What is Your Core Business?

Too often, startups risk getting misdirected by the media and customers to add features and functionality to a product or service that turn out to be collateral to the core business. I believe this is happening now with Gowalla and Foursquare, among others. Both services have recently become media darlings, but neither has managed to break out beyond a relatively modest group of technology enthusiasts.

Last week while at SXSW, I tested both services and believe even more strongly now than I did before SXSW that the feature creep evident in the recent releases from both companies may do more harm than good to their ability to compete with other companies focusing on local advertising (Google, Facebook, and MANY others).

By following the media’s lead (and thirst for more “cool” releases), Gowalla and Foursquare seem to be focused on features collateral to their businesses.

Are Gowalla and Foursquare squandering their opportunities and visibility? I believe they are.

Location based marketing is important, but every website and service will soon be able to execute location based marketing strategies. Importantly, location based marketing is expected to take up a 70% share of all U.S. interactive marketing spending as soon as 2014 – $4 billion in 2015 (up from $34 million in 2009). Companies that don’t focus on their core business will cede leadership and market share to those who do.

As I discuss in this video, there’s a danger when you split your focus and forget about your core business.

Do you think that the features being introduced by Gowalla and Foursquare are critical to their location based advertising models? Why?

  • I hate to be a skeptic, but I don’t see how communication *features* are a business model. The ability to pin my location can be added to any major network – Facebook, Google search, Twitter – and these networks that already have built switching costs (by me embedding my social graph in them) will be much more likely to monetize my location than a new network trying to build audiences from scratch. Soon, everything will broadcast its location; networks will just pick up that signal.

    I admire what Foursquare is doing, but I think it’s too niche to succeed. It’s trying to build a user network based on a small feature, and that small feature can easily be replicated by anyone else.

  • Ben – it’s ironic, especially given the recent news about Foursquare’s valuation (based on investment or purchase) of $80-$100 million that the market doesn’t seem to appreciate the fact that communication features are not a business model. Perhaps Foursquare has a different plan and this is just a community building phase of their roll-out. But as you’ve said, it’s not easy to build audiences from scratch, and far too many establishes players already have significant audiences they can easily leverage.

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