Foursquare’s Future Slowly Takes Shape

A few weeks back, when I met Foursquare CEO and co-founder Dennis Crowley for a coffee in New York, our conversation turned to the future of Foursquare. While Dennis remained coy about the specifics, he was clear: Foursquare wants more folks to use its application-programming interface (API), and thus build an ecosystem around Foursquare’s data.

The more apps are built on its API, the easier it is for Foursquare to grow faster, which in turn would allow the company to start monetizing its efforts to bridge physical and digital worlds. Foursquare (and others like it) can essentially bring a cost-per-action business model to the real world, perhaps either supplanting or complementing traditional forms of advertising.

The Swarm Sales

Over the weekend, I read about a Swarm Party hosted by a UK-based tea salon, Metrodeco. Swarm is a badge that is unlocked if more than 50 people show up at a location. The store apparently doubled its daily earnings and also saw a sudden increase in social media buzz around the shop. It’s very similar to events hosted by certain establishments in the U.S., but there are ways to take this further.

That news item made me wonder if there is a possibility of retail outlets, such as J.Crew, using Foursquare as a beacon for flash sales. It would be a much more effective way for a clothing retailer to move inventory of the shelves at a specific location.  This would contrast sharply with millions of dollars spent by them on advertising in a newspaper, for example.

Loyalty 2.0

Topguest — a New York-based startup that has built a meta check-in application — has started to build a business around what is essentially the 21st century equivalent of loyalty rewards. The company rewards travelers who use Foursquare to check-in by giving them loyalty points from hotels, airlines and other such establishments.

The latest to join TopGuest’s growing number of partners is Viceroy Hotels, a luxury hotel-and-resorts chain, which will be offering a $20 credit for restaurants, bar or spa after someone checks-in five times. Adding a reward to checking-in turns the somewhat frivolous activity into something more valuable. Topguest, which is backed by the likes of Ron Conway, Jeff Clavier and The Founders Fund, is seeing its user base double every week, according to founder Geoff Lewis.

Check-in & Check Out Some Coupons

GroupTabs, another New York based startup, is experimenting with a new model that marries location to the idea of group deals, much like the hot social shopping service, Groupon. According to ReadWriteWeb, GroupTabs is working with local businesses and offers discounts if a certain number of people check-in at that business location. The idea behind the service that will go live on Wednesday: drive foot traffic to real locations and increase their business.

GroupTabs is part of a growing number of startups that are trying to reinvent what is essentially the coupons business. In the past, many startups have tried to build big businesses by sending you digital coupons via SMS. These days, the check-ins unlock special deals on certain locations. Foursquare clearly is focused on larger brands, while others are building different value propositions.

Behavior + Local

When I look at Foursquare and other such companies, I finally see a solution to the conundrum around local advertising. Everyone from Yahoo (s yhoo) to Google (s goog) has viewed local advertising (long the preserve of newspapers and yellow pages) with lustful eyes, with little or no success.

Over the past decade or so, I’ve watched numerous ill-fated attempts made to build media companies in order to cash-in on local advertising. Unless you’re in a big city like New York or Chicago or Houston, the local media market isn’t big enough to be a viable business proposition.

By marrying geo-location to behavior targeting and adding commerce on top, one can finally start to see some answers. I recently wrote about Whrrl’s positive experiment with the gas station chain Murphy USA that brought drivers to the pumps, who in turn got coupons for their loyalty.

Now imagine you had a platform big enough to encompass a lot of locations, married to an e-commerce platform and an army of local sales people: You can start to see the possibilities. The operative phrase here is “a platform that’s big enough,” which also explains why Crowley wants more people and more apps to develop on his platform.

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