Following last week’s launch of loyalty marketing program “Local Updates,” Foursquare is introducing a new paid-advertising program — its first formal effort at generating revenue — called “Promoted Updates.” Foursquare calls it a pilot program and is working with roughly 20 companies initially, in an effort to gather data and feedback. It launches tomorrow.
Foursquare is calling Promoted Updates “search ads for the real world.” The participating group of pilot advertisers includes Gap/Old Navy, Hilton, JCPenney, Best Buy, Hertz and Walgreens among others.
Promoted updates will appear exclusively in Foursquare’s mobile apps. The company sees the program as a complement to Local Updates. Local Updates provide a way to communicate with existing customers (under the Friends tab), Promoted Updates enable companies to reach new customers (under the Explore tab).
Targeting will use the Explore algorithm and take into account location, day part, check-in history and friends’ histories to decide which ads to show. Promoted Updates will be clearly labeled to distinguish them from “organic” recommendations.
Below are a couple of screenshots provided by Foursquare. Each ad or offer features a “promoted” logo indicator.
Foursquare says in its blog post that users will only be shown Promoted Updates when they’re “close enough [to a business] to actually stop by, so you can take advantage of the information being shared immediately.”
People aren’t always prepared to take immediate action on such offers and I predict that aspect of the program will be adjusted. For example, people might like exposure to offers on Wednesday or Thursday in order to make plans for the weekend. But this kind of feedback is what the pilot is about.
The business model during this trial is cost per action, where an action can be defined in various ways, such as checking in or unlocking a special. Foursquare is going to be trying to figure out what the right model and pricing are during the trial period.
I can imagine these “ads” being very effective because of their context and the multiple layers of targeting involved. The tie-in with friends makes them similar to Facebook’s Sponsored Stories. However these ads by their nature are going to be more immediately relevant to users’ interests.
While Foursquare is characterizing the program as search ads for the real world, they actually combine the “directional” relevance of search with some of the serendipity and influence potential of display advertising. Along those lines they also provide a larger visual canvas for advertisers than conventional search ads.