The future of virtual currency?

The huge furore over the hype generated by the Arrington/ Shukla saga seems to be dying down and there’s some good commentary from well respected bloggers Andrew Chen and Jay Weintraub who have decided not to jump on the Techcrunch driven bandwagon that’s been driving through town. From the dust that’s settling, Weintraub highlights “better offers” as a way of . This is backed up by Gurbash Chahal of gWallet on his blog.

Weintraub points to ingame advertising as a solution to the current monetisation game with brands paying to have their products placed in games. There are several issues with this.

1. Geotargeting – most brands will want their budget spent in a particular territory and this means any product used in the game will have to be IP targeted

2. Saturation – the game needs to reach enough people within that territory to make a brands involvement worthwhile

3. Valuing the offering – how do you value the placement of a Papa John’s pizza in Cafe World reaching 10 million people every month in the US. What does the client actually get for this apart from a few pixels?

4. Relevance – is everything. Is  the average user of Cafe World a foodie? Are they the person who buys the shopping in their house? The level of targeting that can be implemented into a social game will determine whether product placement in social games is the way forward. I’d guess that it’s going to be a while before social game developers offer product placement targting 25-30 year old US IP’s with a realistic reasoned pricing model.

I used to work at Adknowledge and after the acquisition of Cubics we went down the route of trying to sell product placement on various applications on what was then a very embryonic application space. It was a largely unsuccessful activity, mainly because of the lack of knowledge of media buyers but one success was selling a large pet insurance brand onto a tamagotchi style application for puppies called Pokey (now called Foopets). This was a simple button offering pet insurance and was sold on a cost per click basis. It was an unmitigated disaster, we didn’t sell one pet insurance plan during the campaign run date.

Product placement isn’t going to be the solution in the near future, especially for smaller applications.

Offer walls are incentivised offers. A virtual currency company can tell you until they’re blue in the face that they’re “soft” incentivised etc but in ultimately the end user gets something for taking up an offer. That “something” is unrelated to the product they’re buying into. Incentivised offers have been around for years, mostly in the form of lead generation companies buying and selling data. The stigma this channel suffers from is one of lower quality. If someone has been incentivised to take an offer then that acquisition is of lower quality.

We need to bridge the gap between affiliate deals and brand deals then I believe the company who can do that for the forseeable future is companies such as UK based Quidco.com. The US alternative would probably be Memolink though it’s nothing in comparison. Quidco is a phenomenon that’s taking the UK advertising space by stealth storm. I’ve heard one of the UK’s largest broadband providers say they’re addicted to it like crack. Cashback is a great way of rewarding a consumer for purchasing a product. While a mobile contract retailer may pay a highstreet resaler $200 to resell phones if they can give half of that back to the end user then it’s win-win. The end user was looking for a mobile contract and the marketing costs they would have spent are given back to the consumer.

Why are they the next iteration of payment walls?

Relevance – it’s everything, right ad/right place/right time. There’s zero relevance on the current virtual currency walls and that’s a big problem. There’s no behavioural historical knowledge and there’s no way of sorting offers in terms of interest (apart from the very broad “surveys” etc tab). Quidco.com offers this a way to sort though offers, it also offers a mechanism brands have bought into – giving cash back to a user who’s bought something from them. They understand this so it’s a short hop to giving them pretend money.

I think if anyone could quickly dominate the UK virtual currency market and I keenly wait to see their approach into this sector.