Forsquare seems to be very excited about new product and the idea that the actual user activity could be measured, the company wrote in a blog post: "We're moving past the days when business owners have to figure out if a "like" or a "click" has any meaning in the real world; now they can tell if someone who saw their ad actually walks into their store." However the appearance of advertising in Forsquare was predictable, because of company's financial situation. $112.4 million has been received by Forsquare from investors. The reported revenue for the last year is just $2 million.
The main objective for creators of social media is making money from the site, app, blog, etc. Monetization of a product could be done in different ways, but always should be well planned to be effective, any mistakes could lead into decrease in user's attraction to the product and even in lost of existing and potential users.
In case of Foursquare there recenly was a persistent belief, that the company just does not know how to make money. Foursquare took $41 million in debt earlier this year. Taking into account that the company reported revenue was just $2 million last year, the future didnt seem to be very promising.
The only way for the company to stay afloat was to find out a new way of generating a revenue. I guess the new advertising method announced by Forsquare is a great start and potentially a chance to be independent. With the launching of new service, Foursquare is going make between $10 million and $15 million this year, according to Business Insider http://www.businessinsider.com/foursquare-pulling-in-1-million-ad-deals-2013-8 The new self service ad solution was created in a very smart and convenient way.
First of all it is easy to use by merchants. There is no requirement for technical integration or negotiation with sales representatives. Everything is simple and could be done in just 1 click. The amount of payment is small and could be paid by credit card.
Second, it gives a lot of information to merchants, now they can pay not for advertising by itself, but for user activity (only when user clicks on ads or redeems the offer), tracking the effectiveness of a particular promotion. Moreover, now merchants dont have to find the potential customers, foursquare does it for them.
The company claims that it has enough data about users activity to understand which places to offer and whom to offer. "I think we have a really good idea of who the best customers are for businesses because we're in the business of making recommendations," Noah Weiss, Foursquare's director of product, told CNET. ( http://news.cnet.com/8301-1023_3-57607309-93/hungry-for-money-foursquare-dishes-out-self-serve-ad-tool )
Now the idea of foursquare ads is to give a right recommendation to right people. That means, that as a foursquare user you will see the promotions from local places that supposed to be interesting for you. Sounds interesting as far as foursquare could really determine the relevant offer. Taking into account that it was a decrease in foursquare popularity in recent time, many foursquare users stopped to check-in in every place they visit, some of them check-in only in new places in order to save them in the activity list. That means the data is not so accurate as it supposed to be. So there is a…