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Has Foursquare Found Some Deal Revenue?

Foursquare has been busily expanding its location-based social network and recently hit the 10-million-user mark, but its revenue-generating abilities haven’t kept pace. The New York-based startup seems determined to remedy this by offering "daily deals" via a number of partners. If Foursquare can manage to make this marriage of location and deals work—and if it can somehow bring deal giant Groupon into the fold, a partnership it is rumored to be working on—the company might be able to justify its backers’ high hopes. The potential clouds come from Google (GOOG) and Facebook.

In a blog post announcing the news, Foursquare notes that it has been expanding into the deal, or discount-offer, market over the past few months. Moves include the launch of a "load to card" partnership with American Express (AXP) that allows cardholders to get discounts without having to print out coupons—an arrangement that brings Foursquare no profit. The new partnerships represent a more substantial move in that direction because they include LivingSocial, the No. 2 player in daily deals; Gilt City, which is part of the giant European Gilt Groupe operation; and BuyWithMe. (Zozi and AT&T Interactive (T) are also involved.)

In some ways, the launch of these daily-deal partnerships fulfills Foursquare’s avowed ambition to "go beyond the check-in." As far back as last summer, Founder and Chief Executive Officer Dennis Crowley admitted in a sit-down interview with Om that he knew the simple check-in had become—or was rapidly becoming—a commodity. He said Foursquare was making plans to add more value for its millions of users to keep them coming back and perhaps generate revenue.

LivingSocial Will Pump Volume

It wasn’t yet clear how that value would go beyond further badges and mayorships. Marrying daily deals from retailers to a user’s location or relationship with an advertiser seemed an obvious addition for the network, and Foursquare started to expand into that market with the rollout of specials that involve discount deals with specific retailers and locations. The latest announcements are a huge step in that direction: LivingSocial, backed by online retail giant Amazon (AMZN), could add a massive volume of location-based offers to Foursquare, although it’s not known how much revenue Foursquare will gain from these partnerships.

Big question marks remain. One is Groupon and the others are Google and Facebook. Groupon recently launched its own effort to marry daily discounts and location in a program called Groupon Now that provides offers to users of its mobile apps and website. Groupon’s impending initial public offering is expected to give the company a market value as high as $30 billion. If Crowley can land Groupon as a partner—something rival Loopt has already managed to do), Foursquare could become the market leader.

Any Takers for Google Offers?

Meanwhile, Google is busy rolling out a deal platform called Google Offers. While the search company is obviously a gigantic competitive force with billions of dollars to spend, it has long tried to make an impression in the location-based market with Google Places and such further experiments as Google Hotpot, (now rolled into Google Places). A mobile offering called Latitude has been around for some time. It was a successor to Crowley’s previous company, Dodgeball, which Google acquired in 2005, but which never managed to gain traction.

Facebook has also experimented with deals through its Facebook Places platform, which launched last year with the support of a number of players such as Yelp. The social network giant also has its own Groupon-style offering called Facebook Deals, which also began rolling out earlier this year. Should Facebook opt to combine the two, would it try on its own or find a partner such as Foursquare—a company it reportedly once attempted to acquire?

It isn’t at all certain that Google Offers or Facebook Places/Deals can break the location-based market open and broaden it beyond early adopters. Even with competition from the two giants, a Foursquare-Groupon combination (assuming one ever comes to pass) would be pretty hard to beat. Landing such a deal might finally justify the $600-million market value implied by Foursquare’s latest financing round.

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