Double Bus Stop

The technology, film and music conference South by Southwest (SXSW) in Austin has become a black hole. It pulls a massive amount of attention from the tech biz community, destroying startups and spitting their pieces back out like crushed planets. But fortunes are made here as well and if you listen closely, you can hear what’s coming beneath the wailing of drunken parties and desperate tech entrepreneurs. Twitter was born at SXSW and a later was given its first singular media moment. It is worth paying attention.

It’s silly to try to predict the next big internet thing. The nimble industry has made as many pundits look like morons as geniuses. Its tempting to stay on the sidelines, but the new partnership between location-based social media app/game Foursquare and American Express has too much juice to ignore. Here’s why.

Location based apps are a bit creepy. They feel like an invasion of privacy; mostly because they are. Foursquare is a poster boy for invasive software. For the uninitiated, Foursquare uses a GPS enabled smartphone to set up “check-ins” from various locations. It awards badges and arbitrary titles to users who check in the most from a particular place. In its infancy, Foursquare didn’t do much more than that. For users who didn’t really care about who was the “mayor” of the local Starbucks (or weren’t stalkers), it didn’t hold much appeal. Foursquare has grown over the years partnering with business to reward users for regular check ins and offering coupons and rewards.

This is a strike at services like Groupon and Living Social. Those services give users special pricing on daily deals (assuming the deal reaches a certain adoption level) and have become popular enough to warrant awkward Superbowl commercials.

The problem with those services lies in their irregularity. Groupons, for example, are limited in number. Days or weeks might pass before a deal pops up that might interest you. In that time, the app may be forgotten.

Foursquare has seen around that problem. By knowing the businesses you frequent and then offering deals for those locations, Foursquare is offering an even more direct strategy. Their new partnership with American Express takes that even a step further.

The process works like this. I walk into my local coffee shop and immediately check in on Foursquare. The app informs me that there’s a five percent discount if I use my Amex card. I accept the coupon, order my tall triple shot, skinny vanilla latte with no foam and pay with my Amex. I didn’t have to show anything to the cashier and in fact, the bill looks the same on the register. But if you check the charge on my card, the discount has been applied. This could work.

American express has opened up its API for the first time, allowing a third party to connect with its customer database. If it works out, expect to see all sorts of other financial partnerships to pop up. There’s a ton of potential here.

I’m generally a contrarian. I don’t believe in many of the companies that make up the big social media bubble that’s captivating investors. In fact, until this point, I didn’t have much faith in Foursquare as more than an ad-based location game. This though, is real. There’s real money at play and the potential for massive growth is there. The only question left is, will users really trade away their privacy for a five percent discount on coffee and scones? If you follow the trends in technology, that question has already been answered with a emphatic yes.

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