Five Strategic Steps
This section outlines how Foursquare has strategically leveraged Web 2.0 techniques to become a leading player in the location based social networking gaming.
Build on Collective User Value
Consumers use Foursquare to share information with their friends, play games and be exposed to exclusive promotional offers. When a new user signs up to the game they are immediately gratified and able to use the platform to its full functionality. Through harvesting the data users generate the platform is improved.
Gamers contribute value to the platform when they share information with their friends such as where they are, what is worth doing and when they attempt to earn badges. Notably, these functions are Foursquare's core competencies and the reason why clients use the application. Businesses also generate content when they create badges and specials to promote their products or services. Foursquare has created the application in this way, such that, personal users and businesses each use the application to meet their own purpose and are consequently increasing the value of the platform through creating new content.
Following a model where content is generated by users, Foursquare has been able to avoid many costs related to traditional application development. Savings are as a consequence of reduced cost in content production and scalable business practices.
Users generate the content they use the platform for and marketers sell to these users. Without users, Foursquare would be worthless, no locations would exist, no tips would exist and marketers would have no one to advertise to. In summary, Foursquare's estimated worth is $6 million and that value extends from its user base.
Activate Network Effect
Foursquare's success has been dependent on their ability to activate the network effect. As discussed in the previous section, the company's value is directly linked to the number of users they have. Furthermore, the product greatly improves as the user base increases. Foursquare captures the network effect whenever a user or business uses the platform to communicate ideas, tasks or promotions.
In an effort to maximise the positive effect of the network, Foursquare has strategically combined the different methods within the application. Of the range, the most obvious is the direct network effect captured by Foursquare. Firstly, by directly capturing explicit and implicit content users generate, the platform's content is continuously being improved. Improvements to the application are being made indirectly by third party developers who have accessed the open API Foursquare offers and have began to develop new applications using Foursquare's content. Such practices are increasing the value of the application and through analysis of new applications Foursquare can gather new ideas that may be later implemented. Finally, Foursquare allows users to identify friends. This is an example of a local network effect where a friend's decision may directly influence a user.
Part A of this report outlined the steep competition Foursquare faces and describes the steps Foursquare is implementing to gain market share. One such example was through viral marketing. Foursquare places the emphasis on gaining market share early because the usual trend in Web 2.0 applications indicates that due to the network effect the platform with the most users will consequently have the better product. As a result in order to continue to improve it is vital that Foursquare continues to increase their market share. Furthermore, as more people join, Foursquare will be able to better serve the long tail because more niche content will be generated. History has shown, in such examples as Yahoo and Google, that the company with the largest market share prevails.
In summary, Foursquare has identified the important link between the number of users and the quality of their product and have taken many steps outlined in Part A to keep these consumers. Through successfully utilizing the network effect they are able to satisfy a broad range of audiences and have placed themselves in a strong position for the future.
Work Through Social Networks
Foursquare has been successfully viral marketed because of the structure of the application. Foursquare functions as a platform that users can engage with and are rewarded for participation. This encourages them to frequently participate and refer to their friends/businesses.
Foursquare meets most of the requirements for successful viral distribution, and it is unique and very relevant to people now more than ever. Mobile phone as a platform is a new approach to enhance Web 2.0 dimensions. This is highly relevant as the growing market in Smart-phones is apparent. This enhances the Web2.0 features and allows for a new experience that users can participate in. Furthermore, Foursquare's viral influence is sustained by its game-like features, and its novel approach to this content application. These factors combine the influence of viral distribution of Foursquare and create a buzz that can be seen everywhere.
Foursquare has a role for each of Gladwell's people types in social networks. By targeting each of these types of people users are more likely to be gratified and in turn contribute to the network effect. Furthermore, Foursquare is able to reward each of these important types of people. The largest proportion of the community are "connectors". They are referred to as the social glue. In the Foursquare example these participants in the communities that have associations many locations and friends. These users are rewarded through the everyday game play where they are awarded points for making friends and checking into locations. The second classification of roles in the Foursquare community are the Marvens. These people know the most about a location and share their knowledge. They are acknowledged as mayor after regularly checking in or contributing content. These are the "information connectors". Finally, the businesses and locations themselves play the role of the sales people. They offer promotions or information to convince you to comment on their location for the potential reward.
In summary, Foursquare has identified the different roles people play and built its platform to reward these people and encourage their interactions. Futhermore, the application has been developed to trigger socially influenced viral distribution.
Dynamically Syndicate Competence
Foursquare is very good at developing marketing and mobile GPS software. These are their strengths and what they sell to monetise. Currently they provide consumers with a social networking game and businesses with powerful marketing tools. Foursquare however, outsources some of the processes needed to operate. As mentioned in Part A Foursquare's API development team and servers are outsourced. By mixing their internal competences with outsourced external teams they are able to invest their time appropriately in what they do best. Due to economies of scale it is more cost effective for Foursquare to manage their resources in this way.
Futhermore, the creation of the API allows the product to better meet consumer demand because third party developers are applying their strengths to the product to dynamically develop a new platform. In summary, through outsourcing, Foursquare allows its employees to work to their strengths.
Foursquare's platform as a business has many promising attributes that bridge stakeholders for a unified goal. They do this by creating APIs for developers. The transparency of the platform benefits all stakeholders including Foursquare itself by allowing for innovation beyond the resources of the individual site. Rather than competing with the versatile market and new Web applications Foursquare has built the infrastructure that allows them to work with alliances to evolve the platform to meet the industry demands. This means that the platform will continue to evolve without the strain on internal resources, and also makes the platform more scalable for increased demand. Beside its online innovation, Foursquare brings in elements from the offline business world that integrates with the application. This provides distribution that meets a larger proportion of the community and also improves its presence in society.