Foursquare: Factual Merger is All About Exponential Gains

By now, you’ve likely heard about Foursquare’s announced merger with Factual. Announced yesterday, this creates a location intelligence powerhouse including data that span 500 million global devices. The firms also collectively boast more than 105 million points of interest across 190 countries.

As background, location data companies can benefit from a certain network effect as they grow their base of tracked devices. In sheer numbers, it means larger sample sizes for location insights. But there are also qualitative benefits through a more diverse and representative consumer segments.

Thirdly, there are capabilities and competencies. Location intelligence providers generally shine in different areas such as audience data, point-of-interest data and other things that comprise the mosaic of data points for reliable consumer movement insights. Building that data set is a years-long process.

On all these measures, it makes lots of sense for Foursquare and Factual to combine strengths where the whole is greater than the sum of its parts. This was part of the logic behind Foursquare’s recent Placed acquisition. Now it’s doubling down on these network effect-driven exponential gains.

Foursquare CEO — and former Placed founder & CEO — David Shim told us as much. In discussions with Factual CEO Gil Elbaz, he quickly discovered the opportunity for the above synergies. This effectively becomes Shim’s biggest corporate move in the newly minted position at Foursquare’s helm.

“Gil and I had the chance to reconnect shortly after my appointment as CEO, and it became pretty clear early on in our conversations that there was a natural fit between Foursquare and Factual, with each being their own category leaders in location,” said Shim. “In this case, it’s number one in Audiences (Factual), number one in Attribution (Foursquare), number one in Developer Tools (Foursquare) and both with a strong POI data set. In the past, I said that the Placed deal allowed us to deliver a 1+1 = 3 combination. Today, it’s actually 1+ 1 = 6. We’re delivering more than individual parts; it’s now a complete, single solution. And that’s what got us really excited.”

There’s also lots of talk in local commerce and SMB SaaS industries about consolidation due to recession. We will see some of that, but can’t say definitively if Foursquare/Factual was driven by such factors. Either way, the point remains that the combined company now has much stronger footing.

There could be additional M&A activity on the horizon — driven by recessionary economics as well as the need for others to combine location data strengths in the above ways to compete with this now more formidable entity. We’ve been predicting consolidation in the location intelligence sector for a while.

Meanwhile, the combined entity also gets a step closer to competing with Google and Facebook. It maintains the largest independent source of location data outside of the “duopoly.” Independent is the key word as it decouples the data source from the entity that’s selling ads. It’s all about data integrity.

The newly formed company will maintain the Foursquare Moniker with Shim as CEO. Elbaz will join Foursquare’s executive team and board of directors. The financial terms of the deal were not disclosed, but we’ll report back anything we hear.  See our past Foursquare coverage here.

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