Early adopters have seen this before — friend invites from “normals” pouring in (Facebook, 2008), big brands arriving (Twitter, 2009) and servers failing as a team struggles to scale (Twitter, 2006–2010) — yes, Foursquare is taking off and even going mass.Given the explosion of smartphones, a “location-based service” taking off is hardly surprising. But what has made Foursquare’s ascent noteworthy, even suspenseful, has been its race with Gowalla. The competition between the two has been well-covered in the tech media and deservedly so: Though one is in New York and the other in Austin, they do pretty much the same thing and launched around the same time – it appeared to be an even match.
Although it may be too soon to declare a winner, it isn’t too early to look at why this is happening. While there are many differences worth examining, a recent visit to the Foursquare app store has made me wonder if Foursquare’s early release of its API has given them a meaningful boost. (Editor’s note: We have declared a winner: Foursquare. See more here.)
For those unfamiliar, APIs (Application Programming Interfaces) allow outside developers to quickly build additional services using the data and functionality of an OS, application or website. Sometimes the APIs carry a cost to use, though often they’re free of charge.
For a new site, releasing APIs enables what Caterina Fake, co-founder of Flickr, called “BizDev 2.0” – a fast, mostly lawyer-free way to turn a service into a platform. When building an audience any network effects help, and while the focus is often on users attracting other users, APIs provide their own value.
API development can spread awareness to new users, increase engagement with additional functionality and yield entirely new use cases. Those are pretty distinct competitive advantages and ones that a startup should obviously embrace. In the case of Foursquare vs. Gowalla, Foursquare did it first.
On the face of it, this first-mover advantage appears to have paid off handsomely: While Gowalla has yet to publish a list of apps, Foursquare now lists 42 apps in their app store including games, check-in enhancements, clients and a service that allows users to track venues by gender ratio.
Although it doesn’t yet appear that any of the apps have been widely embraced, like, say, TweetDeck for Twitter, behind all them are API-evangelists. The developers are out there promoting their work, explaining Foursquare to their mums, and generally rooting on Foursquare’s success.
While the developers might eventually work with both APIs, being first to feed the hunger for location data has most certainly helped Foursquare capture developer attention to the detriment of Gowalla – these influencers had signed onto Foursquare before Gowalla even fielded a team. In a quick sprint for supremacy, this advantage may have been the deciding factor.
There are, of course, some unanswered questions:
- Exactly how much incremental usage has the API generated and are the network effects of all of these apps just a blip compared to, say, the larger social graphs (to say nothing of the more frequent boozing) of New Yorkers vs. Hill Country Texans?
- Can Gowalla catch up or overtake Foursquare through an even more-aggressive approach to their API or, for that matter, through some other means?
Answering these questions, asking more, and getting a fix on an API ROI will yield considerable benefits for internet entrepreneurs. We’re watching in real-time as the market determines a winner in Location Based Services – a likely b-school case study in the making.
And following closely as these companies manoeuvre will be incredibly informative for start-ups in any category.
Paul Marcum, a former Yahoo! and one-time Shake Shack Mayor, is working on a new startup. It will have an API. He can be found on Twitter at @jpmarcum and blogs at http://marcum.com, where this post was originally published.