News broke yesterday that Yahoo is considering purchasing geo-location start up Foursquare. Foursquare is a location based game played on mobile phones – your competitors are your friends, and your entire city. The idea is that you use foursquare to ‘check in’ to a venue whenever you visit. The more venues you visit per day/week, the more points you get. If you check into a specific venue more than ANYONE then you become ‘mayor’. You also unlock badges as you check into various locations around your city (i.e. checking in on a ferry wins you the ‘I’m on a boat’ badge). It’s a popular mobile game and has seen quite a bit of growth the past year – expanding the number of cities it’s available in, and having a huge presence at nerd conference SXSW.

With acceptance rates of smart phones and other internet-connected devices on a such a steady rise, Yahoo buying Foursqaure would be, as The San Francisco Chronicle points out, a really smart move. Recently, Cisco released a report predicting that by 2014 mobile data traffic will increase 39 times and smartphones, laptops, and other mobile-ready portables will drive 91% of that traffic (9% going to non-smartphones and home gateways). Thus, according to SFC, not only would the acquisition demonstrate Yahoo’s commitment to innovation, but it would prepare them for the subsequent fallout of the “paradigm of web sites”.

I don’t interpret this growth in mobile traffic as the end of web sites as we know it, but instead recognize it as a point in our digital history where there is a greater awareness of the importance in creating mobile friendly products. Currently, there are so many different types of smartphone platforms available, that I’ve found many product managers keen on developing well optimized mobile sites in favour of a iPhone/Android/Black Berry app. This of course allows their product to be accessible on multiple platforms, smartphone, mobile, or otherwise. Nonetheless, as adoption rates increase, I don’t doubt that in a few years the primary screen we will find ourselves developing for will only be about 3 inches large.

As this trend grows, Yahoo purchasing Foursquare would mark an important step forward for them, not only technically, but on the business end as well. Foursquare is a popular app with a growing amount of users and not-too-shabby (unused) business model. The Foursquare developers were apparently waiting to work out all the kinks in their app before cashing in. And the release of ‘Foursquare for Businesses’ late last year did indicate the kindling of a monetization plan – yet, one that remains un-tapped. Currently, ‘Foursquare for Businesses’ is a free feature offered on the Foursquare site. This feature allows businesses to create special offers for Foursquare users, such as freebies or discounts to frequent visitors and mayors. Furthermore, these offers are advertised to all users who check in to a venue close to a specific business – so I don’t have to be checked into the Starbucks on the corner in order to receive a notification that today they’re offering free lattes to customers who have checked in ten times or more, I just need to be near it. This type of advertising for a business is practically priceless – you’re reaching out to a customer who is within the vicinity of your business in a much more intimate way than any street side chalkboard sign could- you’re reaching them through their phone, your message is literally in their hands. Furthermore, you’re contributing to the very thing that keeps Foursquare users addicted: the nature of the game. Foursquare is about becoming mayor, getting points, and receiving badges – having a tangible ‘prize’ for playing the game will only serve to sweeten the experience. That said, I would even be inclined to check into one or more Starbucks locations to win a sponsored Foursquare badge – another part of the package which could hep to make ‘Foursquare for Businesses’ a money machine.

As exciting as these features are for both users and business owners, quite possibly the most valuable feature Foursquare has to offer it’s business members are statistics. Foursquare business members can track how many people have checked into their location, what day they had the most visitors, and how many were new visitors versus repeat customers. This information is undoubtedly useful for any business owner – from an independent family run bakery to the entire Tim Horton’s franchise. If the deal with Yahoo goes through, then their first priority should be to further develop the Foursquare analytics engine to offer it’s business members more comprehensive statistics. Currently Foursquare is giving away this information for free, but as smartphone and Foursquare usage increases, this info will wind up being the type of market research CEOs could only dream about, and certainly something Yahoo and Foursquare could capitalize on.

It will be interesting to see how/if this deal pans out, and how Foursquare continues to develop. Personally, I’d like to see such features as Teams, (sponsored) scavenger hunts, and a levelled badge system. There is a lot of promise in the future of Foursquare, and hopefully it is innovation and imagination that keeps this great start-up growing.