Foursquare announced today that they will be releasing a new version of their iPhone and Android apps later tonight. Foursquare has stacked some impressive numbers over the past couple years. Growing from 500,000 users to 7.5 million in the last year alone, racking up a half a billion(!) check-ins in 2010. It appears the massive growth has slowed their product drive as can be seen by the lack of feature addition in the past year. That's all going to change with foursquare 3.0. They've got big plans.

The new version is going to focus on three main concepts: Discovery, Encouragement and Loyalty.

Discovery

Discovery means providing foursquare users with new means of finding relevant places they wouldn't have found otherwise. While this is possible with online listing services such as Yelp or Zagat, the discovery mechanism is allegedly better with foursquare. This is due to the promenence of the "check-in". Foursquare describes a check-in as an "atomic unit of measuring interest in a place". The idea is that reviews are easily skewed or biased, but aggregate behavior can't be denied. When dozens of people check in to a bar every Saturday night, there must be something consistently good about that place. Foursquare is using this knowledge about human behavior to then recommend new places to their users. These recommendations help their users discover new places and have more fun in their neighborhoods.

Encouragement

Encouragement is largely responsible for foursquare's growth thus far. These are the game mechanics that drive participation with the foursquare user base. The company makes friend participation, competition and leaderboards an important part of their product. These aspects drive users to continue to check in to see progress and competition among their friends. In foursquare 3.0 they are defining this further. In the past, you were measuring by arbitrary point values. Now metrics will be provided based on concrete behavioral patterns among your friends. These metrics are then applied to a seven day sliding scale. This all seems very dry and confined, however I think it's a step in the right direction. With better rules governing the "game" of foursquare users will be able to know how to "win" better and have more fun doing so. I'm sure Charlie Sheen is excited about that.

Loyalty

Loyalty is the business side of foursquare. When companies hear about foursquare's games and place discovery, they don't think much of it, understandably so. Where they start to get interested is when foursquare is able to tell them "We will make that customer come back". That is a very powerful offer, let's look at how it works. Discovery and Encouragement work together to help their users find new places and are then encouraged to compete with other friends and patrons. The encouragement is through game mechanics and reward systems. The most loyal customers get rewards for their loyalty. So by providing one of your customers a reward for being a loyal customer you gain more returning business from not only that one customer, but all the other customers competing to take that top spot. This is clearly very inticing to businesses, and I'm sure with foursquare 3.0 we'll see this trend continue to dominate local businesses.

Get the whole story from foursquare's blog.