Watch CBSN Live

Foursquare Plans Could Stir a Privacy Problem

Like all good social media start-ups, location check-in service Foursquare Labs needs to make more money. According to CEO Dennis Crowley, it won't be through selling ads. Instead, Foursquare will sell to businesses software that can track behavior of Foursquare users who could be prospects.

The company is trying something different from lining up its share of ad dollars, and that's smart. But the move has some risks. Most particularly, it could put Foursquare in the center of growing privacy concerns and attention from the FTC and Congress.

Currently, Foursquare offers merchants free tools to attract and retain customers:

Specials â€" mobile coupons, prizes or discounts â€" which are presented to users when they check in at or near your venue. Specials create extra enticement to get customers to stop by â€" think 20% off a meal, a free dessert, or even a reserved parking spot for your most loyal customers. Specials can be tailored to fit your needs, whether it's a unique discount for first-time customers or rewards for the 10th visit (see our full menu of available Specials below).In addition to driving business through Specials, signing up for foursquare's free Merchant Platform also allows you access to your Venue Stats dashboard, allowing you to track your customer foot traffic over time.

It's like a more nuanced approach to a Groupon-style daily deal, and there's no cost to the merchant, which is a plus. Foursquare is essentially running a variation on a freemium business model, in which a basic level of service costs nothing, but more advanced features require a paid account.

In the case of Foursquare, the consumers use the service for free and so do the merchants ... for now. But the additional paid tools that Foursquare will make available offer a potential privacy problem.

The company's plan is to help merchants recognize consumer behavior and then market more effectively to them. But Foursquare is a step beyond what other social networks do. Most provide behavioral targeting, but generally act as intermediaries to actually deliver the ad or offer.

Foursquare does as well, except that it ultimately tailors its business to locations, whether particular stores in a chain or local merchants. The new services would be even more so:

The company aims to help merchants recognize customer behaviors and cater offers to them, Crowley said."Do we want to hit the users who come in five times a week? Do we want to hit the users who bring five of their friends?" he said. "We're starting to develop more advanced tools for the merchants, and that's starting to be really interesting for us."
The minute you start analysis on people at specific stores, particularly smaller stores with repeat customers, consumer anonymity begins to fade. If someone came in with a coupon for five people, you start to remember them. Set the right specials, and a store owner could begin matching faces, names (especially from credit card purchases), and online identities.

That could make Foursquare one of the bigger potential leakers of personal data, because it could offer the tools that would let third parties effectively do their own triangulation.


Image: Flickr user hyku, CC 2.0.
View CBS News In