Report: Foursquare valuation wavers following Facebook's IPO flop


Foursquare is struggling to attract investor interest in the wake of declining growth and social networking giant Facebook's (NASDAQ:FB) discouraging IPO, The Wall Street Journal reports.

Citing sources close to the matter, the report states venture capital firm Spark Capital Partners LLC acquired a $30 million stake in foursquare in early 2012, valuing the four-year-old mobile social networking startup at $760 million. Foursquare is now seeking to raise around $50 million, but insiders say investors are now skittish about making bets on the sector with Facebook now down 40 percent from its IPO price and other social media stocks such as Zynga (NASDAQ:ZNGA) and Groupon down more than 75 percent since going public.  

Potential foursquare investors also feel the company is moving to monetize too slowly and have expressed concern that consumer interest in its services is beginning to decline. Foursquare boasts more than 25 million registered users, but only about 8 million access the app on a monthly basis--foursquare Vice President Jon Steinback told the Journal that the company's growth rate is slowing, but he added that it signed up more new users this year than in any other year in its existence. Steinback also said foursquare's efforts to sell targeted coupons is catching on with advertisers and consumers.

"We are coming off the hype and sliding into the trough," said Todd Chaffee, general partner at Institutional Venture Partners. "Companies will have to come to the realization that the valuations of the social and mobile boom are starting to fall." The Journal reports that foursquare does not face an immediate need for more money and may mothball its fundraising efforts if it is uncomfortable with its valuation.

Foursquare overhauled its user experience this summer, de-emphasizing its signature virtual check-ins to focus on personalized recommendations and user interactions. At the same time it began trialing Promoted Updates in an effort to monetize its platform. Promoted Updates spotlight deals from local merchants via the app's Explore recommendation engine, which highlights nearby points of interest based on the user's check-in history and their friends' foursquare activity, complete with consumer reviews and merchant offers. Merchants pay foursquare only when consumers check into their business, unlock a special or otherwise interact with their promotion.

Foursquare is expected to bring in about $2 million in revenue this year, well off the pace established by Facebook--which raked in $153 million in ad revenues in its fourth year--and also behind Twitter, which generated $45 million in ads at the same point in its evolution.

For more:
- read this Wall Street Journal article (sub. req.)

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