New Comm Biz

Mahendra has a great post hypothesizing on Facebook’s announcement to offer it’s own virtual currency and how other social networks (namely LinkedIn) could do the same thing: Why LinkedIn Should Have A Virtual Currency | Skeptic Geek I was glad to see Mahendra’s post because it reminded me of a post I had been noodling over.

I have long been fascinated with the success of virtual worlds like World of Warcraft and Second Life. Yes calling SL a success is a misnomer but a lot of people made a lot of real money through their virtual money, Linden Dollars. Why would people waste real money on virtual money? I understood that to buy things you had to use their currency. Then it struck me that this model has been around for years.

When I was a child I would go to video game arcades and buy tokens. As an adult I buy things on my credit card so I can get “miles.” Many people use reward cards when they shop at their favorite stores and earn bonus points they can redeem for goods. This is all virtual currency.

One of the reasons virtual currency works is that it negates the 1:1 ratio we have in our minds. Airline “miles” aren’t actual miles.

Chuck-E Cheese get’s you your kids to spend way too much money to buy tokens to win tickets to exchange for cheap crap. This really warps the 1:1 ratio because you play the games (presumably) for fun. Winning the tickets becomes a mechanism to keep you playing the game. The tickets then become their own currency and exchanging them is like a bonus. It’s not why you played the game, but it is a motivator to keep playing the game past when you normally would.

All of these motivators are explained by Gaming Theory, something every marketer or startup should be familiar with.

Beyond social networks I think the next big opportunity with virtual currency is in the mobile space. Especially with developments like Square Up and advances in mobile and micro payments.

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