Mashable is reporting that location based social networking company Foursquare is now testing a new advertising platform geared towards small business, by letting large advertisers like Burger King, Gap and Starwood Hotels to test promote themselves with the platform. These listings show up in Foursquare when a customer gets close to a business’ physical location. Small businesses already had the capability to offer discounts when a user checked in to a location, but this time Foursquare is giving them a way to attract geographically close customers by showing an image ad and/or review by a previous Foursquare user.
What’s in it for Foursquare?
Foursquare is a location-based social networking site for mobile devices, such as smartphones. Its users “check in” wherever they happen to be 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 opportunity to market themselves directly to consumers. Foursquare, while seemingly successful with more than 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 boost the cash flow.
How the new ads work
The way the new ad platform works is through targeting Foursquare users based on their locations and check-in histories. Merchants are able to attract nearby customers with specific tastes, say for example a hankering for Far Eastern cuisine, or simply just customers who had checked-in to their location previously. Merchants can stop their Foursquare promotions whenever they want, and the pricing for this is similar to a pay per click model, that is, they are only going to be charged on a “per action” basis (when a user actually taps on a promoted listing as opposed to merely looking at it). Initial ad prices are $0.50 to $3 per action, but that could change as it’s released to everyone. Foursquare CRO Steven Rosenblatt said, “Small businesses are willing to pay for local advertising if it makes sense.”
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