Deals

Microsoft is just the sugar mama Foursquare was looking for

Above: Foursquare CEO Dennis Crowley

Image Credit: Sean Ludwig/VentureBeat

An older, financially-secure power player shacking up with someone young, exciting, and looking for security — we’ve all heard that “love” story.

Microsoft and Foursquare are putting a tech industry spin on this old tale by announcing a union of their own today.

Microsoft is investing $15 million into Foursquare and signed a licensing agreement to use its extensive location data. This data will help Microsoft improve Bing’s local and search products. For Foursquare, the deal provides a new revenue stream and creates a cushion as the company continues to iron out its business model.

Rumors about this deal have circulated for months, and were confirmed today along with news about Microsoft’s new CEO.

Foursquare was once one of the hottest startups out there. People use the location-aware mobile app to “check-in” places they visit, and see what their friends are up to based on where they check-in. The company has collected data on 45 million people, 5 billion total check-ins, and 40 million recommendations.

It is sitting atop a treasure trove of data on local businesses as well as consumer habits, but struggled to make money off of it for years.

Then in 2013, Foursquare began to show that it could become a viable business. It grew into a local search/discovery platform, rather than just a social app, and put six monetization options in place. 

Foursquare began offering paid promotions and check-in ads, expanded its self-serve ad platform to small businesses, and is making major investments into the idea of “passive awareness.” Licensing agreements, like the one with Microsoft, are another channel for revenue.

Microsoft’s cash injection will help Foursquare get through this “experimental” phase, and Foursquare could be just the revitalizing boost Bing needs. Now through greater access to Foursquare’s data, it will be able to offer people smarter search results and recommendations. This is not an exclusive agreement. Foursquare wants to keep its options open.

This kind of deal isn’t new for Microsoft, which invested $240 million in Facebook in 2007 in a move that eventually led Facebook to use Bing to power its web search.

With this $15 million, Foursquare has raised $121 million in venture capital, as well as $41 million in debt financing.

More information:

Foursquare is a location-based mobile platform that makes cities easier to use and more interesting to explore. By “checking in” via a smartphone app or SMS, users share their location with friends while collecting points and virtu... read more »

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