I'm still astounded by this. They had a #&$%ing verb. That is the #&$%ing gold standard of presence. "I'm going to foursquare this." I actually heard real human beings say this.
If your app name has become a verb the last thing you ever want to do is refocus. If you want to go to a ratings app like they apparently did (because... uh... that's not a saturated space or anything?...) then you make another app and leave your wildly successful app alone.
1. You're left with an app that has stagnated in market share for a number of years (even dropped a bit)
2. Your brand has been marginalized by Facebook's vertical integration of your primary feature
3. You have some money left (investment, revenue, whatever - I don't know about Foursquares's finances, but they obviously have some money or they'd be gone)
Given the aforementioned, do you A) pretend like nothing happened and continue watching your brand fade into obscurity (e.g., MySpace), or B) try to reinvent (e.g., like MySpace did - their traffic topped 55M uniques/mo in 2014)?
Because of your #3, that means they had some time. Rather than torpedo something that was still a bit of a success, if no longer a moon shot, they could have innovated something new alongside the existing product. Either a compelling new feature or a separate product that was able to leverage their huge data set. Their users were delighted by the existing product, but they ignored their users in order to go with the torpedo route. Clearly they had never read anything by Paul Graham?
You have two options. One will leave you bankrupt within a year or two with probability 1.0 and one will leave you bankrupt within year or two with probability 0.8. Which would you chose?
Except if they had monetised in a way that isn't changing their entire app then they would have been more likely to stay successful.
This change was poorly thought out and probably wasn't going to be successful, same as if Twitter spun their micro-blogging to another app, it wouldn't end well.
What's your evidence for that? I could entirely believe they thought it through very carefully, knew that this was a likely outcome, and did it anyhow because it was the best chance they saw for success.
Remember, this is the third checkin app in this series. It started life as a student project. The first commercial version was Dodgeball [1], which was created, grown, and purchased by Google before the iPhone even existed. Google wasted the opportunity, so Crowley started Foursquare and did it again.
Personally, I suspect they discovered that the whole check-in dynamic was fading. E.g., it's something people did for a while out of novelty and they expected its true long-term audience to be small.
Once you take VC money, it's "go big or go home". A small, modestly profitable company is not something your investors are interested in; they would rather you gamble and lose. And Foursquare took $162 million [2] so they had to go very big indeed. The "success" period of the article's graph looks like VC-failure to me.
Winning back your penny at the penny slots isn't the result you're playing for, but it's a better result than losing the penny.
I don't know the details of the FourSquare pivot, and hindsight is 20/20, but if I had even a small chance at medium-to-long term profitability (good brand, loyal followers, but flat growth), and a minuscule chance at riches by burning down the building, I wouldn't light the match.
Which person are you projecting yourself onto here?
The CEO doesn't have that choice. He'll get replaced by the investors.
The VC investors don't have that choice. It's not their money they're working with. They've promised their investors, the limited partners, that they'll go after high risk, high reward scenarios. If they don't make those gambles, they won't get the capital needed to run.
The limited partners also don't generally have that choice with this money. They are people who manage large pools of cash, and part of what they need is long-term, high-reward investments, which are necessarily high risk. [1] They have other money in safe, low-return investments. This money is for go-big-or-go-home bets.
This is the devil's bargain people make when they take VC money. There are other ways to build businesses, but they aren't the kind that will let you spend $100m-2b before you get to break-even, which is apparently what it takes to build a social network.
IMHO - Dens is a romantic dude. He has just as many conceptual aspirations as he does commercial ones. Power users of 4sq. turn their worlds into farmville - mindlessly checking in everywhere they go (i.e. "home", "gym", "home" etc.). He wanted to disassociate the brand from that activity, and emphasize the utility of check ins (i.e. who else is here, how popular is that etc.).
Could he have done this in a more elegant way? Maybe. But either way, the data he has compiled to entice advertisers is already quite substantial. If he successfully rebrands 4sq. as a resource and swarm as a tool, he's done exactly what he wanted to do.. as opposed to something close/safer.
If you settle for barely breaking even, your investors will replace you with somebody who believes they can take your company and have a chance of making ridiculous money. They will do that even if it is a 20% of wild success and an 80% chance that you will drive away the millions of users.
Why? Because merely covering core operational costs doesn't do anything to pay back the investors who put in $160 million.
I'm having trouble understanding what you want to know here. Is this whole VC funding thing new to you?
Assuming so, the short answer is that the venture capital ecosystem is about investing in businesses before we know what kind of businesses they'll turn out to be. This was especially true for free-to-use social apps like Facebook, Twitter, and Foursquare. Those only make sufficient money if their scale is very large. It's also hard to know what their true monetization opportunities are until they reach scale, which is why Twitter and Facebook didn't really bother with pursuing revenue until they were huge.
This worked out pretty well for the winners. But it has a known failure mode for the losers: things that might have been good small businesses end up getting totally destroyed in the rush for glory and riches.
mentions "stream[ing] hundreds of millions of daily application logs each day." These logs must be at least 0.5K w/ metadata (probably more), so we're talking about...what, 100GB/day of application logs? Alone?? You're not persisting those using cron + MySQL--they likely use Kafka/Kinesis, many threads/instances subscribing to topics, and a large, horizontally-scalable db or Redshift to manage them.
Note that I haven't even addressed querying those logs (I believe 4sq uses Hive, the case study mentions Tableau). That all costs money.
We also haven't mentioned reviews for their millions of locations, user auth, check-ins, app development (web/iOS/Android). Each of those is a problem for a company with a MM-level user base.
Do you have some kind of intimate knowledge of their monthly engineering costs?
EDIT: 4sq website says 2M legit businesses, 65M total places.
Ha. Hahaha. How many apps at that scale have you run? Foursquare is on AWS[0] and serves 40 million users. Their monthly spend there is probably at least in the 10-20k range. And this is before even considering that they had 135 employees at the time[1] and swank offices in a hip neighborhood in NY. Making all that back with "ads", especially when your platform is almost completely on mobile, is not a cakewalk.
they had 135 employees at the time[1] and swank offices in a hip neighborhood in NY. Making all that back with "ads", especially when your platform is almost completely on mobile, is not a cakewalk.
How about firing 120 employees and moving to a smaller office, just until you've figured out how to make money?
Or why the need to grow to 135 employees with a checkin app for two mobile platforms? What do they all do and how is that aligned with the product at hand?
When the parent comment is asking "how much does it REALLY cost to run the site", I don't see how them having to pay for swanky offices is much of a rebuttal.
Not really, because for a lot of NY tech companies the office is a significant selling point for potential employees, and they do community events there that raise the brand's clout. Nobody wants to go work in a basement in Harlem when they can do the same work for Facebook and have a skylight and yoga balls.
Given their location data and technology stack, I wouldn't be surprised if you've underestimated their spend by an order of magnitude (eg. $100-200k/month, ~$1.2-2.4M/year).
Yes, I think you're probably right. I noticed after the fact that they mentioned "hundreds of machines" and I was estimating more towards "dozens of machines".
More armchair quarterbacking. You don't just pick up and move to save a buck when you have a whole company running on AWS' specialized architecture. There's a lot of process and a lot of overhead that factor into that consideration. A lifelong Mac user, for example, couldn't seamlessly jump into Windows just because "it's cheaper".
Even if you ran on bare metal on colocation, I doubt you save more than 50%. That's time wasted that could be more fruitfully spent iterating on profitable ideas. Plus that's exactly why you took investment capital in the first place, so you didn't have to do all that fiddly stuff. It's always better to maximize revenue than to minimize costs. On that note, the cost of paying all those salaries is probably 10-50x the Amazon bill, but you can't really cheap out there either.
True, they should have made Swarm their new Yelp clone or whatever their curated travel guide strategy was, instead of gouging the flagship app that had popularized the check-in for 10s of millions of active users. It was such a departure and made no sense branding wise. I mean I guess they wanted to associate their company name with the money making version of their app (if this strategy worked out) but still... it was oddly done. A lot of bouncing back and forth between two apps (check in on swarm, look at tips on FS?!).
Right. They could have simply launched a new app that centralized the review data that they'd already gathered from 4sq and continued to populate this new app w/ the valuable data from 4sq, and then used the two apps to feed each other. That would have been cool and not irritated their most loyal users. Also, Brand extension almost never works: http://amzn.to/1D2J4c8
The leadership of Foursquare failed. They had a very popular product but couldn't make anything out of it; hence the pivot. They should have sold the company while the valuations were good. Now, the company is the Mayor of crushed expectations.
Is it really the leadership that failed? Their product was popular, but I can't see any way they could make money on it. I don't think that means the leadership was bad, I think it means the product was inherently un-monetizable.
That's a fair point, but I read the parent post as complaining that the leadership couldn't squeeze blood from a stone, not that they came up with a non-commercial product in the first place.
You could have monetised it the same way you monetise many other apps. With ads? I mean, Twitter's monetisation model isn't exactly genius either...
Why not give a coupon when checking into a place that is near others - making people stop by another place/shop to maybe purchase something? (lat/long based)
Lots of valuable data for mapping, local search, and the ad targeting that goes with it. Valuable to Google, Apple, Facebook and a few others. The failure was in growth, blame likely correctly laid on Facebook.
It's funny how everyone in this thread is saying they needed a monetisation strategy but no one has suggested one. Maybe there just isn't a business in check ins.
The app isn't the product. The points-of-interest database they built from their apps' users is the product. And that is what they're now selling to companies like Twitter.
Twitter's incorporation of the POI will give them much more "check-in" data than their own apps ever could.
Ah, yes, I've done broadcasting too. The app is not the product if it's free. But people mistake that: you still have to actually have an app people want, if you're going to make them the product.
The app doesn't matter anymore. Twitter is the app now (and whomever else they license their points-of-interest service to). Consumers of their service likely feed back check-in-equivalent data to foursquare, which allows them to do trending and bolsters their database further.
I lament the loss of the app too. Checking in and becoming the mayor was the fun of the old app, and Swarm just doesn't do it for me. At this point I use it mostly as a log of new places I've been to so I can visit them again in the future, particularly while traveling.
Pretty well. Actually very well. Meeting expenses with quite a bit of padding. That used to be the definition of success before the cult of "growth" took over everything.
If your app name has become a verb the last thing you ever want to do is refocus. If you want to go to a ratings app like they apparently did (because... uh... that's not a saturated space or anything?...) then you make another app and leave your wildly successful app alone.