LeWeb has a very active official bloggers community from around the world and is proud to open its blog to guest posts from them. Here is a post by Sebastien Provencher from Canada.

As an industry observer of local and social media, I've been following the rise in popularity of Foursquare, a mobile application enabling discovery of local places and friends and built with a reward system mechanism in mind. Users earn points for their various actions with the core activity being "checking-in", i.e. indicating to your friends that you're currently at a specific place. Like in a videogame, you get special badges (virtual rewards) and can even become "mayor" of places if you are the user going there most often.

As it brilliantly leverages gaming mechanisms, the application is very addictive and it's going viral as people "signal" on Twitter and Facebook they are checking in to various places (although some people think it's too much). According to the Wall Street Journal, "nearly 150,000 users and tens of thousands more (are) jumping aboard each month". Co-founded by Dennis Crowley of Dodgeball fame (acquired by Google in 2005), the service launched at SXSW 2009. The Foursquare team is starting to think about their monetization strategy and it will probably revolve around coupons and special offers (which is, in my opinion, the best way to monetize a local real-time ecosystem). Some people are saying Foursquare might be the next Twitter. It won't and here's three reasons why.

Reason 1: Advertising is valuable if it's early in the consumer purchase decision process

Inspired by the consumer purchase decision process found in marketing theory, I explained in a recent blog post why I think Twitter and Facebook are well positioned to go after some of the dollars Google and other traditional media firms are after. Consumers signal needs and ask questions to their friends in real-time on social networks and get relevant answers. No need to do research in Google or in the Yellow Pages. Where is Foursquare in that process? It's much later in the decision timeline, at the "purchase" stage, when people are stating they are present in a store or a place (restaurant, bar, etc.). A conclusion has already been reached by the user and they've chosen to go to that place. It's difficult to monetize except as Techcrunch suggests, by building "a compelling recommendation engine that introduces you to new people to meet and places to see based on your past checkin history". I'm sure you could make a case for loyalty or customer retention programs but that's not where the big bucks are online.

Reason 2: Foursquare hasn't reached the scale yet to be a platform play

Foursquare has perfectly executed on their check-in function which could eventually become the "default" standard to check-in on local Web sites, serving an important purpose. As I wrote in my recent post about the "The Perfect Local Media Company in 2014", I strongly believe check-in will be a required component of mobile local services. Foursquare has an API that you can use to interact with their platform and introduce a check-in function in your own local application/site (see an example here). The big challenge here is Facebook. The gigantic social network is used to maintain your existing social graph o friends, already has critical mass (including in mobile) and I predict (like Jason Kincaid did) that Facebook will introduce a check-in function as part of their soon-to-come geo-location roll-out. I don't think Foursquare will become big enough in time to avoid this disintermediation.

Reason 3: Monetizing through local dollars is hard and requires a lot of financial and human resources

Outside of directory publishers and maybe Google, anyone who has tried monetizing "local" traffic has found it very difficult. It often requires a large sales force which means human resources and dollars. I was reminded of that fact with the recent announcement that Groupon, a local group-buying startup, had raised $30M. The article mentions that "they have 126 employees, more than half of which are sales staff finding new deals for users". I can guarantee you that Groupon needed all that money to scale local sales nationally. ReachLocal, a local search engine marketing firm, raised a total of $67.9M over multiple rounds to do the same, to "reach" local merchants. So, it's going to be difficult for Foursquare to monetize their traffic unless they partner with existing sales forces but they need to get bigger to appear on the radar screen of those organizations.

So, is Foursquare doomed? Not at all. They've perfectly executed so far on a shoestring budget (they raised $1.35M in September after self-funding the first months of operations), they're growing exponentially and expanding internationally. I expect them to be acquired in 2010, possibly before a next funding round. But are they the next Twitter? To that, I have to answer no.

Sebastien Provencher has been blogging about the intersection of local and social media since 2006 and is generally known as one of the top international experts on the future of directory publishing (aka Yellow Pages). He lives in Montreal (Canada), a city at the intersection of Europe and America.