Balance in the Economy of Foursquare

If you’re not familiar with Foursquare, here’s a primer: Foursquare is a location-based social network with gaming elements. To play, you download the Foursquare app onto your AndroidiPhone or Blackberry device (or go to if you have something else). When you’re out and about – at a pub, cafe, restaurant or anywhere else – you open the app and “check-in.” The app will use your phone’s GPS to see if you’re near a venue in it’s online database. Screenshot of Foursquare on iPhoneIf Foursquare finds a match, just tap a button to check-in to that place. If the venue isn’t in the database, type a name to add it. Straightforward, but why would you do this? Well, if you have friends that use the service, you can see if they’re nearby, or maybe they’ve left some tips about the place. You might share things like “Best pizza in town” or “Skip the pasta, try the salmon.” As more of your friends use the system, you should develop a better awareness of where you live, find cool places to hang out, explore the city and have fun based on the recommendations and information from people with similar interests. It’s an exciting concept, because it brings social networking closer to real life socialising.

Foursquare is unique, because in addition to the social networking aspect, it’s also a game, the object of wich is to collect virtual badges and “mayorships” by checking-in to more and different types of places. Check into a dozen coffee shops in town, and maybe you get a “coffee snob” badge. Check in after 3am Sunday through Thursday and you get a “Out on a School Night” badge. Be the person with the most check-ins at your favourite cafe and you’ll become the “mayor” of it. As such, some businesses have even started giving deals – say, free coffee – to the reigning mayor, adding real-world incentives for virtual social activity which creates a fun and potentially viral marketing angle to the traditional loyalty punch-card scheme.

There’s just one little snag with the game: it’s easy to cheat. You don’t have to be a hacker to do it either, though some have gone that route. You simply check into places you’re not really at. Because your GPS is only so accurate, and because most “places” you’re inclined to go are indoors, the little GPS (or radio-assisted aGPS) chip in your phone can only determine your location to within a few dozen – or a few hundred – meters, depending on your device and conditions. This is good enough to give a ballpark estimate of your location for the purposes of finding out if any of your friends are nearby, but it’s not accurate enough to give a definitive location or to verify a check-in. So, if I’m sitting at a pub in the CBD, checking-in to Foursquare, the GPS can’t actually tell if I’m at the pub, the shop across the street, or the cafe a few doors down – so I may as well go and check into them all. If the cafe next door wants to offer free coffee to the reigning mayor of their shop, they might soon find that none of their best customers are able to snatch the title away from the punters who frequent the pub next door.

I’m guessing that the game mechanics were layered on top as a marketing angle, which is a clever way to increase the user base, and bring people into the system. Allowing cheating to become commonplace, however, leads to “data pollution,” as those who cheat aren’t adding any value to the community, thereby depleting the usefulness of the service as a whole.

As a human living in a civilised society, your first thought is probably to bring cheaters to justice. Create a police department – punish the offenders! But on the internet, that doesn’t work, because policing cannot adequately scale as the system grows. The people who run Foursquare will never be able to find and stop everyone who cheats, undo every fake check-in and delete every fake venue. So discouraging such behavior has to be built into the game.

This is where we can learn from economics. If another layer, let’s just call it “credibility,” were linked to your ability to gain rewards, you’d add a reason not to cheat, to balance out the reasons you’d want to cheat. Your economics professor would probably call it “introducing moral hazard.” But that doesn’t really matter, here’s how it’d work in something like Foursquare: Everyone starts with a normal, medium credibility which allows normal, medium privileges. You can add places, you can steal mayorships and you can check-in at a new place every five minutes or so. Abuse the system by making too many check-ins too quickly or by adding useless places and  you run the risk that another user will catch on and flag you. A single flag would not lead to serious consequences – it might only slow down your maximum check-in rate to 10 minutes, which most people don’t do anyway. But if you continued your campaign of abuse, you’re likely to run into more users, who would also notice that you’re checking in all around town, and flag you as well, increasing your minimum wait between check-ins to 30 minutes. Or several hours. Or maybe days.

The theory is that the more prolific you become as a cheater, and the more broadly and blatantly you cheat; the more users would take note and flag you. The distribution, breadth and credibility of the users you’re being flagged by might also influence your penalty. If you’re simply checking into the pub across the street from the one you’re really at,  no one may take notice – or care – but if you check into every pub in town you can bet that dozens of folks would pick up on it. Your credibility would also be tied to your ability to attain rewards, so the best stuff might only be available to those in good standing.

If a credibility layer is implemented, I think that it should be used positively as well. The system could be more useful by using these points in the background to rank and display tips. For example, if I take the advice of a friend to get the salmon, and I really like it, I can indicate that I took their advice, improving their status and giving their tip a higher ranking in the list of tips for that venue. Maybe tips would always be listed in order of their writer’s credibility. Not only could this model limit cheating, but it might encourage people to provide more helpful tips, limit trolling and create a more useful system – being the most credible Foursquarer in town would be something to aspire to.

Dennis Crowley, co-founder of Foursquare notes that there are a lot of fake check-ins, but that they haven’t put a lot of effort into the problem of tackling cheating systemically. He seems to favour approaches that more closely validate your checkin.

I feel the phenomenon is rooted in economics. Wherever you create incentives, people find ways to use the system in unintended ways to get them. Such a system must also have disincentives, things that people do not want, which limit your ability to gain the incentives, and thereby balance the system. In the real economy, big rewards bear big costs, and so would it be in a micro-economy like Foursquare. Lasting success can only be gained by adding genuine value to the community, which can only be earned as the player becomes more respected by their peers.

I understand that a lot of these social tools are more social experiments than anything, and that cheating on Foursquare is hardly breaking-news, but I find it fascinating that any time the concept of reward is introduced to a society, even if it’s a tiny one like on Foursquare, you invariably find economics and game theory at work.

Update: Foursquare launched a new version today, and I’ve updated the screen-grab from the new version.

Dear Mr. Whippy, Please Use Twitter

Recently, Julie and I serendipitously crossed paths with the Mr. Whippy man at the end of a fun run. It seems that the only way we’re currently meeting is by happy accident, so while he was dipping my cone in chocolate, I suggested that he use Twitter to update his location so that I can plan my next summer Saturday around ice-cream stops. His response was more along the lines of “ussa-twitta-who?” Granted, I was at the front of a queue of children waving money in the air, so there wasn’t a lot of time to give my pitch, but suffice it to say, in the few seconds I had, he wasn’t really won over by the concept.

Me eating a Mr Whippy Choc Nut cone.

First, let’s just take as a given that there are people who are willing to plan their day around ice cream. Second, I’m going to go out on a limb and guess that there might be a small cultural divide between those of us who spend our days fanatically trying out all the new stuff on the internet, and those that spend their days making delicious treats for children – so allow me to introduce the two of you:

Twitter: Mr. Whippy is a purveyor of soft serve ice cream, who roams the streets of New Zealand in search of children (ok, adults) that like ice cream.

Mr. Whippy: Twitter is a website where you post short messages to anyone who is interested in following you. You put where you’re at, or what you’re doing, and anyone who is interested can be updated in real-time. Think of it as a sort of public text message that anyone can receive. You can post a message (called a “tweet”) by sending a text to the service, where it will be broadcast for everyone. So ideally, Mr. Whippy will post something like “I’ll be in North Hagley, near the rugby fields for the next few hours.” Moments later, I’ll look at my phone, see your “tweet” and ride several miles out of the way I was intending.

Ok, now that we’re sorted on the introductions, let’s get you set up:

First, go to and get signed up. Pick a cool name like “ChchWhippy” or something like that – something people can remember. Add a little photo of a cone or the truck to flash it up a bit.

Next, grab your mobile and text “Start” to 8987, a special number just for Twitter that works on Telecom and Vodafone. Twitter will reply with a series of prompts. Tell it the cool name you came up with in the fist step and your password and you’re done. Try it out by texting “Who loves Mr. Whippy!?” to 8987. Save that number to your phone so you can post to Twitter every time you move the truck.

That’s it. Tell your friends to follow you, put a sign with your Twitter name on the truck or just let word spread. Soon, all the Mr. Whippy fans who use Twitter will be following you, and when they need a Whippy fix, they’ll know where to go.

Advanced Option:
If you really want to get nerdy, you can get a fancy internet-enabled phone like an iPhone or Blackberry. With one of those you can download a third-party apps like “Tweetie 2,” “TweetDeck” or “UberTwitter” that will let you attach a photo or GPS coordinates to your tweet, so people don’t even need to know their way around town to find the truck.

If you do me this one little favor, I promise to start bringing cash on bike rides.