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The big unidentified market is in quantifying or monetizing the creation that takes place within virtual communities/networks. Gupta is absolutely correct that if your business opportunity is simply to convert traditional currency into virtual currency, then you are just a payment system. Twitter has been so successful because it has allowed people who didn’t necessarily have economic power to develop and alternative sort of influence and quantify that influence.

I expect tension between these two approaches to grow dramatically as virtual communities grow. In most cases what will be best for the community will be to encourage and reward value creation within the community, but profit motivated companies will be pressured make that value convertible in such a way that it can be extracted from the community/network/platform (so that they can take a cut of that transaction). Users will flock to those platforms that are least monetized, or at least, those where the monetization impinges least on the user experience. If your farm, for example, is just a reflection of your bank account then the game isn’t much fun…

I think the trick for companies is minimizing friction between payment and value. The reason World of Warcraft, and many online games, are so successful with their virtual currency is because people value time more than money. You can play the games fine without paying but you get further faster by paying. But this is a very one dimensional view of extracting monetary value. It’s not that different than what Google does with paid ads. You can get to the top of the search results if you have time, or you can pay to get there.

[...] This post was mentioned on Twitter by Tac Anderson, Sean Moffitt. Sean Moffitt said: Sharp point “@tacanderson @GregoryJRader the trick for companies is minimizing friction between payment and value http://disq.us/k1t7u” [...]

I have to confess that I have never played WoW so I might be speaking completely out of ignorance but…it seems that what you are rewarded (compensated) for in the game is relevant to this discussion. If your efforts in the game contribute to building the gaming environment in some way then I think that is a different situation than a game that is fully designed by the hosting company. For example, my understanding is that the currency in Second Life arose naturally as an emergent property of the gaming environment/community. Now suppose Linden Labs started taking a significant commission on all transactions in Linden Dollars including those that occurred fully inside the gaming environment and did not involve conversion to traditional currency. I suspect there would be some resentment to what would be perceived as Linden Labs extracting value that was generated inside the community.

In WoW, on the other hand, I suspect the gaming world is more thoroughly a product produced by Blizzard that the players interact with rather than create themselves. In that case I can understand gamers treating WoW as more of an entertainment experience than a self contained economy and therefore being more willing to pay to enhance that experience (product).

So, having thought that through, perhaps I should rephrase my original comment: If your game/platform is ultimately just entertainment primarily created by the hosting company, then you are still just selling a product and your currency is only a payment system. If your platform encourages user generated content then it has the potential to develop into a true alternative economy with a true alternative currency. It is the latter type that I think will resist blatant conversion of user generated value into traditional currency for the sake of extracting revenue.

Am I making sense?

[...] Who is Google’s Biggest Rival? By Jon Taplin Leave a Comment Categories: Applications and Social Networks Tags: Apple, Facebook, Google, Social Networks, Social Payments Is it Apple or is it Facebook? Perhaps social payments is the real battleground. [...]

I especially like the distinction between UGC & Gaming. Makes perfect sense.

[...] This post was mentioned on Twitter by Tac Anderson, Google Buzz Filter. Google Buzz Filter said: RT @tacanderson RE: @GregoryJRader I especially like the distinction between UGC & Gaming. Makes perfect sense. http://disq.us/kbiqv [...]