How does Foursquare make money?

Foursquare offers six different types of advertising products for local businesses

You know the old adage used by real estate developers, "location, location, location"? Well, the same thing can be said about mobile. There is a huge amount of money to be made now that advertisers now have the ability to give send people ads based on the exact location.

And Foursquare is in a great position to cash-in. Given that the entire network is based on location-based check-ins, its pretty obvious where the company is going to make its money. 

Foursquare offers six different types of advertising solutions for businesses on the network:

• Foursquare Audience Network (F.A.N.) - Re-targeting solution launched last summer in partnership with Turn, and which now includes DoubleClick, that allows brands to target users when they're on the web or on their phones. F.A.N. uses Foursquare (anonymized) first-party data and isn't based on someone visiting a website, but on actual visits to physical locations.

• Place-Based Ads (PBAs) - This allows brands to run ads on the post check-in screen of relevant categories.  

• Promoted Places (PPs) - which are used to drive new customers in-store. Promoted Places show up on the "Explore" tab when people are searching for things around them, similar to paid search in the typical web-browsing experience.

• Foursquare Ads for Small Business - a self service platform that allows local businesses to target only the most valuable potential customers, with payment happening only when an ad is acted on. Ads are only shown to potential customers physically near a business location, and with promotional copy flexibility (positive tips; photos; discounts etc)

• Merchant Claims - gives businesses control over their Foursquare listing, and provides them with a suite of tools and analytics to track the number of check-ins at their establishment, number of tips left, etc. More than 1.7 million businesses have claimed their venues on Foursquare. The fee is $20.

• Data Deals - Foursquare can provide enhanced anonymized data for its partners to help them improve their products, get insight into locations, and other uses. 

In all of its ad products, Foursquare is paid on a Cost-Per-Action basis. That means that if its serve an ad to a user, Foursquare only gets paid if that user either toggles on the ad to get more information, or if they check\-in to a physical location within 72 hours upon seeing that ad.  

Since Foursquare is a private company it would not reveal its revenue numbers to be, but the company would say that since it launched its monetization program in the summer of 2012, it has seen significant growth.

The company saw 500% growth year to year from 2012 to 2013, and 600% growth from the first quarter of 2013 to the first quarter of 2014.

Foursquare recently decided to split its services into two separate apps: Swarm, which will help users keep up and meet with friends; and Foursquare, which will be relaunched later this year in order to help users discover new places.

This was done to enhance the company's advertising products. By unbundling the two services, a Foursquare spokesperson told me, "advertising value propositions are getting stronger and clearer for our advertising partners."

Founded in 2009, the company has raised over $142 million in funding, from investors that include DFJ Growth, Union Square Ventures, SV Angel, Andreessen Horowitz, Spark Capital and CrunchFund. Most recently, Foursquare partnered with Microsoft, which, in turn, invested $15 million into the company. 

(Image source: digitlab.co)