Foursquare Should Stop Following Facebook's Lead

While the tech world was busy listening to Mark Zuckerberg announce upcoming changes to Facebook's mobile features yesterday, Dennis Crowley, CEO and co-founder of Foursquare, was speaking at the ad:tech conference. Much of what he said went largely unnoticed, but he, too, hinted at changes coming to his product.

Crowley could have guessed, but probably couldn't have known, what Zuckerberg was going to announce about Facebook Places. If he had, he probably would have taken a different route. The anticipated direction of the two products is now very similar: customized recommendations using a smart algorithm, better specials and deals, etc. By following Facebook's lead, Foursquare is digging its own grave because it won't be able to keep up.

One of the first location-based services, Foursquare is inevitably going to lose this battle. By making these changes -- and not focusing on others -- they're agreeing that what people will want from their location-based services is largely dependent on data. To make smart recommendations tailored to individual users, you have to collect reams of data -- about where you check-in most often, where your friends check-in, what deals your friends are most drawn to. And, while four million people are using Foursquare, more than 30 million have tried Facebook Places already, according to Business Insider. (An official number has not been released.)

As we noted yesterday, the number of users is bound to grow now that Facebook has made this a priority. "That's where these new 'deals' come into play. They enable businesses to give what amounts to a virtual coupon to proximate consumers. Facebook doesn't take a cut of that transaction or anything because they don't care about it. What they want is the data that you're generating so they can use it to fine-tune their algorithms."

I expect that Foursquare will hobble along for a while before collapsing or selling itself to some 10-steps-behind media conglomerate. If they want to be smart about it, though, Crowley should backtrack -- or hope everyone forgets his announcements yesterday -- and have his developers abandon their current projects in favor of something new, something that will differentiate them from Facebook Places.