According to this story in Ad Week, foursquare is going to use a chunk of its new funding to dramatically improve the functionality and features of its service. The goal is to provide its more than 500,000 businesses with better analytics and opportunities. Oh, and they are also planning on charging said businesses for this opportunity.

Could this be the death knell for Foursquare?

The platform has shown impressive growth in business participation over the last year. As recently as last fall, you could check in at your local establishment and struggle to find any offers. Now, you are more likely to see a slew of near-by deals every time you check in via your smart phone.

Unfortunately, in the “deal” game Foursquare is a lot less sexy than Groupon, Living Social and the chattering host of other deal makers. While Foursquare did recently closed a deal with Groupon one has to wonder if that is where the business should be headed.

Large brands have the financial clout (as opposed to Klout) to spread gobs of cash around any and all social media platforms. The results are mixed but the bigger you are the better you can cover your mistakes.

Conversely, the small and medium-sized business owner does not have this advantage. Their marketing dollars are deemed more precious and demand a level of return that can be quickly quantified. For them, Foursquare as a free service is a nice perk that may help generate new and/or repeat business. Plus, it adds an element of “cool” to their image. Their participation in the Foursquare platform is a no-brainer. The time commitment is minimal. It is one of the few Social Media platforms where you can “set it and forget it”. (I do not advocate that philosophy, by the way. Smart businesses should be monitoring check-ins, listening to the conversation and doing what they can to connect to consumers. However, if they choose to leave their Foursquare on auto-pilot it won’t hurt them.)

While we do not know what Foursquare is going to charge for their service, simply crossing the line from free to premium is a dramatic game changer for the small and medium business owner. This places Foursquare into a different category – paid media. That means is now occupies a budget line and is bound by the same decisions and expectations as search, print, radio, etc.

It will also force business owners to compare it to other “free” platforms like Facebook and Twitter. Why should they pay for Foursquare when they can make offers and gather check-ins via those free platforms.

Finally, when compared to the deal services, Foursquare is unable to offer businesses the large email databases they use to communicate their offers. Getting your name in front of one million people in a Groupon market makes Foursquare’s check-ins look meager by comparison.

I will admit that I am a fan of foursquare. It is mobile friendly and easy to use. While business participation is improving, I think too many miss great opportunities to develop and retain customers. I surmise that part of this is due to the fact that Foursquare’s top-of-mind as a Social Media platform is nowhere near where it needs to be to become a pay-for-play service.

Foursquare boasts of 10 million participants. Wonderful. Google Plus doubled that figure in two weeks! Yes, they are different services – for now. We have yet to see how Google Plus will deal with business pages or how they will integrate Google Places into the platform.

Of one thing we can be sure – Google will not be turning theirs into a paid service. Nor will Facebook, Twitter,Flickr, You Tube, etc.

Foursquare must establish value for their service. Once they convince small and medium business owners of the this – then they can move towards a premium service.

These guys aren’t stupid. I’m sure the $50 million they are using to upgrade the Foursquare’s features will yield some interesting and useful results. The question is – will that be enough to get businesses to hand them cold hard cash?

On that, the future is not so clear.

Your thoughts?