Report: Potential Foursquare investors raising eyebrows at paltry revenue

Location-based service Foursquare is reportedly expected to bring in $2 million in revenue this year after finally launching its first advertising products, reports the Wall Street Journal. It’s a modest start — to be kind — and may not be fast enough for investors who are wavering on whether to plunk down money in Foursquare’s upcoming funding round.

The Journal said that some investors are balking at Foursquare’s internal valuation of $760 million, which was reportedly SET in May when Spark Capital bought $30 million of shares in the company from employees. Foursquare is now working on a big Series D round between $50 and $100 million, TechCrunch reported recently, which would value the company at more than $700 million. That would follow a $50 million round last year which placed a $600 million valuation on the company.

The Journal said that some investors are worried about slowing growth, something Foursquare vice president Jon Steinbeck acknowledged in the story. The New York startup has more than 25 million users but only 8 million are monthly active users.

Foursquare, Dennis Crowley

Foursquare CEO and co-founder Dennis Crowley

Foursquare may not be worth $760 million in the eyes of some investors, especially in this tech environment, which is taking a toll on other big social companies like Facebook (s fb). But I think Foursquare is also getting its act together and really starting to make use of all of its big data. With its more than 2.5 billion check-ins and even more use behavior data, it’s learning a lot about how to bring users together with interesting places.

As we’ve mentioned before, there’s an opportunity for Foursquare to start scooping up local search advertising revenue if it can make its Explore engine a go-to search and discovery resource for more people. Foursquare has said recently that 20 percent of people who search for a place end up checking-in at the location within three days.

That’s the challenge for Foursquare: it needs to keep getting more people to use it like a daily utility, so it can make more money through its paid promoted updates. Foursquare is trying to help the process along by opening up its website as a local search tool to all users. But it needs to keep on growing and show that its data is a valuable asset. Yelp (s yelp), which currently has a market cap of $1.2 billion, had 84 million unique monthly visitors including 8.2 million visitors from a mobile device as of the most recent quarter.