Dollars and cents

Swarm is the big story today, but it’s really the changes that will occur within the classic Foursquare app that could grow the company in a massive way. It's a distinction signified by the apps’ internal nicknames: Batman for Foursquare, Robin for Swarm. It’s a tacit acknowledgement by Foursquare that checking in may never appeal to more than a niche audience. Local search, however, is a mainstream activity that anyone with a smartphone is going to want. "The thinking is, if we start to remove a lot of the friction, we make the tools much more accessible to people, that’s the path by which you get from where we are now to 75, 100 million, more than 100 million users," says Crowley.

Back in 2012, Foursquare struggled to raise new funding at an attractive valuation. First it took on debt, then raised fresh capital, but at a lower valuation than its earlier rounds. The company’s net worth, in other words, was shrinking, and one of its two co-founders, Naveen Selvadurai, departed. The core issue was that its user growth had slowed considerably and fallen behind its peers in the world of mobile social networks.

But if these changes help Foursquare finally hit those bigger user numbers, its investors believe it will be extremely valuable. The company has been inserting ads into its app for a little over two years now, and that taught it some critical details. "We’ve learned a lot," says Ben Horowitz, one of the company’s investors and board members. "And the results have been quite good in that Foursquare already monetizes better than almost any social experience." When it comes to advertising, Foursquare can make far more per user than public companies like Facebook or Twitter. "That is a powerful fact going forward and helps them keep a focus ... they know they can build an extremely valuable company without having anything like a billion users."

The company’s head of revenue, Steven Rosenblatt, knows better than most about earnings potential. His previous job was at Apple, one of the most profitable companies on the planet, where he helped launch its mobile ad product. He was inspired to leave for Foursquare, he says, because he thought it was simply the best way to do mobile advertising. "Everybody else is using geo-fencing, which is nice, but gets things wrong about two thirds of the time," he says. "We have location accuracy that is better than anything I’ve seen during my 16 years in this business, and that’s why advertisers are willing to pay." Sources familiar with the situation say Foursquare has grown its revenue from around $2 million in 2012 to $12 million in 2013, and is on pace to make between $40 to $50 million this year.

"They can build an extremely valuable company without anything like a billion users."

The best model for where the company hopes to be a few years from now is probably Yelp, and in fact people around the Foursquare office refer to its new discovery app as a "Yelp-killer". Built on its user-generated reviews of local shops and restaurants, Yelp is now a public company valued at $4.6 billion. Foursquare thinks it has the data and technology to beat Yelp, but people just haven’t realized it because they were scared off by the check-ins, badges, and social features that Foursquare originally pitched.

"If we all went to Google right now, or went to Yelp right now, we'd all get the same results, and that seems really really broken to me," says Crowley. "Foursquare should understand the neighborhoods I've spent a lot of time in, and the restaurants that I went to once but never went back to." In that sense Foursquare hopes to provide not just the best local search, but the kind of predictive intelligence that comes with a digital assistant like Microsoft’s Cortana, Apple’s Siri, or Google Now. In Crowley’s future, your phone doesn’t just tell you what’s nearby — it tells you what you’ll enjoy based on everywhere you (and your friends) have ever been.