Foursquare CEO Says Merchant Fees Will Provide Bulk of Revenue

Foursquare Labs Inc. plans to get most of its future sales from software that helps merchants track the behavior of potential customers, Chief Executive Officer Dennis Crowley said.

Foursquare, a Web service that lets users share their whereabouts, already offers free tools to 500,000 businesses. The New York-based company will eventually begin charging for additional services that help monitor shoppers, Crowley said today in a televised interview with “Bloomberg West.”

“It’s going to be the tools that we offer these local merchants,” Crowley said, when asked where the company would generate the majority of its revenue in the future. While there are no immediate plans to charge for new services, “it’s something that’s on our road map,” he said.

The strategy marks a departure from the approach used by Facebook Inc. and other social-networking companies, which rely mostly on advertising to make money. Instead, Foursquare wants businesses to pay for help analyzing the data generated by its 10 million users. Foursquare already collects some revenue from partners such as Groupon Inc., which show users discounted offers on meals and activities that are nearby.

Foursquare also gets some advertising money. It has ad deals with companies such as PepsiCo Inc., Safeway Inc. and Zagat Survey LLC. Meanwhile, it faces increasing competition from location-based features offered by Facebook, Google Inc. and other large rivals.

‘Really Interesting’

Foursquare announced in June that it raised $50 million, providing money to add engineers and expand internationally. The company aims to help merchants recognize customer behaviors and cater offers to them, Crowley said.

“Do we want to hit the users who come in five times a week? Do we want to hit the users who bring five of their friends?” he said. “We’re starting to develop more advanced tools for the merchants, and that’s starting to be really interesting for us.”

Crowley — who sold his previous startup, Dodgeball, to Google in 2005 — has no plans to sell Foursquare. The service is approaching profitability, he said.

“I’m hoping that we’re going to be a profitable company relatively soon,” Crowley said. “That will probably open up a number of doors for us.”

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