Mashable is reporting that location based social networking company Foursquare is currently testing a new advertising platform created for small business, by permitting large advertisers like Burger King, Gap and Starwood Hotels to test promote themselves on the platform. These listings show up in Foursquare when a customer gets close to a business’ geographic location. Small businesses already had the ability to offer discounts when a user checked in to a location, but now Foursquare is offering them a way to attract geographically close customers by showing an image ad and/or review by a previous Foursquare user.
Why this may be a good idea for Foursquare
Foursquare is a location-based social networking site for mobile devices, such as smartphones. Its users “check in” wherever they are using a mobile website, with a text message or a device-specific app. Foursquare locates them through the GPS in their mobile device. While Foursquare has until now been an easy method for consumers to share their hangouts, favorite places and eateries, now they are allowing these places the capability to advertise themselves directly to consumers. Foursquare, while seemingly successful with over 25 million registered users, they have been singularly unimpressive when it comes to earning money. They made a paltry $2 million last year, according to The Wall Street Journal, and are searching for ways to increase the cash flow.
How the new ads work
The way this works is the ad platform targets Foursquare users based upon their locations and check-in histories. Merchants will and do have the ability to target nearby consumers with particular tastes – a predilection for fine dining, for instance, or customers who had previously checked-in to their store. Merchants in this program are able to turn on and off their Foursquare promotions any time they want, and are being charged similar to a pay per click model, that is, they will be charged only on a “per action” basis (when a user actually taps on a promoted listing rather than merely viewing it). So far, Foursquare is charging $0.50 to $3 per action, but that’s subject to change when it is rolled out to the masses. Foursquare CRO Steven Rosenblatt said, “Small businesses are willing to pay for local advertising if it makes sense.”
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