Social media vehicle: Foursquare - Essay Example

Foursquare was a small website in the initial years of its launch. But they started experiencing huge rise in its growth rate ever since it changed its location model. As per the new model, it was available to check-in from anywhere in the world. Reasons for Growth/Decline The company started tasting immense success ever since the day they changed the primary technology base. The main reasons for the growth of Foursquare is the fast growing smart phone market and the growth of geo-location marketing.

(Young, 2011) Also, Foursquare is one of the few players in this arena. The company recently bagged a $41 million deal from Silver Lake Waterman. The deal is more like a loan from Silver Lake. “The company is trying to change from being a niche, location-based social network to something more pervasive and powerful.” (Newyorker, 2013) Foursquare is in fact the third most popular mobile social application after Facebook and Twitter. With the new funding of $41 million dollar the company is going to invest strategically on its growth in the coming years.

This will begin right from the recruitment of fresh sales and engineering talents into the company. Risk Factors While Foursquare has been a success story in the social networking space, the sustainability of its success is being questioned by many experts. The famous private company research firm Privco said that Foursquare will fail in 2013. The major reasons that it pointed are (1) The company missed the profit projects for several quarters, (2) Company has been unsuccessful in raising fresh round of equities, (3) Existing investors are not ready to infuse further capital, (4) Only 8 million out of the 20 million registered users actually use the application and (5) the company generate only $2 million in revenue though it is the fourth year of its existence.

(Wallstreetoasis, 2013) The second and third point can be ruled out now as the company had already bagged out a good deal in April. But the number of active users and the revenue target is really a cause of concern for Foursquare in the coming days. The inactive users and poor revenue figures can bring down the valuation of Foursquare. Business Model Foursquare does have a good business model in place. The appropriate channelization of the elements of the model is what is required to insulate itself from the risk factors.

Foursquare’s business model is to connect local businesses to its customers. The company is planning to use new platform called location layer in order to boost the location sketching. It provides ad spaces for the merchants to place their ad banners on the website. This can enable the merchants to have better reachability to the customers. The ads can also be customized based on the search results of the visitors. This business model can work well for Foursquare and can help them in boosting the revenues and valuation in the future.

Future of the Business Though the company received funding, the future of the business is unclear. It is also very early to conclude what actions the company might take because the funding was received only in the mid April 2013. Another reason for this unclear situation is the fact that Foursquare is still a privately owned company and there is less obligation for it to disclose matters to the public. For Foursquare, expanding their location based application in the coming years is like the same way Google revolutionized web search.

As of this month, almost 1,300,000 businesses and 33,000,000