Foursquare is rolling out the pilot for a new Promoted Updates programme, which will charge merchants to send recommendations to users about their products or services.
Used by over 20 million people worldwide as of April, Foursquare in New York offers a free location-based mobile app that links people to their friends and places in their vicinity. It redesigned its app last month to, for example, allow the app's Explore function to allow users to browse locations by category or do a specific search like "free wi-fi" or "dumplings."
Promoted Updates, which will figure in the app's Explore tab, is described by Foursquare as a "great way to find out what's happening at a local coffee shop, save money on your next clothing purchase, or just discover a store you've never been to before."
Paid for by businesses, Promoted Updates will only appear in the Explore tab, and they'll always include a "Promoted" logo, the company said.
The launch of the new service follows the company's introduction last week of Local Updates which allowed businesses to connect with their loyal customers for free on their activity stream on Foursquare. Updates from a business can be turned off by users.
The company has been looking out for opportunities to monetise its services by providing tools to merchants. "We're on our way to helping them solve some of their biggest problems by delivering the right messages to the people who are most likely to love a business when they're nearby," said Steven Rosenblatt, the company's chief revenue officer.
Other social networks are also trying to boost advertising, with Twitter for example having its Promoted Tweets programme.
The promoted advertisements will be based on relevancy to the user and his proximity to the business advertised. Foursquare compares its programme to search ads, where the user may see an ad for an electronics website next to the results if he searches for 'laptops' online. In Foursquare, if the user does the same search in Explore, he might see a promoted special about a weekend deal at a nearby computer store, it said.
Users will only be shown promoted updates from businesses when they are close enough to actually stop by, so they can take advantage of the information being shared immediately, it added.
The company is running the pilot, which starts today, with 20 partners including smaller enterprises and large chains such as Gap. It aims to make promoted updates available to the nearly one million merchants on Foursquare in the coming months.