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Foursquare: A New Method of Advertising

Foursquare is a relatively new social networking tool that has recently gained popularity among smartphone users. Users of foursquare use a smartphone app to “check in” to locations which they visit (using the geo-locational abilities of the phone’s GPS to ensure they are within a reasonable distance of the location). The user who checks in most at one location becomes the “mayor” of that location, and check ins are rewarded with points (with the more unique check in accomplishments being rewarded with “badges”), making the social network fun and competitive. Users can broadcast their locations to their friends, and can leave tips and reviews for other users for those locations.

These features all make foursquare a unique new social networking tool, but one of the most overlooked features of foursquare is its potential for advertising ability. As described by the article below, foursquare allows businesses to post “specials” to their foursquare locations, giving users who check in a certain amount of times a discount or prize (ranging from the first check in to being the mayor of the location). Specials are broadcast to users who are located nearby to the location, enticing users to visit and patronize their business. Since advertising businesses do not have to pay to post specials, there are essentially an unlimited amount of advertisement slots. Advertisers thus do not have to compete for slots, leading to a potentially limitless amount of advertisements. Foursquare isn’t able to make any profit and only gains advertising for itself through offering this program. Advertisers only really gain positives out of this advertising system by enticing users to come and even frequent their locations by offering rewards without having to pay any money or go to much effort to advertise to the rapidly growing user base of foursquare. User’s also do not have to spend much effort past simply checking in to redeem their prizes.

However, foursquare’s advertising still requires much development in order to be successful. The fact that these advertising slots can be so easily bought and broadcast to users makes them much less effective. Users can easily get inundated with several specials that are often not relevant to their interests. Specials that require users to become a mayor may become more a nuisance when the place is a popular check-in location, especially if the resulting prize does not merit the work of constantly visiting and checking in. Eventually users will start to ignore specials because of all of these problems. Marketing using these foursquare specials will then lose their effectiveness when users start ignoring the advertisements. In order to improve the specials advertisement system, foursquare can use the information about a user’s check in history so they can gather data about the type of products and services they would be interested in and the areas they frequent and create a set of categories (such as a category for restaurants or athletic wear in locations such as Times Square or Georgetown). Foursquare could then make advertisers bid for a limited amount of slots, creating profit and limiting the amount and scope of advertisements (making advertisements more attractive instead of annoying to users). Using any type of auction (VCG or GSP for example), advertisers can place bids for slots (valuing certain categories above others), and foursquare can delegate and sell these slots to advertisers based on their bids and the type of auction, creating competition and profit which will only make these “specials” advertisements more effective.


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October 2011