The BigDoor Blog | Virtual Currency

Unless you’ve been living under a rock, you probably saw the news that Zynga filed their IPO late last week. After everyone has combed through their S-1 filing, virtual currency emerges over and over, “Zynga’s filing revealed its revenue comes almost entirely from the sale of virtual goods within its otherwise free games.”

At BigDoor we’re also placing emphasis on virtual currency and will be using it as a way to help online publishers create their own monetization moments.  We’ve even done the legal due diligence when it comes to virtual currency and can provide regulatory compliance for USD-backed currencies powered by our platform.

Up until this point, online publishers have really only had two ways to monetize their content: Subscriptions & Advertising.

The reality is both of these ways create a lot of friction for the users’ experience with the content.

At BigDoor we’re working on building a third way for digital publishers to monetize their content: Virtual Currency.

We see virtual currency as the monetization vehicle to increase user engagement and provide a frictionless way for users to engage with content on the web. While we’re not creating social media games like Zynga we do think virtual currency is important and we can only hope we’re heading in a similar direction. Zynga’s epic one hundred million active users in less than a month (Cityville) then thirty million users in under a month (Empires and Allies) is pretty huge.

So how does it all work? Stay tuned. There’s some cool stuff to come as we unveil our Engagement Economy this summer!

We got the opportunity to meet Founder and CEO Jonathan Hegranes and were introduced more to his company Workables during Gluecon last week. The company is helping people outsource their to-do list.

Jonathan was one of the lucky winners of a test we ran a while ago on Brad Feld’s site. Brad offered 30 minutes of his time for the first four people who earned 10,000 “Feld Gelt.” Time with Brad actually sold out very quickly and it was a great litmus test for us as we’re working on the private beta of our Engagement Economy. Jonathan gives us a recap of his 30 minutes and how gamification is working for Workables here. We’re glad to officially welcome Workables to the BigDoor publisher network.

We wanted to let everyone know about this amazingly cool experiment Brad Feld is currently testing on his site. For those of you who don’t already know Brad, he’s the managing director at Foundry Group who invests in software and Internet companies (including Zynga). He was recently named the
“Most Respected Venture Capitalist”and he’s also one of our investors. For the next 30 days Brad will use the BigDoor MiniBar on his site to offer 30 minutes of his time as a reward for anyone who wants to exchange 10,000 Feld Gelt for the opportunity to speak with him. With the help of BigDoor’s MiniBar (white-labeled on Brad’s site), users have five easy options to earn Feld Gelt, including Check-in when visiting Brad’s site; Adding a comment to any blog post on the site; Sharing or Tweeting posts; ‘Like’ any post from the MiniBar and most importantly, the best way to earn Feld Gelt is when users click on links you have shared or Like links in your Facebook feed. Users can get started working their way up the Leaderboard for a chance at 30 minutes with Brad!

Update: Brad’s deal was so popular that it took about eight minutes to sell out! Brad mentioned there might be a new deal and we’ll update with any new details!

If you’ve been following this blog you may have noticed that we’ve gone completely silent for going on five months now.  The reason for our silence is because we’ve been heads down on some very interesting things, but it’s time we pick our heads back up and start telling everyone what we’ve been up to.

There is a wonderful axiom among startup companies that “no business plan survives its first encounter with a customer.”  Ours was no different.  We started BigDoor with a very big vision and a core thesis – and while those remain our guiding principles, we’ve significantly shifted our business model, our product and our strategy.  The Lean Startup folks (lead by the incredibly bright and talented Eric Ries) call this the “pivot”, but we’ve always referred to it much less eloquently as the “startup two-step”.  Call it what you will, but it is all part of the process a startup goes through in finding the right strategy, the right customers, the right technology and the right business model.

The “two-step” is a critical part of the “Lamplighter” methodology that Jeff and I have been utilizing for the last dozen years.  Our Lamplighter Theory states that that as a startup we need a large and guiding thesis that tells us where we want to go, yet it recognizes that we really have no idea what the incremental steps will be to get there.  I envision Lamplighter as if I’m standing on a hilltop and off in the distance is another hilltop that is drenched with sunlight, flowers, rainbows, butterflies and unicorns – yet between us is a dark valley filled with bogs, moats, thorns and other scary things.  The sundrenched hilltop in the distance represents our business when it is profitable and scaling – the valley in between holds the pitfalls that kill most young companies.

There is undoubtedly at least one path through the dark valley, but the paths are obscured and unknown from our current perspective.  To get to the fluffy, magic hilltop in the distance we must light a lamppost which will allow us to see just far enough into the dark valley to get to the next lamppost, which we will light when we get there and so on until we ultimately make our way through what seemed like an impossible barrier.  Looking back at the lit lampposts that lit our path will show the route we ultimately took may have been a bit windy with a fair amount of severe turns, but thinking one knows the path intuitively through the dangerous and dark canyon will most often lead to ruin.  The light from the lampposts are provided by many sources, but often the most important source is from current and potential customers.  Speaking with and listening to our potential customers is something we love to do, and we want to say a huge thank you to each of you who have helped enlighten us so far.

So it was in keeping with our Lamplighter methodology that we decided to take a severe turn last year.  We did the “two-step”, took a sharp left turn and began developing a platform that helps publishers build loyalty programs and game-like mechanics into their site or app through points, badges, levels, virtual currency and virtual goods.  We quietly launched with our first customer in March, and currently have an additional 18 companies that are in the process of implementing our platform.

We predict that by 2012 half of all sites and apps will employ some form of game mechanics or virtual economy components.  We are working to build a platform that is as powerful as it is extensible in order to help make this prediction a reality.

see more Epic Fails

So often in highly competitive marketplaces competitors find themselves in a race to the bottom.

This is certainly true on the Internet for both publishers and advertising networks. For publishers the name of the game is getting as many eyeballs looking at your site at the lowest cost. For advertising networks it’s about creating a profitable margin between the publishers who are constantly getting pitched better rates and advertiser’s who are always looking to cut their payouts.

With some notable exceptions, the eyeball, the actual user of the site, gets lost in the equation. We think the publishers who create the best and most interactive user experiences should be rewarded. Aligning advertising rates with the interactivity of a publisher’s user experience is the challenge that we, here at BigDoor, are working on right now.  We like to call this the Loyalty Economy.

Rather than racing to the bottom, we want to be involved in helping our publisher’s race to the top. Racing to the top is about creating win-win-win monetization strategies that reward user loyalty and participation, rewarding interaction between publishers and users and building on that relationship to create value for trusted advertisers.

Recent events have amply demonstrated that when values are improperly aligned online advertising can become a vicious cycle of manipulative and deceptive advertising begetting poor user experiences begetting cynical and manipulative users.

If values are properly aligned then trusted advertising should beget better user experience which begets engaged and happy users in a virtuous cycle – a mutuality of value for everyone involved in the process.

–Patrick Murck

There has been a lot of talk recently about virtual currency, and rightly so.  Points based systems took off in Asia years ago, and as is often the case the U.S. is just now catching up.  It is our thesis that rewards (points, virtual currency, coins – whatever you want to call them) lie at the heart of a shift that is going to substantially alter the online entertainment industry.

The Challenge

There is a well documented macro trend under-way in U.S. consumer behavior as it relates to how we entertain ourselves.  People are shifting their time from more traditional media (Newspapers, magazines, CDs, television and theaters) to the online world.  Whether part of the cause, or in reaction to this move – the online world has built an amazing entertainment infrastructure within just the last few years.  We’ve invested countless millions into in systems and content in order to make sure that users can be connected, entertained and can even personally express themselves in this exciting new world.  We’ve improved the experience and are making the online world a truly great place for massive consumer entertainment.  The problem is we are still using offline models for monetization.  Until recently, in-content ads (that nobody wants to click on if they are in “entertainment mode”) and subscription models were the only two significant monetization methods employed by online entertainment related properties.  But a new model is coming, and if we are going to make the online world a sustainable and healthy ecosystem for consumer entertainment, we have to embrace and evolve our methods of monetization to match these new experiences.
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Today’s chart of the day from The Business Insider.  Virtual goods and the revenues derived from them are exploding.

The BigDoor team has been watching with great interest the massive debate that Michael Arrington kicked off last week when he publicly blasted some of the practices of the large offer platforms.  He then followed that ambush up with a scathing report in TechCrunch.

All we can say is, well done Michael!

Well, maybe that’s not all we can say.  A few more thoughts on the subject.

Our founders have more battle scars than we ever cared to earn from public debates of this nature, and as a result we’d like to think that we’ve learned a few lessons along the way.  Here’s a few pointers we’d like to offer for no charge at all (virtual or otherwise) to the players in this debate:

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Today Eric Eldon from VentureBeat posted a presentation given by Zynga’s CEO Mark Pincus at the Web 2.0 Summit in San Fran.

We’ve all known that Zynga is on a rocket ship, but it is cool to see their growth mapped on a chart. Fueled by well integrated virtual currency and offer platforms, their growth is nothing short of phenomenal.

What virtual currency, quality games and Facebook have done for Zynga.

View the full Zynga presentation here.