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So Who’s Gonna Buy Foursquare?

The conventional wisdom and widely held perception in the market is that Foursquare has peaked in terms of growth and engagement. The company strongly disputes that perception.

Last week at the MMA Forum in New York, Foursquare Chief Revenue Officer Steven Rosenblatt said the business was strong, citing “triple-digit [revenue] growth.” Today, announcing a location tagging deal with Twitter, Foursquare CEO Dennis Crowley cited stats intended to let the world know that all is generally well.

Here are the stats Crowley mentioned:

  • 50+ million monthly users across apps (Foursquare, Swarm) and the company’s PC site
  • 85,000 developers and publishers using its locations API, which the company says is up 30% vs. a year ago
  • Partners (in addition to Twitter) now include Microsoft, Pinterest, Waze (Google), Flickr (Yahoo), Samsung, Citymapper “and thousands of others”

In a Fortune interview, investor and board member Ben Horowitz says, “The Foursquare platform is a pretty fast-growing SaaS business compared to the other new SaaS businesses we’re invested in.”

From what I can tell Foursquare has built a more sophisticated technology platform and “recommendations engine” than Yelp. But Yelp has the stronger brand and usage. Foursquare is not obviously better to most people and so people aren’t substituting Foursquare for Yelp.

It’s pretty clear that Foursquare is not a candidate for an IPO.

The company has raised well over $100 million in several rounds and its investors will reach a point where they want to cash out. That may have already happened. If not, I believe that point will come relatively soon — unless the company really is growing as suggested.

There are quite a few potential buyers of Foursquare. They include Google (as a spoiler), Facebook, Yahoo, Microsoft, Amazon, Alibaba and potentially others. AOL might even be a dark horse.

It’s a pretty safe bet that Facebook will enter the local search market with a “Places app” or something similar. As a foundational element of its local search strategy, Facebook could buy Foursquare and maintain the brand, integrating all its own ratings and other social data on the back end.

This is when Google might get involved as a spoiler.

I had thought for a long time that Yahoo was the most likely buyer but I no longer believe that’s the case. Microsoft is an investor in Foursquare and may have a “right of first refusal” option. There are many potential scenarios.

I see no shortage of potential demand for Foursquare; the only questions in my mind surround selling price and timing. I suspect we’ll see a sale within a year — again unless everything the company is saying about its growth and momentum are true.

Then it will take longer.

2 Responses to “So Who’s Gonna Buy Foursquare?”

  1. Perry says:

    Twitter [bit data infrastructure bet], Apple [cheaper than Yelp, go head-to-head with ground-up mobile play] and Priceline [traveller segment focused] are equally logical exit choices to throw in the mix.

    I’d probably even include YP if they get their cap table ducks in a row – they need consumer traction in mobile to match/sustain their ambitions/claims, and 4SQ and YP are very complementary [YP being SMB centric and a B-player in consumer media], culture clash aside.

    FWIW, I’m not convinced the pressure from investors is so onerous – there are some serious long-term bettors around that table. I think they are focused on finding the sweet spot for re-energizing growth MUCH more than they are focused on exit scenarios. I think it’s way too early to declare Swarm/4SQ a fading violet.

    Ironically, Facebook’s entry may well be the catalyst to trigger value growth as players line up against their expected moves.

  2. Greg Sterling says:

    The data business has always been part of the plan but usage is not growing according to everything that I’ve seen. There is a point that investors will force a sale although we’re probably not yet at that point as you suggest. Facebook’s entry (depending on quality/utility) will negatively impact 4SQ and Yelp . . . but contingent on utility of any offering. A weak one does nothing to competitors.

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