Forget Goopon–Why a Groupon-Foursquare Combo Makes More Sense

As major Web players look to make a play in local, Groupon and Foursquare have both walked away from lucrative acquisition deals.

But now, as these young start-ups go it alone, would it make sense for the two to combine their forces and become the next major Web powerhouse?

The joint company would have an enviable head start on all things local and social, a combination current leaders Google and Facebook have yet to crack.

To be clear, it’s just a scenario. But in case any investment bankers out there are left without a new project after these acquisition talks fell apart, here’s something to explore.

Groupon has a working business model, local merchant relationships and an ample waitlist, and a salesforce numbering in the thousands.

Meanwhile, Foursquare represents the areas where Groupon needs to grow. Foursquare has innovated around GPS and the mobile application experience, which is obviously where local is headed. Foursquare also has insight into incentivizing users to connect to merchants and each other on a daily basis rather than for a one-time deal. It could provide the tools to help users and merchants have a lasting, mutually beneficial relationship.

Put more simply, Groupon excels at recruiting customers, while Foursquare’s emerging strength is loyalty and retention.

Still, Groupon currently has far more value than Foursquare, so a merger of equals is unrealistic. Groupon has more than 20 million subscribers and a $2 billion revenue run rate. Before Groupon walked away from recent talks, Google wanted to buy the company for $6 billion, an almost unimaginable valuation for a two-year-old company.

Foursquare, which was courted by Facebook and Yahoo before taking funding from Andreessen Horowitz, has five million users and its own experience striking merchant deals and branding relationships, if on a much smaller scale. For years now co-founder and CEO Dennis Crowley has been passionate about social location-sharing and multiple start-ups, and is still waiting for, and provoking, the market to catch up to his vision of mapping people’s real-world experiences.

At the very least, a Foursquare-Groupon partnership seems likely. Speaking about Groupon at our recent D: Dive Into Mobile event in San Francisco, Crowley said, “There are lessons we can learn from them and ways we can work together.”

He elaborated, as you can see below in a video of the interview: “We could easily pull Groupon deals into Foursquare and make them sweeter based on the stats behind them.”