Why Foursquare Is Beating Gowalla: Location, Location, Location

Why FourSquare is Beating Gowalla: Location, Location, Location
Why FourSquare is Beating Gowalla: Location, Location, Location

Check-in phenom Foursquare just announced that it has passed 3 million users, further cementing its growing lead in the business of mobile social networking -- and increasingly, in mobile advertising, mobile coupons, and other sundry revenue models. Trailing further and further behind is Gowalla, another mobile social network that was born at about the same time and with arguably better technology. Foursquare's milestone comes right as Facebook is crashing the already crowded location-based social networking party with Facebook Places.

Gowalla, an Austin, Texas-based company has decidedly different roots than FourSquare, and it's entirely possible that those roots are the reason why Gowalla has lagged Foursquare, though the two companies were roughly even just 18 months ago. I knew that Gowalla was probably toast when I checked out this slide show from Henry Blodget's BusinessInsider blog breathlessly detailing how Foursquare CEO and founder Dennis Crowley had the titans of the venture capital game eating out of his hand. The post was titled The Most Wanted Man in Silicon Valley, which is pretty much in line with most of the massive coverage Foursquare received of Crowley's Valley crawl, complete with the appropriate check-ins at Sandhill Road destinations and, naturally, the Tesla dealership.

Silicon Valley is hardly a meritocracy -- it's more like a location-based momentum play. Those in the in-town "in club" are far more likely to succeed, even with products and execution that may not be as good as their competitors. Foursquare founder Crowley became a Silicon Valley name after his previous startup was bought by Google (GOOG), while Gowalla founder Josh Williams was an unknown and therefore a nobody. In their battle for mobile social networking dominance, old success begat new success.

I have to acknowledge: Yes, Foursquare is actually a New York City startup. But the closest association Foursquare had was with its founder's former employer. After Crowley sold DodgeBall to Google, he spent time at the search giant before leaving to launch his own thing again. Many of the big venture capitalists who were hungry to get a piece of Foursquare came out of Silicon Valley. The earliest, Fred Wilson and a few cohorts, were primarily NYC folks. When the race was still in its early stages, they made the right bet. But at that time, oddly enough, I was hearing from my coder friends on the West Coast that there was a Foursquare alternative, one whose richer functionality and more attractive user interface just blew doors off Crowley's creation.

Real World Network Boosted the Virtual Network

That alternative was, of course, Gowalla. It had features up the wazoo, like allowing users to build tours, drop prizes, and do other things that made for improved game mechanics and user interface. I actually encouraged a few VC friends to check Gowalla out, and they were impressed. Some even invested. They were concerned that Gowalla was located in Texas, but the product was good and its geek cred was impressive. Gowalla started to make the scene, primarily on the West Coast.

Then the Silicon Valley momentum machine kicked in. Due to his past record and Google connection, Crowley got a disproportionate share of the media attention. Many of the journalists who lavished praise on Crowley had never met Josh Williams. Often, when I asked if Williams was on industry panels at the same events where Crowley was featured, the response was "Josh who?" In the beginning, Williams wasn't -- at least not often enough.

Of course, the Bay Area and New York City are the two hubs of tech journalism and tech conferences (SXSW excluded). So which CEO do you think was more likely to pop in for an interview at DailyFinance.com or at TechCrunch or VentureBeat? And which CEO was more likely to be at the same bar as tech influencers and huge Twitter hounds like Digg founder Kevin Rose or PayPal Mafia mouthpiece Dave McClure?

The Power of a Good Track Record

The success of any social network is a matter of network effects: The value of a network grows exponentially with the number of nodes in it -- what the tech crowd calls Metcalfe's Law. But networks don't only exist in cyberspace. They play out in the physical world as well, where a group of Stanford grad students drinking at the Dutch Goose in Menlo Park probably ran into other grad students working on computer science programs. So Gowalla will likely be sold for a nice chunk of change at some point, while Foursquare will gallop off to a multibillion dollar valuation.

Had Josh Williams made the Silicon Valley grin-and-grip circuit, and had he sold his last startup to Google, we might have had a better horse race. But in Silicon Valley, past results dictate expectations of future returns, even when that's not totally warranted. That feedback loop has led to a self-fulfilling prophecy, a check-in checkmate for Gowalla.

It's true: Crowley had the right product for the right time, and he had the right ideas. But he also had a track record, one that created connections and a pre-existing, highly valuable network. The rest was location, location, location. Some mantras hold true no matter the medium.