How Harry Potter Geek Created FOURSQUARE and went from $1 to $1 Billion
Foursquare.com is a location data platform that was created by Dennis Crowley and Naveen Selvadurai. They launched with playfoursquare.com in early 2009 and after its first round of funding, first thing Foursquare did was purchase the foursquare.com domain.
The idea for Foursquare was born back in 1999 around the time when Dennis graduated from Syracuse University and moved to New York City. He was in his early twenties and he was figuring out what he was going to do next.
He worked for the company that built applications for the Palm Pilot City guides, which is like an early version of a Smartphone that kind of barely worked. The app name was Vindigo.
In the words of Dennis Crowley:”Back in the dot com heydays, I used to work for this startup called Vindigo (Palm Pilot cityguides!). Because the Palm was so small (like 2mb memory) there was only so much info you could fit on the Palm per city – and we usually had to draw lines around a city map to decide what was going to be included / excluded from the guide. We often had users complain (the map boundaries were never really made explicit) about their homes / favorite hotspots being outside the map boundaries (and often questioning our city knowledge and mapping integrity) At one point some disgruntled user asked us “just how the heck do you define what’s in and what’s out anyway?” and we ended up sending them this pic. Ha!”
But how did Dennis came up with the idea for an app that will help you navigate around cities and experience them more fully with the help of personalized tips? He was reading Harry Potter at the time and there’s this concept of a Marauder’s Map. He thought how it would be cool if you could have a real life Marauder’s Map, but for New York city.
The idea of a map where you can see where your friends have been didn’t exist at the time because the technology wasn’t there. Dennis thought how this is something probably nobody will create, so he decided that he would create the app for himself. But at the time he had no one that was an engineer that could build a software and he couldn’t afford to hire an engineer. And back in the early two thousands it was pretty expensive to build software like this. So he decided he would just learn how to code himself. He decided to pick up one of the books that taught you how to code in 30 days and that was enough for him to build a rudimentary app, called Dodgeball.
This was around 2000, and everyone told him how this won’t work and how it was a bad idea so he left the project unfinished, got a job at Vindigo and moved on.
After the.com bubble he and a couple of his friends lost the job at Vindigo and Dodgeball was back in the game. But this time he and his friends decided to put some extra resources into it, and to create something that would work a little bit better than anything else on the market.
After a while they started getting thousands of users (mostly in NYC) and Dodgeball gained the traction, but to scale the operation, they needed extra funds that they simple couldn’t get at that time.
They tried everywhere and finally got a break at one conference where they met with Google rep. Google got interested and Friendster -meets-cellphone social service Dodgeball.com got bought by Google.
But Google never did anything with it and few years later the service was turned off.
You know what? I’m going to build it again
And this time he went with Foursquare. Still, 10 years after the Marauder’s Map idea, there is no interactive map of NYC on the market. But things have changed and Smartphones evolved from text based services to technology that would know where a user had been without being told.
By March 2009, the prototype was in the testing phase and they decided to have the application ready so that they could present it at the SXSW (South by Southwest-also known as Spring break for geeks) festival in Austin,Texas. They managed to complete the iPhone application and their presentation was a complete success. They got featured in Mashable during the conference and many geeks sitting at SXSW downloaded the app. The people were impressed with the app, especially the game elements.
During the 4 days app had over 10K checkins in Austin. After the conference Dennis Crowley sent following Email to Austin Foursquare users:
“… you guys unlocked almost 3000 badges. Quickie breakdown below… I love that so many more people got 10 miles out away from downtown (Far Far Away) then hit the convention center 3+ times before 11am (Panel Nerd). 36% of you hit at least one BBQ place (Porky) – a little low no? – and just 1% of you hit more than 3 hotels (Slut) or braved the late-night lines at the PV Lounge (PV Bender). Also can’t get over that more of you checked in at the Karaoke RV than the Digg Party. Ha!”
They had over 4000 users within the first month of launching the app. After a while the number of users started declining and that’s when they decided to add new cities to the app. Every time they added a new city to the app the number users shot up. This was a great contributor to the growth of the userbase.
Foursquare provided a platform for establishment owners to interact with their regular customers. They were able to also reward their most frequent customers and promote the app to other customers. Within 2 years after the launch, the app had registered over 3 million users and it continues to have more check-ins on a daily basis. At the peak of its hype around 2012, the app boasted more than 30 million users.
But You Can’t Live on Users, You need Profit.
Even though app managed to gain traction and attract millions of users, they failed to monetize it properly. Besides this users were not sure anymore, what is this app about? Is it a new Yelp, should it be Google Maps or something else. Foursquare didn’t manage to find a proper way to keep the users engaged and while other apps like Facebook gained billions of users, Foursquare was left at millions,interest in the app dwindled.
This meant that Facebook had bigger sample data for marketers and Foursqare smaller group of people that are leaving their data on the table. But Foursquare have something other apps like Facebook doesn’t have.
The most accurate and reliable foot traffic data on the market.
How accurate? So accurate that in 2016 CEO of Foursquare went live on CNBC and predicted that Chipotle Q1 earnings will go down 29-ish percent. And he pulled this data from foot traffic they were getting from Foursquare users.
And Ben Horowitz, a co-founder of Andreessen Horowitz, who sits on Foursquare’s board saw this before other people, so he approached Dennis Crowley and suggested that they should sell access to their API, the same API huge companies were using free of charge. Why giving them this data free of charge when they can earn money? Crowley thought how this is a bad idea and that big users such as Flicker will stop using their app and move to other providers. Why they would pay us when they can just switch to Google and Google will offer it to them for free?
Ben’s idea was that it would be too painful for them to switch. They rely on your service. They like using it. They like the accessibility that you give them. So just try it. And so they decided to try and Flicker was like, yeah, you know, we were wondering when you were going to ask us to, to pay for this cause it’s such a useful tool. And then they went to Instagram, which was one of their early users that had, millions and millions of users using their location based technology. And they also agreed to pay.
That’s when Foursquare pivoted from primarily being a City Guide for users to becoming a wealth of information for big companies, and that gave them a business model.
Dennis wasn’t the guy to go after the large enterprise contracts. So he hired a CEO. He essentially replaced himself as CEO of that company to hire somebody who knew how to sell to enterprises.
According to Foursquare, more than 150K developers are using it worldwide at the moment, including Uber, Tencent, Apple, Spotify, Samsung, and Twitter.