Caleb Elston

If Twitter was hard to explain to regular people Foursquare is a true enigma. While the digerati find it super cool to know the exact location of any friend, at any moment in time, there is a much larger swath of people who find the concept extremely creepy, and claim they wouldn't be caught dead sharing that kind of "private" information. Even after you can get people over the privacy concerns, their next question is "Why do it at all?". Foursquare and competitors like Brightkite (more of their own social network) and Gowalla (more game, than pure utility) are currently fighting the eternal social app dilemma; they become valuable only when your friends are also using it. Their isolated value is quite low. Facebook can solve the privacy concerns as well as provide instant availability of your friends, the chicken to Foursquare's egg.

People trust Facebook and they operate with the view that only their real friends can see their information. Facebook, better than most recent consumer web companies, have assuaged peoples fears of sharing highly personal and private information. Facebook can solve the privacy concerns which otherwise greatly retard mass consumer adoption of a service like Foursquare. Facebook also solves the "friends" problem, they have the best and most up to date picture of people's friends and their relationships than any web service. This connectedness is essential for Foursquare to provide value to regular users. Foursquare has implemented features such as 'Mayors' and 'Badges' to boost their "solo" value, but I would not use Foursquare if I were not able to get a core group of my friends to join. Facebook acquiring Foursquare instantly solves this problem. My friends would be there.

Foursquare gets a lot of value from being plugged into Facebook, but what does Facebook get? Simply stated, Facebook wants people to share more of their lives on the web. Facebook started their march towards this goal with basic information such as age, sex, phone number, high school, college, and other personally identifying information. Once users were comfortable with this, they moved on to photos, providing more value then ever before to sharing your photos online... seeing who was actually in the photos. Then came video sharing, and most recently a big push for status'. User's physical location and they places they frequent would be a logical next step of new information to share. Sharing where I am, seeing where my friends are and have been, and being able to comment on these check-in's  advances Facebook's goal of helping people share more.

Facebook also has a fantastically large mobile user base which is growing faster than their web presence. From Facebook's published stats, "There are more than 65 million active users currently accessing Facebook through their mobile devices." Foursquare would add immense value to Facebook's mobile offerings. If users became accustomed to checking-in everywhere they go, this simple activity would lead to more overall usage. After I check-in I might take a look at my Newsfeed and notice a friend uploaded some new photos from their latest night out, all the while I am seeing more highly targeted ads. This may be one of the most compelling reasons for acquiring Foursquare. Giving people more reason to engage is important to Facebook and Foursquare provides a clever Trojan horse for more usage. This stat provides credence to this claim, "People that use Facebook on their mobile devices are almost 50% more active on Facebook than non-mobile users." In Facebook's world, more usage leads to more revenue.

Facebook could certainly build this technology and product, so why buy Foursquare? Because it is more cost effective for them to acquire than build at this point. They are on a hiring tear and getting talented and motivated developers through a lightweight acquisition is a swift way to access the best and brightest. The recent acquisition of Friendfeed demonstrates Facebook isn't afraid of this sort of thing, because the best and brightest are often building their own company or working at a hot new start-up.

Foursquare has recently raised another round of funding and is growing quite rapidly, so they may not be interested, but that doesn't mean Facebook wouldn't be a prime suitor. The two companies are well matched; Foursquare has locked onto an interesting social experience around shared place, which would be a logical next extension for Facebook in getting people to share more and be more connected.

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Starbucks gets it. They are a company that knows their customer and knows emotions. They don't just sell coffee they sell a coffee experience. That experience used to be unique just a few years back, but has become common due to their hyper growth, but lest we forget they performed one of the greatest feats in business, transforming a commodity, coffee, into a premium good.

Now Starbucks, looking for more ways to grow, has branched into the super premium ice cream world. Without getting into whether I think this is a good idea or not for Starbucks in the long term, I can't help but be impressed by the way in which they promoted the launch.

They built a Facebook app that is the best indirect advertising I have ever seen on a social network. The app's sole purpose was to run a promotion where every hour 800 pints of the new ice cream were given away, totaling 20,000 pints a day, and 260,000 pints over the nearly 2 week campaign. Facebook users would visit the app every hour to see if they were quick enough to nab a pint from that hour's allotment. They were then given the option to have the free voucher mailed to a friend or themselves. (The campaign has ended but you can find the app here http://apps.facebook.com/starbucksicecream)

This is great on so many levels.

Starbucks is providing real value to people. They didn't create a game where you throw ice cream at your friends, or give your friend a virtual pint of ice cream, they gave away the real product; for free, no strings attached. They could have given a lame discount and offered the promotion to more people, but Starbucks understands how powerful really free is, how it taps into deep human emotions.

The "free sample" is one of the oldest marketing techniques in existence and has been a cornerstone of new product launches for more than a half century. This elemental technique has endured because it benefits both consumers and marketer.  Consumers get something risk free and the marketer, rather than spend gobs of money on convincing consumers to buy something they don't yet want, gets to short circuit the normal buying cycle and get their product directly in the hands of people.

The problem with the free sample technique is how to efficiently get in front of the customer so one can actually give the product away. Companies would hire people to stand in busy places and give away the product, but this doesn't scale and the passers by may or may not be the target customers. Another approach was to buy advertising to promote the give away. Companies often spent millions promoting a campaign giving away only thousands of dollars worth of product. Both of these approaches are flawed, and limit the potential of the "free sample" technique. Facebook fundamentally changes the dynamics for the "free sample" and makes it remarkably efficient.

The Starbucks app consisted of a landing page, a way to "check" for an available coupon, and a way to give your mailing info for the free sample coupon. This app was not complicated, it didn't have to be, and it shouldn't have been. It could have been built for thousands of dollars. Starbucks used traditional PR techniques to alert people to the promotion, but once the ball was rolling it didn't stop, because of the integration with News Feed people discovered the promotion and were clamoring for their chance to get a free pint of the new ice cream. Starbucks gained over 260,000 customer's information and permission from many to communicate about future offers and new products.

Starbucks did something very powerful by combining an age old marketing technique with a fresh implementation. Giving away the product makes consumers happy, and Facebook allowed Starbucks to do just that at a scale and rock bottom marginal cost inconceivable just a few years ago. I hope more marketers wise up to the power of social services like Facebook. They are not just another place to put up a billboard, but a way to change the dynamics of reaching customers and spreading compelling information, in Starbucks' case, a free pint of tasty ice cream.

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