Location, location, location. A POV on the Foursquare and Factual Merger
Recently, the location technology platform Foursquare announced a merger with Factual to create "the #1 independent leader in location-based technology and data for global brands, advertisers, publishers, and agencies."
The following provides a primer on the evolution of the location data industry and an assessment of the implications of the merger for advertisers.
Introduction: A Primer on the Location Data Space
For any marketer who has grown up in the digital age, location data (which for simplicity's sake we’ll broadly define as any data collected through web, in-app, and GPS activity on smartphones) is generally considered to be one of the more ubiquitous and valuable commodities. Today, using location data to fuel a variety of use cases - from consumer insights to audience targeting to measurement - has become commonplace. And, as the space has matured over the last decade, many marketers have become as familiar with terms like point-of-interest (oft “POI”) graphs, geofencing, and SDKs as they have GRPs, TRPs and CPMs.
Rise of the SDK
Brands rely on location data to engage with consumers based on where they are right now, where they’ve been, and nearly everywhere they frequent in between. We can apply location-based targeting parameters in buying platforms to ringfence and conquest people visiting our competitors, work with location data providers to understand which audience segments frequent our key points of interest, and connect visit data to attribution systems to track how well our ads drive users to store. Much of this is powered by collecting location data through wifi and lat/long signals passed in bid requests and by data collected via in-app SDKs (code publishers write into their apps to pass relevant data to partners) tied to mobile ad ids.
Over time, collection mechanisms like bidstream-level lat/long data (which can be easily falcified) have fallen out of favor in place of data collected through in-app SDKs, and as a result, the vast majority of location data companies operate their own or license SDK data in order to build and productize location-based data.
Explosive Category Growth
Location data is an increasingly powerful tool in the modern marketer’s kit, but the data in and of itself isn’t very valuable in its raw state. Hence why dozens and dozens of companies have sprung up to ingest, clean, map and segment this data. Organizations like Factual, Foursquare (who acquired Placed, another location data company last year), Groundtruth (fka xAd), 9th Decimal, and PlaceIQ have become household names in location data over the last decade - each with a slightly different approach to differentiating themselves in an otherwise quite homogeneous arena.
Many of today’s household names in location data trace their origins back to the late 2000s and early 2010s. Yet, despite similar offerings today, their early days featured different approaches to and solutions powered by location data. Some, like xAd, were borne out of point-of-interest graphs coupled with bidstream-level location data to understand more about consumer patterns - using this data in conjunction with a buying platform to pivot into the programmatic ad space. Others operated as pure-play data brokers - licensing location data from other SDKs, and packaging (and marking up) this data up as low-cost data segments available across a plethora of DSPs.
Still others, like Foursquare, can be seen as the beneficiaries of providing consumer utilities that just so happened to also generate heaps of location data that could be used for advertising.
Foursquare, which was founded in New York in 2009, can be considered one of the originators of concepts like “checking-in” and real-time location sharing. Through their app technology, in which users could win bragging rights and other accolades for sharing where they’ve been amongst their social media channels, Foursquare collected seemingly infinite troves of valuable visit-related data. Over time, they developed a host of ad-related targeting and measurement products to monetize it. However, prior to last may, when they acquired Placed from SnapChat, Foursquare was relatively quiet in the location data space - opting to couple their data with media and managed service advertising solutions rather than making their data available to buyers in the form of pre-canned segments in DSPs.
Unlike Foursquare, Placed, which was founded in Seattle in 2011 by David Shim (now CEO of Foursquare), built and operated a large panel of opted-in users who openly shared location data in order to support brands’ advertising efforts. Placed offered marketers a distinct set of solutions that provided a glimpse into the types of consumers that frequented their or their competitors’ brick and mortar locations as well as attribution tools to assess the degree to which advertisements drove increased foot traffic and ultimately sales all tied to the Placed first party panel.
Similarly, Factual (who originated in 2008 as an open-source data sharing technology supporting large scale aggregation and communion of a variety of digital data signals) rapidly moved into the advertising arena - becoming almost synonymous with location data in the process. Over the years since, Factual flourished by offering hundreds of standard “off-the-rack” and custom audience data segments directly in DSPs, DMPs, and data stores, and became one of the location data favorites with agency and brand marketers alike. Prior to the merger with Foursquare, Factual touted a large global presence with sizable monthly active unique devices collected through a mixture of their owned SDK, licensed location data, and bidstream-level data.
Fast forwarding to the last few years, we still see relative newcomers (like Cuebiq who were founded in 2015) entering the space albeit with more privacy-centric approaches as the industry as whole responds to the GDPR and the CCPA. Nowadays, the narrative has shifted from quantity to quality, and marketers have placed greater emphasis on location data that prioritizes consent-driven offerings with privacy by design at the heart of their partners’ location data solutions.
Consumers (and manufacturers) Wise Up
As consumers and policymakers become acutely aware of how digital footprints are tracked and monetized across screens, location data in particular has come under scrutiny not only for how it’s collected (i.e. foreground vs background), but also why it’s collected.
Privacy regulations like the GDPR and the CCPA are forcing data companies to adhere to strict user opt-out governance, and tracking changes like Apple’s iOS13 rollout limit data collection (or at least make it more transparent that data is being collected). This has resulted in sophisticated marketers placing even more emphasis on data providers that source first party location data through their own SDK (rather than licensing through others), bespoke publisher partnerships, and opted-in user panels. Yet whatever favorable views on location-sharing that exist now could very quickly reverse course if users aren’t made more explicitly aware of how their data is being used and by whom.
All told, despite these headwinds, the power of location data has recently become a strikingly valuable source of information used to better understand the spread of COVID-19. In fact, what was once the topic of several scathing articles has quickly been replaced by deep analysis of that very same data sources journalists frowned upon only a few months earlier.
All this is to say the location data space continues to mature in a rapid fashion, and given the evolving uses and challenges above, feels poised for more change. The Foursquare and Factual merger may be an early indicator of what’s to come.
As is often the case with many of our industry’s M&A deals, the expectations generated by initial buzz and excitement quickly diminish without tangible traction in new product / feature offerings, capabilities, or meaningful, sustained changes to the competitive landscape. Considering three of last year’s biggest deals alone - Roku buying DataXu, Amazon buying Sizmek, and Rubicon/Telaria merging - the flurry of POVs, commentary, and speculation subsided within weeks if not days, and unless you were directly impacted by these deals, chances are your day-to-day hummed along as if they never happened in the first place.
Truthfully, the Foursquare and Factual merger could very well be just another blip on the radar. And while we can debate whether this was truly a merger or if Factual found themselves in a financial position that made an offer too good to pass up (news, press releases, even linkedin title updates indicate this is an acquisition), knowing how valuable yet divisive location data has become over its relatively short lifespan, it is not outlandish to think we could see some true benefits, challenges, and corresponding changes to the competitive landscape amongst location data companies.
Is This Deal a Good Thing for Advertisers?
In some ways - Yes. The merger boosts Foursquare’s location data offering and gives them access to new entry points with hundreds of buyers activating Factual’s location data through DSPs. Where Factual has found success in the targeting sphere, Placed (and now Foursquare) has mostly hung its hat on location measurement and attribution through its expansive first party panel. A joint Foursquare / Factual entity should introduce more targeting options available to advertisers through Foursquare, more opportunities for Foursquare to create linkages between targeting and measurement, and possibly greater access to higher quality, opted-in user data.
Assuming Foursquare can join Factual’s data segments, which are largely built on mobile ad ids, to their panel also based on mobile ad ids, the outcome should be tighter alignment between targeting and measurement. As a result, gaps created by using one data source to target and another to measure could be filled by a single Foursquare-powered dataset to handle the end-to-end application of location data.
Additionally, if Foursquare are able to expand their panel into Factual’s SDK footprint over time and also reduce if not altogether suspend the collection of background and bidstream-level location data while also ensuring that consumers have clear, easy to follow opt-out mechanisms, the resulting location data Foursquare collects and makes available to marketers should be of better quality and largely consent-driven. Coupled with leveraging Factual’s established connections to DSPs, DMPs, and data stores, Foursquare could design new targeting and measurement solutions centered on data privacy and already integrated with many marketers’ ad stacks.
That said, seasoned digital marketers know all too well that corners of the industry dominated by only a few large players can stifle innovation, create misaligned incentives, and force solutions that benefit the few to supersede those that improve the marketplace as a whole. And the location data space is no different. This deal - particularly right off the heels of the Placed acquisition last year - may leave more than a few advertisers leery of another too consolidated corner of the industry.
Placed, and now Foursquare, have historically been innovators in the location data space and Factual have been equally supportive of building bespoke enterprise solutions for clients. We have no reason to believe this will change, but it is possible that the merger will slow if not altogether alter the path of roadmaps and decelerate growth simply as an outcoming of becoming the largest location data company over night.
What’s more - without careful consideration of how to design targeting and measurement approaches and interpret results, marketers can potentially over-subscribe to Foursquare data in a way that obfuscates true learnings. For example, packaging a targeting and measurement solution into a single execution could make things easier for some, but also could mean that Foursquare is effectively grading its own homework, and subsequently minimizing the application of results outside its walls. While we have no reason to believe that Foursquare would intentionally lead advertisers down this path, brands that have used either Foursquare/Placed or Factual for targeting and measurement should still consider how equitable it is for the new entity to support multiple use cases.
Finally, considering the intense scrutiny location data continues to face amongst consumers, policymakers, and smartphone manufacturers alike, any additional restrictions placed on location data collection and distribution could upheave the entire location data space as a whole - Foursquare/Factual notwithstanding. In fact, given mobile data’s clear distinction as personal information under the CCPA and Apple’s approach to making data collection more transparent and purposeful, we could see less and less usable location data over time. While Foursquare / Factual offer the promise of scalable consent-driven location data, they are still just as susceptible to wide-sweeping policy changes like the elimination of mobile ad ids from Android and iOS devices. If the mounting pressures on 3rd party cookies across most major web browsers bleeds into the mobile data space, it could have dramatic, insurmountable effects on nearly all location data companies.
Merging with Factual hot off the heels of acquiring Placed certainly makes Foursquare a large and notable player in the location data space. Competitors like PlaceIQ, 9th Decimal, and GroundTruth, who were historically viewed as Factual’s primary competitors now have a new, large force to quickly reckon with - particularly when it comes to scalable, consent-driven end-to-end solutions for marketers.
As consumer awareness expands and the industry places increased emphasis on higher quality, ethically sourced location data, companies that have built businesses on licensed SDK, bidstream, and other less reliable sources of data will become even more at risk unless they adapt as well. Similarly, bubble players like Cuebiq who have rapidly established themselves by designing flexible solutions built on a foundation of high quality, first party data yet are still building scale run the risk of being overpowered by a newly merged company with far greater resources. While other market and economic concerns are clearly in the forefront of minds right now, the timing of the Foursquare / Factual merger should remind us that other M&A deals within the location data space could, and likely will still happen amongst those that remain in an effort to stay relevant and competitive.