Studying the impact of innovation on business and society

The Games Businesses Play with Customers

Part four in a four-part series on innovation and change as the new schools of business management…

As a child, you most likely played two very popular playground games, dodge ball and four square. If you’re an adult who is also an early adopter of emerging mobile applications, chances are you play them once again. The difference is that this time a mobile phone takes the place of a ball and it’s usually not hurling toward you.

Dennis Crowley knows a thing or two about both games. In fact, he’s re-imagined them for the mobile and social markets as a way of connecting people both online and also in the real world. Crowley is a tireless advocate in the concept of geo-location social networks and the idea of using mobile technology to “check in” to physical locations. He earns the tag “tireless” because his first foray into check-ins dates back a decade. Dennis Crowley and his co-founder Alex Rainert started Dodgeball in 2000 to transform mobile devices into a platform where users could text their location to reveal friends, friends of friends and interesting venues nearby.

Playing a New Game

Looking back to that year, much of the world wondered whether or not the now infamous Y2K or Millennium bug would cause a system-wide and worldwide meltdown of digital information. Even though computer systems and our data safely made the transition from 1999 to 2000, the U.S. economy didn’t fare so well. The dotcom bubble burst and the historic stock market crash that ensued caused the loss of $5 trillion in the market value of companies from March 2000 to October 2002.

While the dreams and hopes of many entrepreneurs were dashed during these uncertain times, others, such as Dennis Crowley and Alex Rainert, sought to break new ground. Before Twitter and even before Facebook enchanted the world to start social networking, the pair ushered in a new era of geo-location social networks and introduced us to the act of digitally “checking in” to physical locations.

At the time, Crowley worked as an analyst at Jupiter Research and Dodgeball would serve as his thesis project at New York University’s Interactive Telecommunications Program. The platform initially found adoption among the New York tech elite and generated a significant amount of underground buzz.

Dodgeball fever eventually caught the attention of Google and in 2005, Google acquired the five-year-old startup and ultimately employed the founding team. With Google now behind the Dodgeball brand, interest was piqued, causing a torrent of adoption among the digerati. While usage was growing within tech capitals around the country, Dodgeball was unable to secure the interest of day-to-day mobile phone users. When Twitter emerged in 2006, attention focused elsewhere. And without support from Google, Dodgeball faded into obscurity. Crowley inevitably left Google in 2007, not on the best of terms either. While loyal users kept the service alive for another two years, Google eventually pulled the plug and officially killed Dodgeball in 2009.

In reality Dodgeball was one of the first mobile social services in the US. While it was ahead of its time, it would reveal the birth of an entirely new kind of social network, one that wouldn’t see its first true mainstream adoption until almost a decade after its debut.

Game Theory: A New Look at Mobile Commerce

Fast forward to the present. While Google focused elsewhere, the competition for geo-location was heating up. Twitter was slowly garnering mass appeal, but rather than compete for location, it evolved into a real-time communication network. Other services such as Loopt and Brightkite were carrying the torch for geo-location networking while Google transitioned its Dodgeball service into what we now know as Google Latitude.

In March 2009, Crowley and Naveen Selvadurai founded Foursquare, which one could view as an evolved Dodgeball 2.0. Crowley and company knew that the key to unlocking the true promise of geo-location networking lay beyond connections, the location of friends, and the act of checking-in to local establishments. In order to attract users and convert them into evangelists, Foursquare would have to empower the “me” in social media.

“The inspiration behind Dodgeball was based on the idea of carrying a map in your pocket that shows everything about where your friends are and where they’re going. With Foursquare, the question now was, if you have this map, how can you crowdsource everything a city has to offer…taking the experiences of your friends in an offline world and bring them online so other people can discover them.”

The Foursquare experience starts with checking-in to a location via a mobile phone using the free Foursquare app. Users could easily share their location with friends and also see who’s nearby. Instead of sending Tweets like Twitter, Foursquare players could “shout” out to one another to share experiences and observations. Check-ins and shouts can also syndicate to Twitter and Facebook to unite multiple networks with one action. But, that’s only the beginning. This time, Crowley and team employed a clever system governed by game mechanics evoking a spirit of competition propelled by a reward system that coaxes active and deeper participation.

Game On

Foursquare was developed to change how people experience the world around them. As Crowley explains, “I thought a lot about the amount of time that people spend creating and curating their online persona. We wanted to create a network where people could connect and socialize online around the activity that they’re already doing in real life”

Crowley also revealed why check-ins emerged as a foundation for a new dimension to the social economy, “When people check-in, we know that a person goes to any given place and that they’re there with these people, and we look at how this place relates to the other places they’ve been to in the past. It’s now giving people digital breadcrumbs to leave behind as a reminder, but also to share with others. When people go back to those establishments, it creates an even richer dataset that inspires us to create new products to encourage engagement and exploration.”

With the introduction of gameplay, points were now earned for all previous activity as well as the introduction of new gaming elements, each of which contributed to a local leaderboard. In addition to points earned for check-ins, shouts, etc., players were encouraged to also leave tips about each location to help guide the experiences of others. And, the more players checked in to each establishment as well as greater varieties of locations, Foursquare would unlock hidden badges as rewards. These rewards ranged from prestigious mayorships for each location to achievement badges commensurate with the experience.

Why is this innovative?

First, it was addictive. In its first year, Foursquare attracted its 1 millionth user. In just a year and a half, Foursquare skyrocketed to over 3.5 million users with over 20,000 new users checking-in every day. But it’s also so much more than that. The act of checking-in ushered by Crowley dating back to 2000 was now ubiquitous. Competitive social services such as Yelp, Gowalla, and even Facebook, also introduced the ability to check-in to places within their respective networks.

Foursquare Brings the Yellow Pages to Life

Not only are check-ins done to notify friends of an individual’s current location, these random acts of patronage have now become a form of social currency. The check-in has already evolved into formal personal endorsements, with repeated check-ins practically shouting out, “I highly recommend this place!” Check-ins as a form of social currency also redefined the role of the patron and the relationship between businesses and customers.

“The network started to take on a life on its own. Foursquare gave everyday people, venues, and local merchants a voice. It opened the doors for businesses see a whole new way of seeing their customer.”

Crowley envisioned a new dynamic between people and also between places and people and as a result, introduced a working archetype for consumer empowerment and also customer engagement. He created a new channel where customers create a community around each business. And, as a result of people earning points, leaving tips, winning mayorships, or simply checking-in, business owners awoke to an already vibrant and still growing customer base that now expects their participation and attention. Essentially, Crowley handed business owners the keys to open the doors to social media and fresh business opportunities.

Crowley and company realized that business owners would ultimately benefit from the consumers who were willfully checking-in to their location. As such, businesses would have to jump into the game to steer experiences, encourage points and mayorships, and the creation of helpful and beneficial tips. Crowley and team then focused on empowering businesses by developing tools that gave merchants more control. And, more importantly, they gave businesses the ability to activate their customers through social specials, promotions, and rewards to further entice visits and commerce.

Online Check-ins Lead to Real World Commerce

Local businesses such as AJ Bombers, a popular burger joint in Milwaukee, are realizing increased business as a result of offering free burgers for mayors and free cookies for adding tips. They’ve also offered dedicated badges to guests who attend special events all organized through Foursquare. Larger chains are jumping in as well. Starbucks offered discounts or free products for mayors and subsequently noticed a 50% increase in check-ins. Recently Old Navy experimented with offering 25% off coupons simply for checking-in. As a result, many consumers did just that. Consumers also took to Twitter and Facebook to share the news of the promotion acting as a surrogate sales force or a digital street team designed to trigger foot traffic.

“The activity in Foursquare gives local merchants special insight behind the check-in in order to improve customer relationships, such as understanding who these people are, how often they visit, where else do they go, do they come in with certain friends, etc. It also helps merchants learn who their best customers are and how to ultimately help everyone become their best customer.”

Doing so connected people online and offline, brought local establishments to life in a highly popular digital domain, and also put the customer front and center of the business owner, forever changing how companies think about the people they serve.

With Foursquare, Dennis Crowley reimagined what Dodgeball could be and built an ecosystem that is growing in popularity to the tune of over 20,000 new users a day. And, the company celebrated its 200 millionth check-in this past October.

The company has already fielded acquisition offers from the likes of Yahoo. It was also rumored that Facebook was entertaining the possibility playing Foursquare as well. Instead, Crowley and the Foursquare team closed a second funding round of funding at $20 million led by Ben Horowitz of Andressen Horowitz.

The work is only beginning though. As Crowley explained, “As a startup, we have to continually focus on developing the ecosystem that we’ve created. And it’s not just about consumers; we’re developing solutions for merchants as well to encourage people to check-in more. This is about changing the way people experience the world around them.”

The evolution is far from over, but it has seen validation lately. Local reviews network Yelp and now 800-pound gorilla Facebook have entered the business of checking-in, to which Crowley responds with open arms, “Facebook doesn’t keep us awake at night, but it does inspire us. They’re validating the market, but we’re still focused on innovating and growing our ecosystem.”

In the end, Crowley’s vision is clear and focused. The future of Foursquare will focus on transforming how people experience their world online and offline, “Foursquare is about improving relationships, making cities easier and more fascinating to experience, and making the world a more interesting place to explore.”

Have you checked-in to the future of business?

Introduction: The Innovator’s Dilemma
Part 1: Jack Dorsey, Twitter and Square
Part 2: Zappos’ Tony Hsieh Delivers Happiness Through Service and Innovation
Part 3: Dennis Crowley, FourSquare

Connect with Brian Solis on Twitter, LinkedIn, Facebook

The New ENGAGE!: If you’re looking to FIND answers in social media and not short cuts, consider either the Deluxe or Paperback edition

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17 COMMENTS ON THIS POST To “The Games Businesses Play with Customers”

  1. Brain..I must say you really put this in perspective..the world of four square is and will contuine to be the path us marketers will follow..

    “Black Seo Guy “Signing Off”

  2. iconic88 says:

    Fantastic insight Brian into Four Square. Thank you 😉

  3. Vetter-danna says:

    Will loyalty marketing exist outside of social channels in the future? Has check ins permenently replaced loyalty cards?

    • briansolis says:

      Hello Danna! I think loyalty is taking new roles with an understanding that in each social network rewards carry different value. We’re definitely seeing the gamification of loyalty with programs such as shopkick in retail, foursquare and gowalla with location, badgeville with content and websites, etc. Not sure it’s killing loyalty cards, but it is offering a different form of tangible value to consumers who feel incentivized differently than a traditional customer.

  4. Info says:

    From my point of view – Foursquare can’t replace loyalty cards as far as owners of locations won’t be able to see how many “bonuses” were redeemed. We need a backend platform which will solve that problem, and owners will have real time statistics – Foursquare could simply implement that – you get new promotions (bonuses), and you have to confirm the one, that you will use!

  5. Dave says:

    Hm, maybe an American thing…

    In the UK two games would have been ralio (a kind of hide and seek) and bulldog (a great game).

  6. Anonymous says:

    Brain .. I must say I really put this into perspective .. the world is, and will firmly contuine is no way for us to follow marketing ..
    Adult Board Game

  7. Tom Gregan says:

    Very informative and helped my blog on game mechanics and SEO no end.  Thanks

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