Posted on April 18, 2010 - by Wayne Sutton

Is the future of location-based services that great or should they sell, sell, sell?

Remember this scene from the movie Trading Places?

Yesterday Ben Parr co-editor at Mashable wrote an article called “Dear Foursquare: This Is Not the Right Time to Sell” in which he discusses the uncertainty of the location-based industry and recent rumors of Yahoo buying FourSquare for $125 million. It’s an interesting argument to make if the Foursquare team decides to sell or work towards being the “next big thing” as they have been called by so many industry leaders. In the post Ben highlights 5 factors to consider should Foursquare decide to sell or not: Those factors were:

Potential market size: Currently, Foursquare has almost 1 million users. But what is its potential market size? It’s essentially anyone with a smartphone capable of GPS. And while that number is relatively small now, it’s rapidly rising.

Competitors: Foursquare’s primary competitor is Gowalla, but it has been breaking away from the app ever since the South by Southwest conference (SXSW) in March. It also faces competition from Yelp and potentially Facebook, which will likely be revealed next week at Facebook’s F8 conference. Yet despite these external threats, Foursquare has a commanding lead and all of the media’s attention.

Potential worth: Foursquare’s worth around $100 million currently — can it reach $500 million? $1 billion? $10 billion? Where is the ceiling?

Business model: Foursquare currently burns more cash than it takes in — can it create a business model that will make it profitable and sustainable? I believe there’s a ton of potential in location-based advertising, especially now that Apple and Google are helping pioneer this market.

Exit strategies: If Foursquare were to turn down the Yahoo offer, who would be able to buy it? Or is there legitimate potential for an IPO?

Here’s my comment on the article
Ben, as a Foursquare user/friend of the team and with the current state of yahoo, I understand your post title and the points you make about selling. But as someone with a location based startup (http://TriOutNC.com) I think if Foursquare decided to sell right now, it wouldn’t be a bad idea. Just look at recent Ning news. Also the LBS space is getting more crowded by the day and they have a lot more competition beside Gowalla. The last time I counted there were over 17 different LBS apps and we haven’t seen what Facebook will launch as you mentioned. But we do know it will be big for the LBS industry and it seems almost weekly that Google is making their apps location aware.

Don’t get me wrong, I believe in the team, that they can succeed and continue to grow their user base along with showing their value but a $125 million buyout vs raising $3 & $5 million in a competitive uncertain space sounds like a good number to me. Would you have turned down the half billion from Google like Yelp did?

But hey, what do I know, I’m just a LBS geek from North Carolina. Good luck Foursquare either way and nice post Ben.

Also see:

• Location Based Poll: What is your favorite Location based social network/app?
• Check-Ins are Coupons. Game Mechanics are Bulls***. Show Me The MONEY or Go Home (Loser).
• Your feedback and results from the location based social network/app poll

*Disclaimer: I’m a partner with TriOut a location-based startup in NC where I serve as the Business development/marketing strategist.

It’s one of those cases where you agree but disagree with someone but only time will tell for everyone in the location-based industry.

To answer my own question, “Is the future of location-based apps that great or should they sell, sell, sell?” As we continue to grow and market TriOut, I believe the answer is yes, the opportunity is that great but we’re hyper-local to NC and have our business strategy with financial goals in place. For the rest of the location-based apps, good luck. What are your thoughts?

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