Mapping out Foursquare’s Final Check-in

I need to start this post with a few disclaimers. One, I have friends who worked at Foursquare. Two, I absolutely love the product, and it’s on my iPhone homescreen and is one of the first apps I launch while traveling in a new area (though it was off my phone entirely for a while). And, three, I believe there’s much more room to innovate on the product, especially with their team which is strong in so many key areas. So, with all this taken into consideration, it would be dishonest for me to say that I can see Foursquare remaining an independent company in 2013 (or perhaps sooner), especially with all the mobile maps-related shifting going on as the Big Four (Apple, Google, Amazon, and Facebook) all are locking in their own hardware systems or, in Facebook’s case, will go down the hardware route at some point, it seems. And, while Foursquare’s latest release shifted the language from “search and check-in” to “explore,” mobile navigation for now seems to be dominated by traditional hunt and peck search and, in the future, perhaps by voice command (as apps can tap into Siri) or even push services (like Highlight).

My thinking has evolved on this topic, but was crystalized when Fred Wilson spoke at TC Disrupt 2012 in NYC. He remarked that the traditional path for a web company was to first build product, second build a business, and then third, build a company. This is what Facebook has done, for instance. Same for Tumblr, one of his investments. He remarked that Twitter (another investment), on the other hand, built a product, then a company, and is now focused on the business — so a bit out of order. In this Wilsonian framework, Foursquare has attempted valiantly to build a business, but the friction of trying payments to check-ins may be too hard to bridge because acquiring payment keys is a difficult, difficult task. (It should be noted that some of Foursquare’s deals, especially with AMEX, were extremely creative and work seamlessly today, but not at scale — more on this below.) In the process, Foursquare has raised lots of venture capital at high valuations, and now are in the room with the likes of Yelp.

Recent trends in mobile and the scale issue highlighted above, ultimately, lead me to cement my prediction that Foursquare, when the time is right (in the next ~12 months, perhaps sooner) will be an extremely attractive (and expensive) target for not just one of the Big Four, but possibly a range of other companies that may surprise others, so much so that the clearing price will shock many. I believe that high multiple will be deserved, many times over. The team is stacked with talent, expert in what they do, have built an incredible product and brand, and would be a great asset to any company (especially those with their own mobile hardware and/or payment gateways). While there’s a chance Foursquare could find a way to hit another growth curve on mobile, they aren’t in control of their own fate on distribution, have been partly disrupted by applications that grab location passively (like Instagram), and could be threatened by the next generation of LBS that leverage push notifications over explicit actions. Yelp is currently a publicly-traded company with a market cap of about ~$1.2b (and is itself an acquisition target, but at a premium), and with all of Foursquare’s social context on top of physical maps, it’s easy to see how other big players would want to scoop up the company and product — and I think that clock starts ticking now.