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s5 {font: 8.0px Helvetica} foursquare A case-based analysis Strategic and Tactical Tools for E-Business (CBUSO1001U.LA E17) Business Administration & E-Business November 2017 Group 10: Marten Sievers, [email protected] Stefan Nagel, [email protected]

dk Franziska Schneider, [email protected] Sofie Berggrein Andersen, [email protected] Pages in total: 8 pages / Characters incl. spaces: 18.

156 ii Content Introduction 1 1.1 How is foursquare helping people interact with each other? 1 1.2 How is foursquare helping businesses interact with its customers? 2 2. What explains foursquare’s growth to date? 3 3.

Why did foursquare invest so much in developing search functionalities, but yet has done so little to ensure that the platform has a wide breadth of users, or to encourage its users to check in? 4 4.1 What should foursquare do next to compete with other social media platforms? 5 4.2 What can we learn from the foursquare case in terms of building a successful social media platform? 7 Conclusion 7 References 9 1 Introduction Smartphones are nothing new, but the extent to which we use our smartphones and for what is forever changing and expanding.

There is a new social network culture developing: a very personal and “me” focused one. People increasingly want to share photos, personal activities, interest, likes and dislikes as well as relationships. Additionally, one no longer consumes news, which happened yesterday, but rather events happening instantly, shared by your friends, family and strangers on your feed (Laudon, K. and Traver, C. 2017).

 Around 2008 location-based technology was still new and being developed properly, which together with people’s increased use of smartphones as a guidance tool lead to the successful establishment of foursquare. foursquare, founded by Dennis Crowley and Naveen Selvadurai in 2008, is a location-based smartphone app which allows users to check-in to venues, share their location and tips with their friends and unlock “specials” which give users discounts at nearby locations. Today foursquare consist of several business models: the company has developed two different apps for consumers, the foursquare City Guide and foursquare Swarm. It offers hosted technology and data to build context-smart location-based apps, and provides intelligent technology solutions to help brands locate, message and measure their own consumers. It is a successful company run by nearly 250 employees with more than 50 million users each month and a total of 12 billion check-ins (Foursquare Lab, Inc., 2015). The following report answers four questions based on the case study of foursquare made in 2013 by Piskorski, Eisenmann, Bussgang and Chen. The last question concerning what foursquare should do next to remain competitive will include a look at what happened after 2013 and the future of foursquare and thus also answer the fifth surprise question.

 1.1 How is foursquare helping people interact with each other? The idea for foursquare came from Dodgeball, a platform developed by Crowley for his thesis, which allowed users to share their location with friends and make plans1. Together with Selvadurai’s idea of creating better city guides with tips and reviews, they developed foursquare (Piskorski et al., 2013, p. 2). foursquare’s features and app functionalities are inherently related to how the app helps people interact with each other. The app contains some rudimentary 1 Dodgeball was bought by google, but shut down in 2009.

2 components which can be categorized as the basic-connecting features: it allows you to see where your friends are or have been, it allows you to make plans, connect with friends and find new acquaintances. By allowing its users to post and review venues, friends can use each other as city guides and thus connect and interact. Additionally, and maybe most importantly, foursquare has implemented game-elements into the app as well: every time a user checks in he collects points. The user with the most check-ins at a certain location over 60 days can become a “mayor” – this title can of course be taken away and given to another user if the record is beaten. On top of this users can earn badges, which are displayed on their profile. How you earn these badges is not public, which emphasizes the element of surprise and speculation. Thus, by having these basic connecting-features implemented foursquare helps people to interact, meet, and make plans.

Moreover, the gamification of the app encourages users to compete with each other and the point-earning-system in place (five points for checking in to a new place for the first time, only one point the following times) the app motivates people to go new places and broaden the app’s reachability even more (Piskorski et al., 2013). 1.2 How is foursquare helping businesses interact with its customers? From the business-customer perspective foursquare is an incredibly valuable tool.

Again, this is intrinsically related to the features of the app. First of all, the app is basically a “free” marketing tool as it allows businesses to list their venues on the app, and thereby improve their brand awareness and visibility. Second, foursquare lets users review the venue, which can improve the venue’s listing in the app and thereby attract new customers. Third, it is a great alternative to traditional banner and pop-up ads, which seem annoying to customers. Fourth, the app enables businesses to skip the “awareness” phase, as the customers using the app are already actively searching for a venue.

And last but not least, the “specials”-feature and game-like elements allow venues to create offers for new customers and create loyalty schemes to honor mayors or reward with badges (Piskorski et al., 2013). Based on Donna Hoffman and Marek Fodor’s (2010) work, the foursquare app provides the platform and tools for any businesses (with a venue customers can visit) to reach the three social media objectives: brand awareness, brand engagement, and word of mouth. By having a profile and being listed on the app, businesses increase the possibility of creating more brand awareness and reaching both existing and potential new customers.

With the included user generated reviews, the business can observe how customers engage with the brand, and gain insights into 3 how to improve and retain high level of customer service. Because users of foursquare automatically can see where friends are/have been, word of mouth is digitalized, and they no longer actually have to physically speak the subject – friends can just discover it themselves. Word of mouth has thus become an online phenomenon in form of user written reviews. 2.

What explains foursquare’s growth to date? Explaining foursquare´s growth to date, external factors have to be distinguished from factors inherent to the application, the company and its strategy. External Factors The timing of the introduction of foursquare is an existential success factor. With the launch of the app in 2009, two years after the dawn of the smartphone age through the introduction of the first iPhone, the proliferation of the multi-purpose device had reached a sufficient magnitude to equip a significant number of users with a device that could run location-based applications (Piskorski et al., 2013, pp. 2, 13) – a vital prerequisite for foursquare to have an addressable and ample market for their app. Moreover, social platforms had gained general acceptance and where more widespread than just a couple of years before, which meant that the potential users of foursquare already showed some proficiency with products similar to the search-and-discovery mobile app. Internal Factors Crucial for foursquare´s success was furthermore that they were first to market. At the time of the launch no competitor existed that offered a product with the same set of features let alone a competitor with an already installed user base (Piskorski et al.

, 2013, p. 7). Therefore, entry barriers where not high and network effects in the market could be leveraged in favor of foursquare. Since it launched shortly after the close down of Dodgeball, Foursquare was able to get a lot of its users. Together with introducing the app at the tech-festival SXSW, foursquare ensured high awareness with early adopters acting as promoters. Additionally, foursquare and Crowley gained valuable insights from Dodgeball (Piskorski et al.

, 2013, pp. 3, 5). Also important for the growth of the user base was the possibility to integrate foursquare into fast growing networks like Facebook and Twitter, so that users could see check ins on those networks as well allowing foursquare to not only raise more awareness but also reach potential users. Apart from this, the variety of functionalities of the app allowed a broad spectrum of usage and therefore targeted a diverse and large audience (Piskorski et al.

, 2013, p. 7). 4 Next to the main factors outlined, foursquare also put effort into making the app valuable to their users and communicate that value. A very important issue to Crowley as he believed Dodgeball had failed to do exactly that (Piskorski et al., 2013, p. 5). Given the location-based nature of the app, services and functionalities offered were of high relevance for users and vendors. The integration of user feedback and input during the early phases of the product development cycle furthermore helped to ensure high quality and satisfactory design of the features offered and the app in general.

The ambition to focus on building a great product was moreover emphasized by not making monetization and profitability a priority from the beginning (Piskorski et al., 2013, p. 10). This prioritization also supported the fast initial growth of the user base of the service. Finally, it has to be added that the gamification of the app definitely also attracted and captivated users. This element fueled curiosity with the users so that they were eager to use the app (more often) to discover new features as well as it powered the competition spirit, which fostered interaction between users (Piskorski et al., 2013, p. 11).

 3. Why did foursquare invest so much in developing search functionalities, but yet has done so little to ensure that the platform has a wide breadth of users, or to encourage its users to check in? To understand the behavior of foursquare and answer the question above, it is necessary to understand where the founders come from, how their previous experiences have influenced their decision-making, their unique value proposition and how the success of the company influenced their behavior. Crowley and Selvadurai Looking at the history of the company and its founders, it is important to understand that both Crowley and Selvadurai come from a technological background.

Neither one of them had experience in managing a successful business and Crowley, whose previous company Dodgeball had just been shut down by Google, was mainly motivated to create a better version of Dodgeball, so that he and his friends had an alternative. But instead of founding the company with someone from a business background, he chose to work with Selvadurai, who himself was a true developer (Piskorski et al., 2013). Since they initially funded foursquare from their own pockets, combined with their passion for developing location-based applications, they developed the application and services themselves instead of hiring a developer team to concentrate on the business 5 development and strategy. The case clearly outlines how much time and resources they invested into the development and that their focus did not change after the launch and their series A-round. Here they rather focused on implementing all user feedback into the application to ensure the best user experience possible instead of figuring out ways to monetize foursquare’s business model. Crowley many times emphasizes on his belief that a good product would attract the right people and that learning from Dodgeball, they decided to concentrate on their strengths as developers.

 Even when they hired their first employees, their main focus was on further developing the search functionalities of foursquare, by making sure that their application would run on all mobile platforms available, to ensure that people could use foursquare with their friends around the world. And it turned out to work: their first appearance at SXSW in 2009 spread word and resulted in the signing up of thousands of users for their launch and big media coverage of their services. Their organic growth was strong and only a year after their launch, foursquare had over 1.5 million registered users, proving the founders right, that they should focus their energy and resources into the development of the application, rather than focusing on the marketing aspect. Unique value proposition From a business perspective their approach might seem rather unusual, but looking at the company’s success it is clear that their search functionalities quickly became their unique value proposition. Letting users check in all over the world, providing them with the best tips and recommendations from other users or letting them search venues by special discounts distinguished foursquare’s services from their competitors. Combined with the gamification aspect of the application, they created a new experience in the social platform space and by continuously developing their product, ensured that their users got the best experience possible. In regard to their efforts to encourage its users to check in, we kindly disagree with the statement formulated in question three, since we believe that it is clear that by implementing the point system and badges, foursquare created a functioning mechanism that encouraged the users of the application to check in to new places to gain discounts or trophies on a regular basis.

 4.1 What should foursquare do next to compete with other social media platforms? The new opportunities of mobile technology for functionalities as well as monetization seemed to have climbed to the top of the priorities of every major social media platform and new startup. This 6 intensifies the competition for foursquare.

The SWOT analysis summarized below was conducted in order to propose the next strategic steps, which foursquare should follow: Table 1: SWOT competitor analysis Focus on your niche. foursquare has a first mover advantage in location aware social functions. Since the other companies came from another functional focus and are only now trying to integrate mobile technology in their product, foursquare had this functionality at their core since the beginning and no other company can keep up with the location aware functionalities yet. This is a chance for foursquare to differentiate itself from other competitors in this particular field. Instead of integrating new functionalities of other platforms, it therefore should focus on its existing functionalities. Make gamification a top priority. The gamification system of foursquare is unique from its competitors.

After reworking the system, it would not only be a key differentiation factor especially compared to Facebook. It would also serve as a growth driver, since it attracts new users and existing users have another reason to share their activities in form of achievements and badges on other social media sites as Facebook and Twitter. Furthermore, it can act as a lock-in, since losing hard earned badges or leaderboard positions act as a switching barrier to similar services (Shapiro, C. and Varian, H.R., 1999). Utilize user data more.

The data of foursquare users can be utilized to extend the recommendation and search functionalities of the app. Having the social functionalities that Yelp does not have, 7 gives foursquare the opportunity to utilize collaborative filtering for its recommender systems, which can outperform recommendation algorithms that rely on content-based filtering with a sufficient number of users. Therefore, this is not only a chance to improve the general user experience, but also to gain market share of Yelp users. Furthermore, the quick scaling of the app does not allow for a constant screening of qualitative, unstructured user recommendations through channels like Twitter. Adding quantitative analysis and testing processes that utilize usage date can be efficiently utilized to understand the user’s needs better. 4.2 What can we learn from the foursquare case in terms of building a successful social media platform? The success of foursquare makes the company’s development a valuable case study that can generate useful insights for social media platforms in general, which we summarized in the following best practices: Focus on user value first, monetize later.

Social media platforms are characterized by strong network effects (Shapiro, C. and Varian, H.R., 1999). Therefore, the number of active users is crucial to their success.

The more users, the more attractive it becomes for other users. Also placing ads, the most common monetization model of social media platforms, is only viable for businesses if it will lead to a good reach. Yet advertisements will make the user experience worse, therefore it can hinder the growth of the platform.

 Launch as early as possible and listen to your users. Launching early on, way before the product was of good quality, furthermore enabled the company to receive valuable user feedback. This enabled the founders to prioritize fixes and new functionalities according to their user’s needs. By targeting early adopters with their launch, they furthermore had users that are generally more forgiving for an imperfect product and willing to give feedback.

This was crucial in building a product that is in line with its user’s needs and to not waste scarce resources on functionalities, which do not add value to the product. Conclusion Based on the above, we conclude that in order for foursquare to survive and thrive they should focus on their core competences, functions, and services. This means focusing on allowing people to connect, plan and review venues and more importantly compete against each other using the 8 game-elements. On top of this they need to provide city guides and allow people to keep sharing their tips and recommendations. We learned that a social platform can become successful without prioritizing monetization from the start. What foursquare did since 2013 was to spin off two apps: foursquare cityguide and foursquare swarm.

Cityguide allows users to provide guides for cities all around the world, and lets users rate and review venues, etc. The foursquare swarm is the original foursquare model where people “play games”, check-in and interact. By doing this, foursquare enabled themselves to focus on their core competencies. However, foursquare needed to find a revenue channel to prove worth to investors. This lead the company to leveraging their core technology abilities: foursquare has moved more towards a B2B company as they now provide their location intelligence technology to help brands message, measure and locate their consumers. All of this again contributes and attests to the success of the development and technology focused business model of foursquare. 9 References Foursquare Lab, Inc.

(2015). Foursquare About Us. Retrieved November 18, 2017, from https://foursquare.com/about Hoffman, D.

, and Fodor, M. (2010). Can you measure the ROI of your social media marketing?. MIT Sloan Mangement Review. Vol 52.

No. 1 Laudon, K. and Traver, C. (2017). E-commerce 2017. Global Edition, Pearson, 13th Edition Piskorski, M.

, Eisenmann, T., Bussgang J., Chen, D. (2013).

Harvard Business Review. 9-711-418 Shapiro, C. and Varian, H.R. (1999). “Recognizing Lock-In”, in Information rules: a strategic guide to the network economy, pp. 103-134. Shapiro, C.

and Varian, H.R. (1999). “Networks and Positive Feedback”, in Information rules: a strategic guide to the network economy, pp. 173-225.