Talks between Microsoft Corporation (NASDAQ:MSFT) and Foursquare Labs Inc. about an investment from the software giant are at an advanced stage, according to a report from Bloomberg. The report says that Microsoft is considering a strategic investment into the location-based social network.

Microsoft

Microsoft and Foursquare deal not yet confirmed

According to those familiar with the matter and quoted by Bloomberg, talks with Microsoft Corporation (NASDAQ:MSFT) are at an advanced stage, but the deal is not certain yet. According to these sources, Microsoft is not the only company that Foursquare is talking to, and the talks with the Redmond company may not result in a deal.

Foursquare monetization

Foursquare has gained more than 20 million registered users since its foundation in 2009. The company has failed to show an ability to turn those user numbers into revenue, however, and has had to return to market for funding on multiple occasions. The firm has recently brought in a new advertising model which allows advertisers to target users that have checked into specific locations.

That new strategy has made private equity more bullish on Foursquare, and there are clearly several interested parties trying to secure an investment in the company.

Foursquare has multiple problems as it tries to grow, with privacy and security fears chief among them. The company also faces huge competition from Facebook Inc (NASDAQ:FB) and other social media companies who attract more advertising money and are able to move in on Foursquare business quickly and easily.

Foursquare valuation

Back in April the company raised $41 million, issuing mostly debt rather than equity. An earlier investment in equity, made in 2011, valued the company at around $600 million. With the continued inflation in the value of social media companies since 2011, it is likely the market values Foursquare at more than that now.

Instagram and Tumblr, two services that managed little revenue, were valued at around $1 billion each. It is unclear what kind of investment Microsoft Corporation (NASDAQ:MSFT) envisions at this stage, but with the changes coming to the company it seems unlikely that it will represent a big strategic change for the Windows maker. If a deal is made between the two companies, it will likely surface publicly in the coming hours or days.