Foursquare Announces Deal With Microsoft Corporation (MSFT)

With Microsoft announcing earlier today that Satya Nadella would take the reins as the third chief executive of the company, it was left to Foursquare to announce that it had reached an agreement with Microsoft Corporation (NASDAQ:MSFT) worth $15 million for “commercial and technical licensing. Presumably, the announcement was left to the location-sharing company as to not overshadow Microsoft Corporation (NASDAQ:MSFT)’s considerably larger announcement.

Foursquare Announces Deal With Microsoft Corporation (MSFT)

What’s in it for each company?

The deal will combine Foursquare’s recommendations into Microsoft Corporation (NASDAQ:MSFT)’s local and search products for three years. Bing’s mobile search will undoubtedly find a way to incorporate Foursquare’s information in the near future.

Foursquare was not terrifically forthcoming with details about the deal that the company said is a non-exclusive agreement meant to generate revenue for the company that has yet to show it as a sustainable business model.

The $15 million will be added to the $35 million that Foursquare raised in venture funding in December. That came after the company raised $41 million in debt funding in April of last year. The money from Microsoft Corporation (NASDAQ:MSFT) will be used to “double down on local search and experiences,” said Holger Luedorf, who runs the company’s head of business development. The money will also help Foursquare with  “investing in our engineering team and our sales team and international markets,” he said.

Foursquare was once a phenomenon but many believe it should have sold earlier. It remains to be seen that the data collected on its users can be turned into revenue for the company. In the five years that Foursquare has been around it has collected data on 45 million people, seen over 5 billion total “check-ins,” along with 40 million “tips” and recommendations. The company has, however, struggled to convince others that its data is current.

Whether this partnership with Microsoft will be the first of many such deals is the big question. On the upside, Foursquare says that revenue for 2013 was $20 million up from just $2 million in 2012.

Struggles with local merchants

While Foursquare does have over a million local merchants who are registered, Foursquare has yet to show that it can get these businesses to pay them for targeting its user base with alerts, coupons, or premier listings.

Foursquare has enjoyed some success doing this with larger brands, and chain restaurants but has failed to impress smaller or new businesses that the “in the know” Foursquare user wants. This is largely due to Microsoft Corporation (NASDAQ:MSFT)’s struggles with building local sales teams in smaller cities both domestically and internationally.