In June, AMEX announced it was going to partner with Foursquare nationwide to do some cool discount deals tied to check-ins at some national chains. Then they decided to help out small businesses with a Black Saturday deal. Consumers could:
- Link their Foursquare account to their AMEX card
- Go to a small business with the AMEX deal ($25 off if you purchase $25 or more with your linked card)
- Checkin on Forsquare
- Pay with their AMEX
- Get a $25 credit on their AMEX bill
This was pretty clever and I used the deal at a local pub, Edgewood Tavern. I didn’t have to show my phone to the server or anything, it just happened behind the scenes at AMEX.
However, last night I was at Pure Taqueria in Inman Park (Atlanta) and saw there was a $10 off deal from AMEX if I checked in on Foursquare. I’m in pretty tight with the folks over there, so I asked the GM how he set up the deal with AMEX – were they splitting the discount cost a la Groupon or what.
Here’s the thing. He had no idea the AMEX deal existed. Apparently, it was all on AMEX. What? (inflection should go from low note to high note)
I opened up Foursquare again and started scrolling through all of the local businesses around me. It was like an Oprah moment – everybody had an AMEX deal! After leaving Pure, I went to Savi Urban Market and got a $10 discount on a bottle of wine to celebrate (they had no idea the deal existed either).
What’s going on and why?
So, in it’s simplest form, I’m buying $10 worth of stuff, the business is getting $10 (minus AMEX transaction fees), and I get $10 back. Who’s paying for this and why?
Word on the street is that the program doesn’t drive any revenue to Foursquare, but it represents an initial foray into going “beyond checkins,” an effort that might soon roll in deals from Living Social and Groupon. That will be interesting, but who is paying for the AMEX deal? It seems like AMEX.
The arrangement in its current form doesn’t make sense. Foursquare doesn’t generate revenue and AMEX is having to cover the cost of all the discounts. Currently, it only would work for AMEX if the effort increased the number of AMEX users (driving revenue from annual membership fees), increased the frequency users chose their AMEX card over their Visa card (driving revenue from increased transaction fees), and/or dramatically increased the average transaction size for an AMEX user (again, increased transaction fees). Even if the deal included Foursquare sharing user check-in information with AMEX, what would it tell them that they couldn’t already get by tracking other card charges… except maybe if the user checked in at non-businesses like parks and transit stations.
Foursquare gets closer to being able to claim that its online marketing drives consumer behavior and leads to local business revenue. If they gain access to transaction amount data, they get some awesome insights on the value of this marketing. Of course, in my case, I was at two of the businesses uninfluenced by Foursquare… but my new bottle of wine was effective marketing. Also, Foursquare needs to generate some revenue from all of this.
The Future of Foursquare
Here is my prediction about where all of this is going. Foursquare is striving to be the clearinghouse of location based deals. It will remain focused on doing everything it can to gain adoption by users and then aggregate local business deals from whomever can make them – AMEX, Groupon, Living Social, local news papers, etc. Foursquare gets to focus on technology and lets all of these other guys field the sales force.
AMEX (and potentially other credit cards) will move away from eating the cost for their local deals and begin generating revenue from local businesses paying for these promotions – similar to the daily deals sites. This will be a marketing cost for the local business, but with Foursquare in the loop, they will gain more insight to user behavior, such as:
- Was the deal redeemed by a new visitor or returning visitor (in Foursquare terms, a Newbie checkin) – works regardless of who sold the deal to the business
- Did new customers redeeming the deal ever return (tracked through subsequent checkins) – works regardless of who sold the deal to the local business
- Automated tracking of average customer spend, lifetime value, etc tied to the credit card (in AMEX’s case), regardless of what POS they use – only works if a credit card company sold the deal to the local business
That is pretty Rock and Roll!