Foursquare beefs up merchant tools as it prepares to make money

The value of being a Foursquare merchant is about to go up with the release of new free tool called Local Update that allows business owners to reach loyal customers with more relevant and contextual messages. In essence, Foursquare is opening up a new channel that allows merchants to communicate with their users and lead them into their stores.
Foursquare works in the background to identify which users are loyal to a business, either through their check-ins or explicit actions like “likes”, which became available in the latest update to Foursquare. Then, when a merchant wants to send out a local update for their entire chain or just specific locations, Foursquare routes those messages to people who are already loyal and are also nearby those places. It can be a timely special about happy hour drink prices or it can alert people to an upcoming event. Or it can pass on fresh information about menu items or products. The local updates, which can include pictures, will appear in three places:

  • In a user’s newsfeed. But only if they’re in the same city as the business
  • On a merchant’s venue page
  • After a user checks into a place

Merchants can send out updates from their Foursquare dashboard. This can be a great way to move some product at the end of the day or raise awareness about something coming up on the calendar. Foursquare isn’t allowing merchants to segment their customers at this time. So business owners will just need to trust that Foursquare will send the right messages to people who are close enough to take advantage.
Local Update augments Foursquare’s existing specials, which merchants were able to offer to users. Those included newbie specials for first-time visitors and other rewards for people who came back repeatedly to a location or visited with friends. Users are able to see the specials when they check-in or in their news stream. But the local updates serve a broader purpose in communicating more than just special offers.
This is another good tool for Foursquare, which is facing a lot more competition from dedicated loyalty startups and many payment and commerce startups like Square, Groupon (s grpn) and LevelUp, who are adding more loyalty and engagement features. It also shows how Foursquare can use all of its great location data in a smart way, highlighting loyal users and using its app as a better tool for merchant outreach.
But Foursquare still has more to do. The check-ins are great for establishing recency and frequency of visits, but it doesn’t measure intensity and value through actual purchases. It has a deal with American Express that ties offers to a credit card, but that doesn’t cover all credit cards, so merchants are not seeing the full picture of who their loyal customers are. Also, local updates are just based on a user’s existing location. But Foursquare is smart enough to know, in many cases, that I head home or go to work at a certain hour and  should be able to use time as another signal to push out updates, anticipating where someone will be in a little while.
This is all important for Foursquare because the ultimate goal is to be able to charge merchants for the full suite of tools. The company admits it’s not there yet, but sees a better potential revenue opportunity in helping bring in new customers to merchants. That could come in the form of personalized offers using its Explore technology. That’s something we should be seeing soon. The question is whether merchants will ultimately want to pay up for Foursquare’s tools and give the startup a sizable revenue source. It’s unclear at this point. But with more than 20 million users and a lot of great data, Foursquare is still well positioned in the local market. It’s just got to keep showing merchants it can be as helpful to them as Foursquare is becoming for many of its users.