April 20, 2012, 12:46 PM

Foursquare may introduce advertising

Analysts say the platform could be an effective ad opportunity for local merchants.

Lead Photo

Soon, foursquare users may be doing more than ‘checking in’, becoming mayor of their favorite lunch joint or retrieving specials at local merchants. They also may be viewing ads.

Foursquare plans to launch a paid advertising platform, according to several media reports. The program, slated to launch in June, will allow local advertisers to present ads—such as specials and offers—to users searching for local deals in the area they are currently in, the reports say.

Foursquare declined to comment.

Analysts say the platform could be an effective advertising opportunity for merchants and will likely compete with Google’s mobile ads. Google said in its recent earnings report that it sees great revenue potential in mobile advertising.

 “This definitely competes with Google and adds a local and mobile component,” says David Eads, founder of Mobile Strategy Partners LLC, a mobile commerce consulting firm. “Foursquare users can use this to find deals near them, for example when picking a lunch spot. Then based on their check-in they can see relevant local ads for nearby merchants.”

Facebook offers a similar program as foursquare with its Facebook check-in deals that allow businesses to run offers across multiple store locations and create different deals to achieve various business objectives. Merchants can create Facebook check-in deals for free.

Brian Klais, founder and president of Pure Oxygen Labs, says a paid media platform will likely make foursquare's offering more competitive with Google's local Maps and Places ads. “The difference I see is that consumer usage of Google’s services tend to be search-driven which limits reach, where foursquare's highly social use-case gives foursquare a unique opportunity to drive broader mobile local discovery,” Klais says.

 According to reports, the ads will use the same algorithms as Explore. Explore is a tab in foursquare that displays deals based on a user’s check-in history, time of day and location. Foursquare is said to be pitching big brands it has worked with before to become advertisers.

“I think it's a smart move although not really surprising as foursquare matures and looks to monetize demand for local specials, particularly among mobile users,” Klais says.  “Currently, the listings you see on the foursquare app when exploring local specials are driven by popularity or by your friends, kind of like organic search results.”

For merchants, a foursquare ad platform has the potential to increase the effectiveness of their ad spend while driving more traffic into stores and increasing sales, Eads says. More than 20 million consumers use foursquare, the company says, and more than 2 billion consumers check in to more than 750,000 businesses on foursquare every day.

Bricks-and-mortar brands should take a potential ad platform as an opportunity to lock in their established foursquare check-in strategies, Klais says. He suggests merchants establish foursquare venue profiles for each store, and make it easy for consumers to check in via in-store links or QR codes, and then complement those efforts with with paid media strategies to attract new customers in their areas.

“The holy grail of mobile advertising is getting relevant offers to consumers with intent to purchase when they're in exactly the right location at the right time” Eads says. “This brings this a step closer.”

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