Foursquare – Surpasses the 10 Million Registered User AND 500,000 Merchant Mark

Ever play dodge ball? Apparently Dennis Crowley liked the game and or the name so much that he created a social networking platform that was based on Short Message Service (SMS). Dodgeball was founded in 2000 by Dennis Crowley and Alex Rainert, both New York University students. Apparently the two did well, as Dodgeball was acquired by a tiny company named Google in 2005. Frustrated and feeling stifled, the duo left Google in 2007. In typical Google fashion, Dodgeball was shut down in 2009 and replaced by Google Latitude.

Meanwhile, Dennis felt he had something going with Dodgeball so when application technology became operable, he teamed up with Naveen Selvadurai and together they created Foursquare in 2009. Now, with Global Positioning (GPS) technology the web based mobile application (app) allows friends and family to track each other by updating their physical location. The dynamic duo decided to make somewhat of a game out of it by awarding badges, creating virtual mobile mayors and establishing three levels of super user status.

The results have been spectacular. In February 2011 there were 7 million registered users. In June that number hit 10 million, a 43% increase in only 4 months. Tracking is done by “check-ins” (when a registered user checks in to register his or her location). Check-ins have increased from 2 million per day in February to 3 million per day in June, a whopping 50% increase. A check in can occur several times a day by a single registered user. Foursquare is currently experiencing 30,000 to 35,000 new registered users daily. The June data confirm that 50% of the users are outside the US and 50% of the current users are males.

The merchants are salivating at these numbers and this application and have been signing up by the droves. Because Foursquare is mobile and web based, deals can be directly structured based on the users locations and or preferences. Currently Foursquare allows merchant participation at little to no cost. They receive a tremendous amount of value such as the foursquare dashboard that includes key metrics such as total check ins, unique visitors, percentage of check ins shared with Twitter and with Facebook, the gender of check ins, and the time of day when users are checking in.

Foursquare’s valuation is near the $600 million mark, predictably increasing as its user base increases and revenues flow. Foursquare is not hurting for money. They recently received an additional $50 million in venture capital, bringing their total intake around the $70 million level. Their funding has come from Union Square Ventures, O’Reilly Alpha Tech Ventures, Andreessen Horowitz with a few financial angels thrown into the mix. The company also boasts partnerships with many of the top names in the daily deal world such as Groupon, Gilt Groupe, and LivingSocial.

And what about those revenues? Well, for now a small portion of the 500,000 merchants have revenue sharing agreements with Foursquare, however expect that to change in the not too distant future. Dennis makes no bones about the fact that as Foursquare continues to tweak the platform (which he believes is about 90% complete) to an acceptable level, then there WILL be charges associated for continued use of the Foursquare dashboard. Considering the growth, I’d expect another 50% increase in user growth before year end and a valuation just shy of $1 billion. Think Google may make an offer to buy this company as well?

Well, gotta run now, time to check in and see if I have made it to mayor of my local realm.

About Foursquare Labs, Inc.:

Foursquare is a location-based mobile platform that makes cities easier to use and more interesting to explore. By “checking in” via a smartphone app or SMS, users share their location with friends while collecting points and virtual badges. Foursquare guides real-world experiences by allowing users to bookmark information about venues that they want to visit and surfacing relevant suggestions about nearby venues. Merchants and brands leverage the foursquare platform by utilizing a wide set of tools to obtain, engage, and retain customers and audiences.

Source: Bloomberg