When it comes to the check-in, it appears that Foursquare has checked out. In a bid to appeal to two broad classes of users, Foursquare recently announced plans to split its popular app in two. Starting next week, Foursquare is “unbundling” its check-in and social networking features to a new app called Swarm. The old Foursquare will focus on location-based reviews in an effort to take on Yelp.
To hear Foursquare tell the story, splitting the app into two really makes sense. You have one group of users — the people who only want the fastest and easiest way to connect with their friends. And then you have another group of users – “the explorers” – who only want to know about the best spots near them and then share them with others. To meet these distinct user needs, one app will become your Swarm, and the other app will become your Yelp. Two apps, two vastly different sets of users, makes things easier, right?
But let’s back up for a second.
App splitting sounds a lot like a return of the “pivot” trend, just updated for the mobile era. Remember back in 2012 when so many companies were making a much-vaunted “pivot” into a new space? “Pivot” became a bona fide trend, the new “failure” for Internet entrepreneurs. There were some celebrated pivots that worked — like Fab morphing from a social network to a multi-billion-dollar shopping network. But there were just as many – or more – that didn’t work. Like, for example, Foursquare.
App splitting, when it comes down to it, is all about the math and not the user experience and that’s why it’s so silly. It’s a bit of sleight of hand by investors and company founders to create a higher valuation out of thin air.
Take the example of Foursquare. According to the latest round of capital the company raised, the company is valued somewhere around $500 million to $600 million. But that was nearly three years ago, when the company was still a SXSW darling, the company’s CEO made the Internet’s viral buzz sites for all the right reasons, and the company was considered a pioneer in the geolocation space.
So let’s take a look at how the valuation changes once the company splits into two apps. The real Yelp is valued at about $3.7 billion (using current stock market valuations), so let’s use that as a rough proxy for what the “new Foursquare” could be worth. And the new Swarm should be worth (as a very quick approximation) about half of the last valuation of the old Foursquare, or about $250 million. Poof — overnight, you have a company with a potential value of $4 billion when before it was worth — at most — $500 million. That’s almost an 8x gain in valuation, just because the company convinced you to “unbundle” your experience.
That’s actually pretty clever.
In doing so, Foursquare appears to be following the lead of Facebook, which started the whole app-splitting trend with the decision to create separate Paper and Messenger apps for Facebook users. In Facebook’s case, the move also makes sense – on your mobile phone, you now might have Paper, Messenger, Instagram and the original Facebook app. Without knowing it, you’ve just given Facebook the right to control even more of your tiny mobile screen. (Although, granted, not as much screen space as it hoped to control with the launch of Facebook Home in April 2013.)
So let’s nip this app-splitting silliness in the bud before other companies take their cue from Foursquare and Facebook and start splitting their apps into two (or three) in an effort to control your mobile phone’s screen real estate. If you had app fatigue before now, just wait until six months from now, when just about every company trying to go public stakes their claim for why they should be valued 2x higher than they are now.
It’s great that technology companies are so nimble and able to innovate on the fly in response to rapidly changing market conditions. Unfortunately, app splitting does not qualify as real innovation, just a bit of financial sleight of hand.