Foursquare Adding Paid Promotions to Service in Hunt for Revenue

Foursquare Labs Inc., the creator of an application for sharing users’ whereabouts with friends online, is adding a deal-promotion feature to the service, marking the startup’s biggest attempt yet to generate revenue.

Businesses will pay to feature deals in the company’s Explore recommendation engine, built from more than 2 billion user check-ins to various locations over three years, New York- based Foursquare said.

Customers who use the service to find local businesses will see paid recommendations more prominently. For example, searching for “shopping” in New York’s SoHo neighborhood would pull up a result for Gap Inc. (GPS)’s Old Navy offering a $15 coupon. The item will be marked “promoted” to make it clear to users.

“We’ve created a suite of tools that we think will truly drive business and build loyalty for merchants,” Steven Rosenblatt, chief revenue officer at the closely held company, said in an interview. “It’s something that business owners have been asking of us for a long time.”

With the product, Foursquare aims to capture a slice of the mobile-advertising market, which Bank of America Corp. predicts will surge to $18.3 billion in 2015 from $3.6 billion last year. Rosenblatt, who joined Foursquare from Apple Inc. (AAPL) earlier this year, will expand his team to sell the promoted products nationwide. A million businesses already use Foursquare’s free tools, he said.

While the company has made money by having corporate logos on badges -- the rewards that users get for checking in to locations -- this is the first time Foursquare will charge businesses to use its tools to promote themselves.

The promoted deals, which Foursquare compares to the Google Inc. (GOOG) ads that appear alongside search results, will run in a pilot program for several months with about 20 businesses, including J.C. Penney Co., Best Buy Co. and Walgreen Co. (WAG)

Foursquare faces competition from Facebook Inc. (FB) and Twitter Inc. in trying to get more social-media advertising onto mobile devices. The mobile-ad market is currently dominated by search- engine and display ads, sold by companies such as Google and Apple Inc.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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