Yahoo Rumored To Be Buying Foursquare For $900 Million

Rumors that Yahoo is buying Foursquare have been circulating around since CEO Marissa Mayer has been working on rebuilding Yahoo’s business around mobile. Now, according to some TechCrunch sources, a deal has been made for $900 million, while others claim that a deal is in the works. However, there has been no official announcement from either company, so it remains in the rumor mill at this point.

Why does this rumor keep resurfacing?

Whether this is only a rumor or a deal has actually been made, there are many reasons that a Yahoo acquisition of Foursquare would make sense.

To date, Foursquare has raised just over $162 million in funding. Its last round, in February 2014 from Microsoft, valued the company at over $600 million. The Microsoft deal included a licensing agreement to power location context for Windows and mobile searches.

However, Foursquare finds itself at a crossroads. After the company split its app into two last year, the Foursquare app has hovered in the top 25 of travel apps by downloads in the U.S. App Store, while Swarm has been gradually declining and now sits at approximately 146 in social networking.

At the same time, Yahoo faces challenges of its own. The company has been reorganizing its leadership, while it faces criticism for its product strategy being too focused on incremental iterations, even considering the rush of acquisitions since Mayer took over as CEO. Yahoo has been working on reinventing its search business with technology that includes deep linking on mobile, allowing mobile and Web apps to essentially search and link to specific data in mobile apps that are otherwise siloed.

Furthermore, Yahoo is considered to be a potential choice to take over Google’s position as the default search app for Apple’s Safari browser, which would follow Yahoo’s existing deal in the U.S. with Mozilla for Firefox. Additionally, Yahoo has been in a 10-year search pact with Microsoft, where Microsoft controls the technology behind Yahoo search. This deal passed a five-year break point in February of this year, and the negotiations have been extended by 60 days, which will end next week.

Last year, Yahoo made a deal with one of Foursquare’s biggest competitors, Yelp, to power listings reviews in its search results on mobile and desktop. At that time, some people speculated that the deal illustrated that Yahoo would not be acquiring Foursquare, but that is certainly not clear. Yelp also powers local search reviews on Bing, which is owned by Foursquare licensee Microsoft.

Although it’s possible that Microsoft, Yahoo, Yelp and Foursquare could work together, they could also break apart. In this scenario, Yahoo’s acquisition of Foursquare would provide the company with a massive amount of local search and location data, along with the technology and team to run it in-house.

Another key point is that acquiring Foursquare would boost Yahoo’s overall mobile portfolio of apps and its own primary-source data in local listings. Foursquare’s location database is considered to have more detail and a higher level of accuracy than any other options. Foursquare has very advanced location intelligence systems, and has built up a massive amount of data over the past six years, including 7 billion check-ins and 55 million people. The combination of this data and technology have allowed the company to develop its own viable commercial products, such as Pinpoint, its location-based advertising network that can target users by device, location and other parameters. As we’ve recently reported, major brands have already signed on to use Pinpoint, including AT&T, Jaguar Land Rover, FedEx, Samsung Galaxy and others.

Foursquare’s location API is currently being used by 85,000 app developers, which would provide Yahoo with a significant touchpoint with developers and publishers. This connection could complement Yahoo’s Flurry app analytics business as well as providing a method to sell other products and integrate other services.

Lastly, Foursquare and Swarm would give Yahoo another boost in social alongside its acquisition of Tumblr. Brands are increasingly seeking methods to connect with users beyond static banners and legacy media types, and the acquisition would better position Yahoo in this regard.

So, has Yahoo actually purchased Foursquare, or is this just another rumor? If a deal is in the works or has already been made, is Yahoo truly spending almost a billion dollars on the acquisition? There’s no way to know the answers at this point, but we’ll be watching closely and will report on further information as it becomes available.