The article was updated to add Foursquare’s comments and CPA figures in the last 3 paragraphs.
In a very low-key, pre-holiday post, Crowley announced the capital increase via investments from DFJ Growth and Capital Group. As part of the deal, Foursquare also gets a new board member: the former CEO of AOL turned Managing Director of DFJ Growth, Barry Schuler.
The round is intended to fuel the company’s efforts to boost its ad network, which allow businesses to promote themselves to Foursquare’s 45 million users via targeted deals and coupons offers. The deals are part of the recommendation engine that Foursquare is building, based on the 40 million tips and 5 billion check-ins it has garnered in its database.
Here’s how it works:
At the other end of the game, so to speak, Foursquare’s discovery tool Radar had been rolled out in October 2011 but didn’t survive as a monetization product. So the company is putting a hard focus on making sure their model now works. Today’s platform is letting businesses send real-time ads and places recommendations to your phone as you happen to walk/be in its vicinity, and without you having to check in.
ClickZ checked in (ha ha) with Brendan Lewis, Foursquare’s head of communications: he confirmed that monetization will be the driving force behind the spending. Product development and international growth will both be key. The company’s ad platform for small businesses has gathered momentum enough in just over 2 months to now be actively used in 80 countries worldwide. Therefore, beefing up its engineering and sales teams will allow Foursquare to support the expansion. Key international appointments are to be expected as well. Local partnerships are definitely on the cards, to speed up inventory collection, Lewis explained.
Foursquare gets paid on a Cost-Per-Action (CPA) basis, defined as a user (depending on what type of ad they see) either clicks on an ad to learn more, saves the ad for later viewing, or if they check-in to physical location of the advertiser within 72 hours. “Depending on the ad, we’re seeing action rates between 3-10 percent. As a frame of reference, typical banner ads only see engagement rates of .01-.05 percent,” Lewis explained.
No wonder they are going gung-ho on their monetization…
Users can breathe though: Lewis said there’s not plan to introduce any premium model of any sort – the business model will continue to be solely ad-supported.
Do you use Foursquare?