American Express Joins the Fight Against Facebook

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I'll admit it. I'm among those who envisioned the end of Foursquare after Facebook and Google (Nasdaq: GOOG  ) added the ability to "check in" at various locations. As it turns out, we skeptics were wrong. Really wrong.

Today's Foursquare is much more like a cross between Yelp and a localized version of Facebook than the check-in social game it was just a couple of years ago. The software is more functional, the deals more plentiful, the reviews more informative, and the social features richer. The ecosystem has grown from an estimated 250,000 registered users last January to more than 10 million as of this writing, The New York Times reports.

Expect more growth in the months ahead. American Express (NYSE: AXP  ) is partnering with Foursquare to offer location-specific deals to cardholders, the Times reports. Early partners include Sports Authority and H&M. Check-ins and accompanying AmEx spending at each company's stores will kick off cash rewards -- $10 back for $75 spent at H&M and $20 back for $50 spent at Sports Authority, according to the newspaper.

On the whole, I think this partnership makes sense for both Foursquare and AmEx. Yet I also find myself hoping co-founder Dennis Crowley won't use it as leverage to cash in on the social-media IPO frenzy that's seen LinkedIn (NYSE: LNKD  ) , Renren (NYSE: RENN  ) , and FriendFinder Networks (Nasdaq: FFN  ) soar before joining the ranks of 2011's Busted IPO Club. Why not keep building the business instead? Stiff-arming an acquisitive Yahoo! (Nasdaq: YHOO  ) was the right move a year ago; avoiding a fast-tracked IPO is the right move now.

Indeed, while the AmEx deal gives Foursquare a foothold, the company needs many more national deals to prove that it's a platform of choice for mobile commerce. Do that, Mr. Crowley, and the bankers will be begging to take you public.

But that's also just my take. Do you agree? Disagree? Kick off the discussion using the comments box below.  And if you're interested in learning more about how the Internet is transforming all forms of commerce, take a minute to watch this free video right now. You'll walk away with a stock idea from our Motley Fool Rule Breakers scorecard and a richer understanding of how the cloud-computing revolution has given rise to the likes of Foursquare, Facebook, and other social-media superstars.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On June 28, 2011, at 6:46 PM, gstanski wrote:

    The AmEx / Foursquare coupon partnership offer merchants a much better deal than the likes of Groupon do. Although we don’t know the specifics of each merchant participation agreement, my educated guess is that American Express, as part of its strong push to position itself at the forefront of the fast-growing mobile payments industry, is subsidizing a great deal of the coupons’ value. After all, for AmEx this is just another form of a rewards program. This is definitely not the case with the Groupon deals, which typically cost merchants 50 percent of the already heavily discounted coupon’s value. I could never figure out why any merchant would agree to this.

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