Foursquare Turns To Location Data For Revenue, Joining Crowded Field

Foursquare boldly announced at one point that it wanted to be the “location layer for the internet.” Now the company is trying to make good on that aspiration and cultivate new sources of revenue at the same time.

Amid new rumors of a potential Yahoo acquisition, Foursquare has continued a slow pivot of sorts in an effort to monetize its location data. Earlier this week the company introduced a product called Pinpoint, a new ad targeting tool using location data and location history.

Pinpoint is positioned as a cross-device audience targeting solution. It also comes with offline attribution. But unless there’s some “secret sauce” that escapes me — Foursquare would probably say it’s data quality or location accuracy — the company now joins a crowded field of data providers and advertising platforms that are doing essentially the same thing.

These competitors are using location and location history for audience targeting, retargeting and offline attribution. Those already doing a version of this include but are not limited to Factual, xAd, NinthDecimal, Verve, ThinkNear, YP and Placed. In addition, most of the mobile ad exchanges are starting to use location data and user location history (often provided by one of these companies) in a similar way.

Here are promotional statements about Pinpoint that Foursquare makes on its site:

1. Location is more than a latitude and longitude. We have six years of first-party location intelligence, creating a map of the world the way your mobile device sees it. Our snap-to-place technology filters out inaccurate location data, so advertisers get only the precise places that their audience goes to in the real world.

2. We’re making sense of the relationship between people and places, so that brands can target more than just demographics. Through our verified ecosystem of apps, exchanges and publishers, advertisers can reach beyond the Foursquare Audience to consumers. Marketers can create custom audiences at scale, using the psychographic data that they need, combined with the location data that only Foursquare knows.

3. We work with the leading premium publishers to deliver best-in-class inventory with enhanced custom creative and cross-platform retargeting. Our proprietary Attribution Report ensures that advertisers can easily quantify how effective their campaigns are in driving critical foot traffic in locations.

Accordingly, Foursquare identifies a number of “leading brands” already using Pinpoint, including:

The accuracy of location data used in mobile ad targeting and for audience segmentation can be highly variable. Some apps or publisher sites pass location data that is very accurate and some pass “centroid” data that is wildly inaccurate in terms of real-time user location — and that screws everything up.

That’s because the inferences and data that can be drawn from inaccurate location are essentially noise. Location history is used to correct for this noise and “false positives.” Beyond this, to address the “bad location” issue, most exchanges and mobile platforms are starting to score the accuracy of their underlying sources of location information (publishers and developers) to determine which ones are reliable.

The core idea is that, beyond “geofencing” and location-based ad targeting, user location history reveals behavior, brand affinity and audience characteristics. People who live in certain areas, shop in particular stores or exhibit certain real-world behavior patterns can be grouped and targeted or retargeted later.

Real-time location may or may not come into play in this process. Indeed, retargeting may be even more powerful than real-time location targeting. Is the best time to reach a golfer while she’s on the golf course or later when she’s not focused on the game?

In this way location and location history are being used as a kind of cookie for the real world that can help define audiences and interests based on actual behavior rather than proxy criteria. To use the golf example again (I’m not a golfer), regular visits to golf courses is a probably a more reliable indicator of status as a golfer than visits to golfing sites online.

There are many stronger examples. Someone visiting car dealer lots in the real world is probably a more immediate lead and ready-to-buy “auto intender” than someone reading about the New York Auto Show on a website.

Despite the pervasiveness of the “Pinpoint methodology,” the product could become a viable revenue source for Foursquare. I still believe, however, that Foursquare is ultimately an acquisition target.