Who Needs Foursquare More: Google, Yahoo Or Microsoft?

Bloomberg reported late yesterday that Microsoft and American Express are competing for an “equity stake” in Foursquare. Amex is something of a surprise here and could do some very interesting things with Foursquare beyond its previous experiments.

Amex is also an interesting sales partner (potentially) for Foursquare as it tries to gain more small business advertisers.

It’s possible both Amex and Microsoft could make some sort of investment? It’s also possible another company could emerge as well? I still believe that Foursquare is not an IPO candidate and will ultimately be acquired.

Microsoft could potentially use Foursquare’s data in several ways. It could use them as an input to rank local search results in mobile and online. It could make Foursquare more central to the Windows Phone and Windows PC user experiences (Foursquare is already doing the latter). Foursquare is already part of the Bing social sidebar roster of social networks.

Yet it’s doubtful that any investment in Foursquare will make Microsoft’s products more competitive than they already are. Microsoft’s early investment in Facebook hasn’t impacted its competitive position vis-a-vis Google. The real opportunity was search on Facebook, which so far hasn’t panned out and may never.

Following an equity investment, Microsoft could buy Foursquare outright. That would be interesting and would give Redmond a local + social product that it currently doesn’t possess. Whether it could manage Foursquare over the long term for growth is another question.

All things being equal, I doubt that Foursquare CEO Dennis Crowley will sell to Google, given his history with the company. He previously characterized Google’s acquisition of Foursquare 1.0 (Dodgeball) a “failure.”

Google certainly has the money to pay a $1+ billion price tag that Foursquare investors would demand. Foursquare’s last “official” valuation was roughly $600 million. And despite fiduciary obligations to consider any and all reasonable offers, I think Crowley will argue strongly against any Google deal — unless outrageously large.

Google doesn’t “need” Foursquare really, although Foursquare’s new push-recommendations announced yesterday are very consistent with Google Now and Field Trip. And while we might debate the efficacy of its various local efforts (especially Google+ Local Pages), with the recent acquisition of Waze, it now has an abundance of local assets and content. The company that really needs Foursquare is Yahoo.

(Facebook believes it can do a better job at Foursquare than Foursquare and so won’t pursue the company.)

Last April I made the (incorrect) prediction that Foursquare would be Yahoo CEO Marissa Mayer’s first big acquisition:

Foursquare could give a big boost to Yahoo in “SoLoMo”: social, local and mobile. While Yahoo has mobile apps, it badly lags Google’s efforts — especially in local. At one time Yahoo had the leading local property online and squandered that lead through literally years of neglect.

Ironically Marissa Mayer helped build up Google’s local assets over the past couple of years to make it into the local-mobile juggernaut it is today. The question many people (including me) asked when Yahoo announced Mayer as the new CEO is whether and how she might try to revive local at Yahoo.

Buying Foursquare would kill a couple of birds with a single projectile. It would give Yahoo a leading SoLoMo app with 20 million users and a cutting edge brand that would help make the company “hip” and relevant in ways that it isn’t today.

While I’m sure that the two companies talked, obviously Yahoo didn’t buy Foursquare. Marissa Mayer said she wouldn’t try and compete with former employer Google in local. But what she meant was she wouldn’t try to go toe-to-toe in maps. This is different. Foursquare fills a prominent hole in Yahoo’s mobile portfolio and could be the content backbone of a revitalized Yahoo Local on the PC.

Could Yahoo afford to pay $1 billion (or more) for Foursquare? Probably. While the company only has $4.7 billion in cash and “cash equivalents” (as of Q2 earnings), it still has a significant stake in Alibaba. If it were to sell that interest, which it plans to eventually do, the company could potentially reap roughly $14 billion based on Alibaba’s current valuation.

The sale of half of Yahoo’s Alibaba shares last September brought the company $7 billion (net $4.5 billion). Most of that money was returned to shareholders. So a sale of some of its remaining Alibaba shares could more than support a $1+ billion Foursquare acquisition.