Microsoft Invests $15m In Foursquare, Licenses Data

Microsoft has invested $15m (£9.45m) in location-based social media startup Foursquare Labs, as well as signing a contract to add Foursquare’s recommendations into Microsoft products.

In particular, the data is to be used to bolster Microsoft’s mobile offerings by pushing out suggestions on restaurants, entertainment venues and other options to users of Windows mobile devices who sign up for such a service, according to Microsoft. It will also appear in a voice-activated personal assistant code-named “Cortana” that is planned for release with Windows Phone 8.1, according to an unnamed source cited by Bloomberg.

Data source

Under the terms of the deal, Microsoft will get access to more of Foursquare’s data than is made public or offered to other partners, according to the companies. The two companies have been working on the deal since last year, according to a Bloomberg source.

Microsoft is struggling to compete in the mobile market against leaders including Apple and Samsung, which uses Google’s Android operating system. New Microsoft chief executive Satya Nadella has said mobile devices, along with cloud-based services, are the company’s priority.

“In the near future, when you use Microsoft devices powered by the Windows and Windows Phone operating systems and products like Bing, places will be enhanced by Foursquare—to provide contextually aware experiences and the best recommendations of any service in the world,” Foursquare said in a statement.

The investment values New York City-based Foursquare at more than £600m, according to unnamed sources cited by Bloomberg and the Wall Street Journal. The deal will give Foursquare a significant new data-licensing revenue source at a time when the company is seen as facing difficulties in becoming a sustainable business. Foursquare’s valuation has remained stagnant since 2011.

Disappointment

While other stand-alone mobile applications have been acquired by large Internet companies such as Yahoo or Facebook, Foursquare has remained independent. At the same time, it has seen increased competition in increasing localisation by services such as Instagram, Snapchat, Twitter and Facebook. Investors have continued to back the company in spite of disappointment with its rate of growth compared with social media competitors.

In response, the company has said it is looking to use the data collected from its 45 million users to build new licensing revenue through deals such the Microsoft arrangement. Foursquare is also building its advertising revenue, which stood at $20m in 2013, up from $2m the previous year. One million local merchants have registered on the platform, and Foursquare plans to charge them to target users with alerts, discounts or premier search listings.

Foursquare raised $35m in December in a funding round led by venture firm DFJ Growth.

Foursquare’s users use it to “check in” with others and let them know where they are, as well as writing recommendations on venues such as restaurants or night spots. Foursquare says its data includes 5 billion total check-ins and 40 million recommendations, although all of that data is not necessarily current. Foursquare says its database includes more than 60 million points of interest including restaurants, hotels and shops.

By comparison, Twitter has 230 million users and Facebook has 1.2 billion.

Microsoft invested $240m in Facebook in 2007, at a time when the social network was valued at only $15bn. In 2010 Microsoft inked a deal that was intended to integrate Facebook recommendations into Bing search engine results.

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