, but first and foremost we have to make sure we keep the service up and running.
MS: Is interoperability a key to services like Foursquare? Do they have to work on as many networks as possible?
DC: We thought in silos for a while, but now the tools to share content across networks are out there. So with Facebook allowing us to easily push content into Facebook — and Twitter doing the same thing — it just really helps spread the service.
Fans create Foursquare mobile apps
MS: You relied on external developers to build a lot of your mobile apps. How did those relationships come about?
DC: We built the iPhone one and then we rolled the dice a bit and built an API before anything else. That turned out to be a good bet because that’s how we got the Android app.
It started at South by Southwest where we met some kids who wanted to make an Android app for us. It took four months. There were three or four of them doing it in their spare time, which was great. And in a lot of ways, I think the Android app is better than the iPhone app that we built ourselves.
But we built the API first and then we did a prototype of the Android app and then we tightened everything up from both sides. And now, because there’s so much interest around our Android app, we brought an Android developer in-house to help manage the open source developers.
MS: I’m really intrigued by businesses that have intentionally undefined boundaries. You nurture relationships with enthusiastic users who want to create something and then you make decisions off of that enthusiasm.
DC: Yeah, and I guess in hindsight it seems like a really brilliant strategy. But it was all accidental. We barely got that iPhone app out for South by Southwest. I think we just got really lucky that we built something people wanted to use so badly that they wanted to build apps for it.
MS: Who are your competitors?
DC: People will say we’re the next Twitter. Which I don’t agree with. I think we’re complementary to Twitter. Or, we’re the next Facebook. But we’re more of a feature set to Facebook. Or, we compete with Google Latitude. Well, kind of. But Foursquare’s not just about the maps. It’s about what happens nearby. And then people will say Yelp is a competitor because of the interest in local businesses and the ability to leave mini-reviews behind. I feel we’re right in the middle of all of these folks.
Foursquare’s potential revenue streams
MS: What are you revenue plans?
DC: Well, location-based advertising just doesn’t feel right. The ads aren’t relevant a lot of the time. I think that’s going to work eventually, but there needs to be a better short-to-medium-term solution. Our answer has been scrappy promotions that local merchants can set up with us directly. And those are tied to the metrics of check-ins. So if you’ve been to a place five times, or if you’re the mayor of this place, we take some of the data and turn it into a reward. Things like, because you’re deemed a regular, you get a free slice of pizza or a free cup of coffee. This stuff isn’t changing the world, but we’re finding that venues like giving these rewards out and users love getting them.
Now, is there an opportunity to monetize that little ecosystem we’ve created? Probably. I think it’s going to take time to figure it out. We’re not racing into that because we’re encouraging venues to experiment with the basic tools we’ve created. We’re seeing really interesting things come out of that. At the very beginning, it was come in and you get a free ticket to a band. Then it turned into a free cup of coffee. Then it turned into a free slice of pizza. And at this point, there’s a hotel in Amsterdam that gives away a free hotel stay. There’s a place in Texas that gives a free steak dinner. There’s a place in New York that gives you a free bottle of wine. So we’re getting to real, legitimate, interesting promotions. And it seems like it’s maturing on its own.
MS: But you guys aren’t getting any percentage from those transactions, right?
DC: We’re not taking a cut of that yet. That’s one of the things that comes up in conversation. People say we’re going to kill it in the local coupon space. But I don’t want to ruin it by nickel and diming local merchants.
MS: That sounds like the Twitter approach. Don’t hinder growth by pre-defining revenue streams.
DC: It’s a little bit. We look up to what Twitter has done. One thing that’s different is we’re doing experiments with brands and media companies earlier. What we don’t want to do is go two years without any experiments in monetization and then, all of the sudden, have to flip a switch on. I think it’s nice to have it built in from the very beginning, even if we’re not generating revenue off of it.
We’re in a really fortunate position. We’ve had calls from large media companies, from newspapers, from TV stations, and TV shows and really, everything across the board. For example, Bravo TV is now on Foursquare. They wanted to do something where people go to places featured in their shows and unlock badges that are tied back to the shows. They’re going to promote Foursquare on-air. So as you’re watching it at home, it’s like, “next time you’re out in Atlanta or New York, check-in at these places to interact with Bravo in a different way.” I thought that was an awesome idea.
Different expectations for location data
MS: How does location data differ from status updates, pictures, links and other forms of shared information?
DC: I guess it’s pretty clear that we’re all sharing more data than we thought of sharing before. But we’ve heard from the very beginning at Dodgeball that sharing location gets you in trouble sometimes. Things like, “I saw you were out with such and such when you actually said you were doing this.” Or, your ex-girlfriend sends you a friend request and you have to approve it because you don’t want to hurt her feelings, and then she knows where you are all the time. It creates awkward interactions. There’s just something different about sharing location than sharing everything else because the whole point of location sharing is to enable real world meet ups. And if something goes wrong with location share, it enables the wrong types of real world meet ups.
I think as more people start using these location services, they’re going to be aware that maybe this is the one network that should just be about sharing with your real friends. The friends you would call to pick you up at the airport.
Disclosure: O’Reilly AlphaTech Ventures is an investor in Foursquare.
Note: This interview was condensed and edited.