) is expanding its partnership with foursquare across the country
after a successful
. The new partnership will allow users to link an American Express
card with their Foursquare account allowing users to take advantage
of special offers by paying with their AmEx cards. While we don't
expect it to impact the shares immediately, it provides an
attractive platform that reaches young buyers that use Foursquare
and so could increase card membership or attract users away from
competitors like Visa (NYSE:V) and MasterCard (NYSE:MA) that are
more widely available. It also takes advantage of social buying
similar to Groupon or LivingSocial by promoting local deals.
We value American Express with a
$49.60 Trefis price estimate of its stock
, slightly below its current market price. Here we take a closer
look at American Express's partnership with foursquare.
How it works
With a user base larger than 10 million, foursquare is a mobile
platform that lets users share their location with friends as well
as share views and suggestions about venues nearby. Businesses can
leverage the foursquare platform to attract, engage and retain
consumers depending on their preferences and location.
The partnership links foursquare profiles with American Express
cards, thereby enabling cardmembers to seamlessly redeem deals
& discounts offered exclusively to American Express cardmembers
by merchants without the need for coupons, special codes or even a
show of their mobile devices. Cardmembers make payments at retail
price on making the purchase or using the service, and the discount
is credited back to their American Express card account in 3-5
Mutually beneficial partnership
Partnering with an established global financial services firm
such as American Express boosts foursquare's credibility
and reach. It also enables foursquare to provide its users tangible
'real-world' rewards in the form of discounts - rather than virtual
badges it is best known for. By offering more specials with
retailers, Foursquare will likely gain more users looking for deals
and increase the engagement of existing users.
Similarly, American Express gets exposure to the current
popularity of daily deals ushered in by sites like Groupon and
LivingSocial. This partnership leverages social networking and
consumer spending habits so that American Express can target a
younger demographic for new cardmembers. This will increase the
number of cardmembers, which we expect to also get a boost from the
introduction of prepaid cards.
Expect Muted Impact for Now
Foursquare's user base hit 10 million within 2 years growing at
a staggering 1000% pace. We expect that at its current pace,
Foursquare could well reach over 100 million users by 2017.
In a scenario where 1% of Foursquare members are drawn to
American Express cards, this could lead to an additional 50,000
American Express-issued cards in the U.S. in the second half of
2011 - growing to almost 1 million additional cards by 2017. Since
more cards-in-use translates into higher transaction volumes, this
would mean higher transaction fee revenues for American
You can drag the graph above to see the impact on American
Express stock price estimate.
View our detailed analysis for American Express