Inside Foursquare's Growing Revenue, Which Could Reach $20M In 2013

Aside from what Path is worth, the way in which Foursquare will monetize its user base and dataset is perhaps the most popular conversation over the second cocktail in Silicon Valley. At least if I’m there. Today, in a Fast Company profile, new figures were disclosed concerning Foursquare’s revenue: It’s growing. Ben Horowitz, a Foursquare investor, told Fast Company’s Austin Carr that Foursquare had brought in more than four times its total 2012 revenue by around the middle of the year. As both Carr and Alyson Shontell have noted, that puts Foursquare’s 2013 top line on a run rate between $15 million and $20 million. Compared to 2012′s painfully paltry $2 million in revenue, the new figures are — and we’re leaning on data released by an investor with a firm financial interest in Foursquare’s success — almost rosy. However, at its 2013 revenue pace, can Foursquare break even? Can it drive meaningful profit? Foursquare’s CEO and founder Dennis Crowley told Carr that his company has 160 employees. The old rule of thumb was that you could mentally budget $100,000 per employee in yearly costs, after taking into account rent, insurance costs, and the like. However, given Foursquare’s split profile between San Francisco and New York, I think that the old rule is outdated and far too conservative. Let’s be polite and assume that the figure is $150,000 per worker, giving Foursquare costs in 2013, for personnel alone, of $24 million. So before servers, advertising, expansion and SXSW parties are taken into account, Foursquare is still set to lose money in 2013. And I’d wager that its cash burn isn’t small. It has cash now, raised via convertible debt, but those accounts will depress in time. Foursquare will then have to raise money from private investors, the public markets, or seek an exit. Its ability to do any of the three will depend on its ability to accelerate its revenue growth in dollar terms, and, if it wants to go public, demonstrate profitability, at least briefly. Can it? Inside of Carr’s profile is a telling paragraph, delineating how Foursquare might generate new revenue. I quote at length to preserve voice: The biggest near-term revenue will likely come from the 1.4 million local merchants on the platform. The company plans to start charging them for its ad products on a cost-per-action basis later this year, which could prove a boon to

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