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Strategic and tactical tools for E-Business
Mandatory assignment
FOURSQUARE
Case Report
Group no.: 16
Authors: Isabella Lu?tken (031192-34041)
Ingrid Haug (150192-4330),
Melisa Popanicic (201294- 3876)
Vanesa Kerkelic (230192-4006)
Study program: M.Sc. Business Administration and E-Business
Semester: 1
Lecturers: Qiqi Jiang & Rony Medaglia
Deadline: 1st of December 2017
Number of pages: 10
Character count: 16.841
1
INTRODUCTION
Foursquare is a local search-and-discovery online service that can be accessed via a
mobile application. The app provides its users with helpful recommendations and tips of
places near a current location. The app was launched in 2009 by Dennis Crowley and
Naveen Selvadurai. (Piskorski, Eisenmann, Bussgang & Chen, 2013)
The following report gives insights into the business practices of Foursquare,
analyses the reasons for its growth and presents suggestion on which actions the company
should undertake to maintain a successful social media platform by answering four questions
given by the lecturers. The findings are linked to the case study foursquare, issued by the
Harvard Business School in 2013. In addition, secondary online sources have been used to
complement the research.
QUESTION 1
How is Foursquare helping people interact with each other? How is Foursquare
helping businesses interact with its customers?
Foursquare is helping people interact with each other in several different ways. The
Foursquare app is used to find places such as restaurants, museums, bars, parks, and
shopping centres. Users can check-in to a location, write a review (“Tip”), share photos and
give the particular location stars based on their satisfaction of the visit. In addition, the app is
used to find out where the users’ friends are and to meet up at the same location. Another
element that encouraged the communication and competition to interact with each other is
the game mechanisms. The game features encourage users to compete for the highest
score. An online leaderboard shows, which users have earned the most points and it is reset
every week, so that the users have a new chance to reach the top and beat their friends. By
checking in to a specific location or a set of different locations, users can earn “Badges”. If a
user checked in to ten different locations, he or she could get the “Adventurer” badge. The
user with the most check-ins could gain the title “Mayor”. Finally, the app has a friend
invitation functionality. Users can find their friends on Facebook and Twitter, or import their
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address book. (Piskorski, Eisenmann, Bussgang & Chen, 2013) All of the functionalities
mentioned above, encourages the interaction between users, as it enables users to explore
activities together with their friends in a newly manner.
In the section above we have pointed out how Foursquare is helping its users to
interact with each other. The report will now highlight the company’s approaches to help
businesses interact with their customers. Firstly, Foursquare allowed the businesses to use
location-based advertisement for free. By doing so, the businesses could reach potential
customers that were close by.
Furthermore, the businesses could offer loyalty programs (“Specials”) that rewarded
customers for specific behaviours. A “Special” could be a free coffee at a coffee shop, where
a user checked-in several times a month. Additionally, the users can share their locations
and check-ins on Facebook and Twitter, which allows the businesses to respond to their
customers through other social platforms. Foursquare also made online tools available that
allowed venue managers to “claim” and edit their venue’s description. (Piskorski, Eisenmann,
Bussgang & Chen, 2013)
These profiles allowed them to constantly update and change their offers. From the
customer’s point of view, Foursquare allowed users to search for what they were looking for
and get a list with recommended restaurants in the area. Additionally, Foursquare
encouraged personal user comments. This made others experiences of the restaurant more
playful and fun, which is an attractive advertising element. (Piskorski, Eisenmann, Bussgang
& Chen, 2013)
QUESTION 2
What explains Foursquare’s growth to date?
It is important to mention that the answers to this question refer to the case published
in March 2013. Since March 2013 the company has changed tremendously. Therefore, the
factors that explain Foursquare’s growth to date will be related to the time period 2009-2011,
which is the time period the case mainly addresses. When a company succeeds, it is easy to
look back at what happened and link all actions to its success, but it is hard to know how
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much of the company’s growth could be accredited to good timing, and how much to certain
strategic actions.
First of all, they had a well thought out launch strategy. They tested the product by
releasing an alpha version, which was only “half-baked” in terms of functionality. With this
strategy, the co-founders got an indication of what the users wanted the application to be.
This allowed Foursquare to correct and tailor the product towards the users’ preferences.
Additionally, the founders waited to launch their product until the annual South by
Southwest (SXSW) Interactive festival in Austin, Texas in 2009. During the festival, they
managed to get thousands of users. The word about the app spread fast, and created a
synergy effect within young crowds. The number of users, and the speed of growth attracted
both venture capital investors and angel investors. (Piskorski, Eisenmann, Bussgang &
Chen, 2013)
In January 2010, the company launched “Foursquare Everywhere” in response to
user feedback. This allowed users to sign up for the service from any city in the world, which
opened up for the opportunity to expand and grow further in new destinations. (Piskorski,
Eisenmann, Bussgang & Chen, 2013)
Another reason why Foursquare grew so fast was the wave of the new smartphones
in 2009. The smartphone marked exploded in size, and it changed the way people were
interacting. The success of the iPhone stimulated the competitors to develop new
smartphones which were built on Google’s operating system, Android. In addition to the
iPhone app, the company released an Android and BlackBerry app. Crowley, one of the
founders, stated that “We quickly expanded to cover as many smart phones as possible…
You want all of your friends to participate, not just the six that have the right phone”.
(Piskorski, Eisenmann, Bussgang & Chen, p. 4, 2013)
In addition to this, Foursquare had several commercial relationships with big media
companies like Bravo TV and MTV. Foursquare offered for example badges to users that
checked in at the exact locations that were described in Bravo’s TV-show. While the
commercial deals helped small establishments to build brand credibility and awareness,
Foursquare was raising popularity and generating revenue. (Piskorski, Eisenmann,
Bussgang & Chen, 2013)
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Finally, the founders were engaging with the users face-to-face and on different
platforms like their own blog, Twitter and Facebook, where both Crowley and Salvadurai
frequently responded to criticism and feedback. By listening closely to their customers,
Foursquare could gain important insight and adjust the app after what the customers wanted.
This approach undeniably affected Foursquare’s growth positively. (Piskorski, Eisenmann,
Bussgang & Chen, 2013)
QUESTION 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?
With the smartphone industry on the rise, Foursquare invested most of their
resources into the development of search functionalities. They did so partly because they
counted on the fact that the word about a great product will spread by itself. The spreading of
Foursquare by word-of-mouth was what they were hoping to gain from the commercial
partnerships they agreed to with MTV and Bravo. This seemed to have attracted a lot of
people, generating a high organic growth. Thereby, Foursquare did not urge the need to
invest more into getting a wide breadth of users but rather into the technology behind it. This
was reflected in their organizational structure as well, since they had 45 employees by 2010
and more than 50% were engineers. (Piskorski, Eisenmann, Bussgang & Chen, 2013)
The Foursquare team was convinced that the incentives they provided their users
with, such as the “Badges” and “Specials”, was reason enough for them to stay or might
even motivate them to share it with their family and friends. The prioritization lied with
product development, as this should be the foundation for user acquisition. They seemed to
be of the opinion that creating functions like the “Share with your Facebook friends” would be
more valuable in the long term than investing in developing marketing strategies. This is
supported by the fact that they were trying to cover as many mobile operating systems as
possible. Again, they wanted to give their users the chance to spread the word themselves
by giving them the necessary technical functions to do so. Therefore, they prioritized
compatibility and expanded next to Apple’s iOS also to Android and Blackberry OS and
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hence covered the majority of mobile devices. (Piskorski, Eisenmann, Bussgang & Chen,
2013)
According to Exhibit 7, US mobile phone users engaged most in the search service
for products and services. Foursquare was following the market trend at that time by
enhancing the search functionalities and fulfil the market need first, prior to expanding their
user base. This is just another indicator of why Foursquare was investing their resources into
developing the search functionalities further. (Piskorski, Eisenmann, Bussgang & Chen,
2013)
What is more, Foursquare invests heavily in technology up until today, as can be
seen in Appendix 1. Therefore, one could argue that the founders foresaw the potential in the
amounts of data Foursquare was collecting and planning to steer the company into the
direction of a business intelligence firm. (Contributor 2017)
QUESTION 4
What should Foursquare do next to compete against other Social Media
platforms? What can we learn from the Foursquare case in terms of building a
successful Social Media platform?
In order to make specific suggestions for Foursquare’s next move, it is important to
mention that the Foursquare app has already gone through a major transformation. By
separating the app into Foursquare City Guide and Swarm, the company intends to compete
against different competitors more effectively. Foursquare City Guide focuses on the
discovery of different places and gives intelligent and personalized recommendations,
entering the battle against location-based services such as Yelp. Swarm on the other hand
takes over the networking and gaming features, allows users to check-in to a given location
and meet with friends. Thus, Swarm is positioning itself in the same segment as Facebook.
(The Verge, 2014) In the competitive environment, Foursquare needs to strengthen its
market position and differentiate both its services from those if its competitors. Therefore, the
company should continue to provide a superior user experience by offering valuable
recommendation and exploring even more gamification elements. (Barnett 2010)
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Surviving on the marketplace of established social media platforms, Foursquare could
consider agreeing on a collaboration with Yelp. The platform allows users to search for a
business’s Yelp page, where they can rate the business and write reviews. Although Yelp
helps people to figure out which places to visit, the company only knows about the users who
write reviews. Foursquare represents the missing link and could enrich Yelp with its location
intelligence. By collecting user data through the game mechanisms, Foursquare knows
where users are at any given moment. Besides the recording of location data, Foursquare is
creating a social network effect, as it encourages others to join their friends at a particular
location. However, Yelp can also provide Foursquare with valuable resources such as
content and distribution. Moreover, Foursquare would benefit from Yelp’s popularity.
(O’Donnell, n. d.)
As Foursquare gives its users the opportunity to share their check-in on Facebook
and Twitter, it is suggested to harvest a reverse connection. The company might be able to
negotiate a deal with the two social media giants to offer their users the opportunity to share
their Facebook or Twitter check-ins to their Foursquare profile. Foursquare would profit from
possible new users by upping its brand awareness and even more from the higher number of
posts on Foursquare. Furthermore, it is recommended that Foursquare analyses the users
that use the check-in function of their competitors. Specifically, Foursquare should focus on
examining those individuals’ traits and preferences, and even divide the different kinds of
users into clusters based on their attitudes. As a consequence, Foursquare might be able to
find some correlations between the users and why they prefer to check in via Facebook or
Twitter and not Foursquare. This information can in turn be used in their marketing and
communications to target the competitors’ users and direct them to Foursquare.
Considering the strong market position of Facebook, Twitter and Yelp on the
European and US market, Foursquare should intensify the efforts in establishing its locationbased
services on the Asian market. By investing more in the B2B market place, the
company could gain considerable market share in Asia that competitors have not explored to
the same extent yet. Already today partners in Asia are using Foursquare’s location
intelligence to build AI, AR, online-to-offline commerce, ride-sharing and messaging
solutions. Hence, it is suggested that Foursquare cultivates its already existent partnerships
with companies such as Samsung, LG, Momo, Carousell and Tencent that rely on
Foursquare’s Places database. (Medium, 2017)
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After giving suggestions on how Foursquare could compete against other Social
Media platforms in the future, the report will now focus on highlighting the company’s best
practices. The wave of new smartphones, the explosion of apps and social networking were
important enablers that allowed Foursquare to build a successful social media platform.
However, it was the timing of the market launch that contributed to Foursquare’s success in
particular. The company exposed its app at the Interactive festival, inviting a highly
concentrated social community to try out the app’s functionality and its integrated game
elements. Being able to attract and retain the early adopters helped Foursquare to grow its
user base: “If you can get that community using it and hooked on it, then they’ll go back to
where they’re from and start spreading it to their friends.” (Piskorski, Eisenmann, Bussgang
& Chen, p. 3, 2013)
Instead of spending years on perfecting the app, the co-founders decided to launch a
version that was not fully developed and therefore limited in its functionality and design. The
purpose of this bold move was to solicit ideas on how to improve the application. Rather than
relying on market research or usability tests, the founders invested a huge amount of time in
interacting with its users. Such interactions allowed Foursquare to understand its users and
helped to prioritize features in the app development process. (Piskorski, Eisenmann,
Bussgang & Chen, 2013)
Knowing that Foursquare’s online community enjoyed the entertainment value and
the addictive nature of competing for badges and mayorships, the company first enhanced
the game mechanisms. The game mechanisms did not just set Foursquare apart from its
competitors, but ensured that their users would stick with the platform and invite even more
friends to join them in different challenges. Other users requested the expansion to different
cities and the coverage of further mobile phone devices. The co-founders’ response to
various input and the engagement of its users in the creation of new features, was clearly
one of the success factors that enabled Foursquare to propel. (Piskorski, Eisenmann,
Bussgang & Chen, 2013)
Another part of Foursquare’s success story is the app’s ability to drive consumers to
actually walk to the venues. Being capable of connecting the online and offline world creates
a special dimension that other social media platforms did not integrate in their services.
While Facebook for example is telling its users what their friends are doing, Foursquare is
encouraging its users to invite their friends to a particular location. Apart from Foursquare’s
users, the local businesses are forming and broadcasting the service actively. Businesses
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are allowed to promote their products or services, have meaningful conversations and
reward customers with discounts or special offers. Due to the fact that Foursquare is letting
users and business interact with each other, the platform goes beyond a consumer-only
service and creates a win-win situation for all parties involved. (Piskorski, Eisenmann,
Bussgang & Chen, 2013)
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BIBLIOGRAPHY
Case
Piskorski, M.J., Eisenmann, T.R., Bussgang, J. J. & Chen, D. (2013). foursquare. Case
Study. Harvard Business School
Websites
Barnett, E. (2010). Five reasons why Foursquare’s mainstream success is inevitable.
Telegraph.co.uk. Available at: http://www.telegraph.co.uk/technology/socialmedia/
7895109/Five-reasons-why-Foursquares-mainstream-success-isinevitable.
html Accessed 30 Oct. 2017.
Contributor, N. (2017). After Years of Challenges, Foursquare Has Found its Purpose – and
Profits. Entrepreneur. Available at: https://www.entrepreneur.com/article/290543
Accessed 2 Nov. 2017
Medium. (2017). Foursquare strengthens in Asia – Foursquare Direct – Medium.
Available at: https://medium.com/foursquare-direct/foursquare-strengthens-inasia-
1702d9ce0819 Accessed 3 Nov. 2017.
O’Donnell, C. (n. d.). Why Yelp (…and Every Single Retail Establishment) Should Support
Foursquare. Available at: http://www.thisisgoingtobebig.com/blog/2009/7/13/whyyelp-
and-every-single-retail-establishment-should-suppor.html Accessed 30 Oct.
2017.
The Verge. (2014). Meet Swarm: Foursquare’s ambitious plan to split its app in two.
Available at: https://www.theverge.com/2014/5/1/5666062/foursquare-swarm-newapp
Accessed 4 Nov. 2017.
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APPENDICES
Appendix 1 – Foursquare Timeline
Source: Melisa Popanicic, in-class Powerpoint presentation, 03.11.2017