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Foursquare Begins 'Friending' Madison Avenue

Ballyhooed startup partners with OMD for its paid advertising product

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Foursquare is cozying up with ad agencies to give its monetization strategy a boost. That much became clear today with the announcement of “promoted updates,” which will let brands appear in ads when users tap the “Explore” button. The paid ads product—the young New York-based tech company's first ever—is being piloted by the likes of Gap, Walgreens, Hertz, Hilton and several other notable partners.

While Foursquare typically trots out new ad products with brand partners like Walgreens in tow, what’s interesting about the promoted updates development is ad agency OMD’s participation in the effort. Alan Cohen, OMD chief executive, said in a statement that his company “was eager and excited to bring this opportunity to our retail clients, enabling them to get in on the ground floor of the next wave of engagement technology.”

Steven Rosenblatt, Foursquare’s revenue lead, told Adweek, “With the national merchants, we really made a conscious effort to work with the agencies. They were important with helping us with the pilot…We worked really closely with [OMD]. They’ve been a great partner and are really savvy.”

Some believe that Foursquare—with its 20 million users—has struggled to achieve the kind of scale that agencies take seriously. OMD’s public involvement in the promoted updates release could signal that the three-year-old startup has earned a bit of respect from the Madison Avenue crowd.

Drawing closer to the agency world has seemingly proved to be an effective strategy for Foursquare's digital big brothers, Facebook and Twitter. So why not take a page from their blueprint?

At any rate, the unveiling of promoted updates also underscores Foursquare’s need for monetization. Rosenblatt said advertisers would be charged on a pay-per-action model. "Actions," he said, are defined as check-ins, unlocking a special and buying an offer, among other examples.

“I think the best analogy is ‘search ads for the real world,’” Rosenblatt said. “You might see a paid ad for Best Buy at the top and then at the bottom organic results. You are only going to see a paid promotion if it's something that’s relevant to you.”

Promoted updates, according to Foursquare, will work like this: If downtown New Yorkers open the Explore tab while near an Old Navy, they could receive a promoted $15 off special from the retailer that can be redeemed if they check in at a store in the vicinity.

Meanwhile, the ad-based pilot builds on the “local updates” that Foursquare rolled out last week. The free-to-use business feature enables merchants to present messages to users—after they’ve tapped the app’s Explore button—who have repeatedly checked in to a store or “liked” that brand on Foursquare.

“I think we are really excited that we now have a broad suite of offerings that fit everyone from national chains to individual stores,” Rosenblatt said. “I think that’s really important because it’s been a big challenge on the local side.”