Why Apple and Foursquare Need Each Other

 | Dec 18, 2012 | 2:30 PM EST
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Yesterday, I speculated in TheStreet that Apple (AAPL) was going to buy Foursquare imminently.

Six hours later, The Wall Street Journal said that Apple would soon announce a large data-sharing deal with Foursquare.

For Apple, a tie-up with Foursquare fills a critical strategic need for Maps and Siri. These products aren't just important today. They are going to become critically important as time goes on.

There's a tremendous amount of local data knowledge that Foursquare brings to the party. That means much more to Apple than what Foursquare's current revenues are.

For Foursquare, it's also important to tie up with Apple. It can be so much more successful and change the world if it's under Apple's wing, rather than on its own.

The competition in the local maps space is fierce. Google (GOOG) already has a leg up on everyone, since it has the best maps app out there at the moment and since its recent purchase of Zagat data. Facebook (FB) has also jumped into the local space with the several-months-old purchase of Gowalla from Austin, Texas. Even though Gowalla had been miniscule in terms of user traction compared with Foursquare and Yelp (YELP), it got supercharged by the tie-up with Facebook.

In fact, it turns out that the reason why Apple and Foursquare need each other is really embedded within another post yesterday from Techcrunch that discussed the new Nearby service launched by Facebook. You can take the words of Gowalla founder Josh Williams about why it was important to sell to Facebook and imagine Dennis Crowley saying the same thing about Apple:

"A location service only gets interesting when you get to a certain scale. ... Now we're seeing 250 million of our users tagging locations on a monthly basis – a bit over 800 location tags per second."

As the article states later: "Without data to make helpful recommendations, nobody uses the app, and it doesn't build its data set. Facebook solved this chicken and egg problem of starting a local discovery service with no users or data by simply building the vacuums to suck in geo-tags first and waiting years before starting to use it for recommendations."

So Foursquare can't stay independent. Gowalla, which once was an ant compared with Foursquare, is now 10 times the size of Foursquare, thanks to the fire hose of users from Facebook. Foursquare can expect similar improvement in its service, thanks to its tie-up with Apple.

But make no mistake, Apple needs Foursquare too. The local-maps area is of major strategic importance for Apple. If it weren't, Apple wouldn't have built its own Maps app in the first place. It will need to rely on this service for the next several decades.

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