We predicted over a year ago – ignoring the hysteria – that Foursquare would fail. They are still around, but all signs are that they are in decline.

We are a group of geo-folk, who have been working in the business since the 90’s. Its been a very interesting ride, with the Internet, Google maps and now mobile. But we live in a world of false messages and self confessed leaders. The geo-world is no different. We’ve spoken before on this blog about the various geo-focused conferences which have appeared, many created by purists, but taken over by so called geo-entrepreneurs. These are the folks big on words and great at raising money, but devoid of original thought. They shout loudly, and quickly take their money and run. While the true innovators quietly shuffle to one side. Its happening ever more now, as the cloud and location services and technology have become popular, and venture capital money pours in. To truly find the (figurative) nuggets of gold, ignore the noise and be on the look out for the true drivers behind the new geo-revolution.

Foursquare – An Inevitable Failure

Let’s use Foursquare to illustrate. We remain convinced that Foursquare will eventually fold. Why?

Because they fail the three questions we always ask of so called innovators and their products. These are:

1) Are they loud and (over) hyped? Beware.

2) Ask yourself; how is this going to make money? If its not obvious. Move on!

3) Ask potential users of the product or idea their opinion. Would you find this useful?

Now we like Dennis Crowley, CEO of Foursquare. He comes across as an honest down to earth chap. But Foursquare have been one of the most hyped companies of the last couple of years. Dennis is often a star speaker at high profile geo conferences. And yet, it has never been obvious to us how the company hoped to make money. Particularly given its appeal to young early adopters of new technology. Growing their user base was always going to be a huge challenge. Ask any 30 or 40 something mother (those who hold the purse strings) if she would regularly check-in and be pleased with her status as ‘mayor’ of a store, after receiving her tiny discount on a purchase. I think you can guess the answer!

Foursquare will fail. It was an interesting idea, which might be applied successfully elsewhere.

As often happens; a few investors in Foursquare will make out like bandits, then move on to hype the next ‘great idea’. But most will slide away, quietly waving their money bye-bye.

As in the world of politics, people are too inclined to follow like sheep without stepping back and asking questions; so did Obama actually bring change? If Romney is so concerned about debt, how did his company, Bain Capital, actually make money?

Exciting times are ahead in the geo world. The potential to solve real problems using geospatial tools have never been so great. To make geo-data useful to all, not just geo-geeks.

But beware of false prophets!

Below we reprint a recent article from the New York Post, which discusses the challenges faced by Foursquare.

Foursquare Checking-Out?

There’s no “check out” feature for Foursquare, but maybe it’s time.

Interest in the pioneering mobile “check in” app appears to be cooling despite a much-hyped overhaul earlier this summer. The SoHo firm, once one of New York’s hottest start-ups, has barely moved the needle in active users since its June redesign. Meanwhile, the average time spent on the mobile app has declined, according to comScore data obtained by The Post. Industry insiders called it an alarming trajectory for a company that has been hailed as the city’s great tech hope and has attracted more than $70 million from investors.

Foursquare, run by CEO Dennis Crowley, became all the rage by letting users share their location and exchange insights on restaurants, stores and other venues.

“Foursquare usage and engagement has topped out and has been flat,” said Sam Hamadeh, CEO of PrivCo. Foursquare drew between 5 million and 6 million visitors from March to June, when its redesigned app launched. There was a small uptick in June to 5.9 million visitors, compared with 5.3 million in May, according to comScore, which only counts US visitors.

But the bump in users was met with less engagement in June, when people, on average, spent 143.5 minutes on Foursquare versus 150.3 minutes in May. By comparison, overall time spent using mobile apps has been rising.

Foursquare is also behind in the app popularity contest, according to AppData. It falls outside the top 200 free iPhone apps — its latest rank was 217 — while rivals for people’s app attention such as Pinterest and Instagram ranked in the Top 25. For its part, Foursquare said the redesign has been a success. “Since launching the all-new Foursquare in June, we’ve set records in pretty much every metric we measure internally,” the company said.

The mobile network counts 25 million members, even though comScore’s data shows far fewer active ones. A prominent venture capitalist, who spoke on the condition of anonymity, said that Foursquare backers are pushing for progress.

After its last funding round valued the start-up at about $550 million, investors are feeling anxious, especially after the Facebook initial public offering debacle.

“Foursquare would be a bloodbath if you start having the hemorrhaging that could go around,” said the VC, who is not invested in the company but is familiar with its situation. “With Zynga and Groupon, there is a lot that continues to implode.” Both Facebook and Groupon hit fresh lows yesterday as the social media bubble continues to deflate.

Last year’s big-money round was led by top VCs like Union Square Ventures, Andreessen Horowitz and Spark Capital. “It’s great to raise money at a high price, but they have to start delivering the goods,” said one insider. Foursquare’s revenue is estimated at less than $10 million a year. The company’s ultimate success would be a testament to New York’s tech cred but a failure would be a big setback.

“Foursquare is important psychologically,” one source said. “If anyone can figure it out they can.

http://www.nypost.com/p/news/business/app_loses_its_way_xvmmnHb7wdBvZQWe3iiNAI

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