Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

There's Real Gold In Virtual Cash - Is This A Solution For Newspapers?

Posted by Tom Foremski - April 1, 2009

Virtual currencies are booming, they have become the best way for gaming sites to monetize their content, and it might also offer a way for news sites to earn revenues. That's what popped into my head when I recently interviewed Jason Bailey, CEO and co-founder of Super Rewards.

This company today launched a virtual currency monetization platform to help primarily gaming sites earn money from their users. Some of Super Rewards customers are already making more than $1 million per month!

Gamers can convert real money for virtual money and use it in a variety of ways to gain access to higher levels, gain status, etc. But many gamers don't have to use real money, they earn it through engaging with advertisers.

The Super Rewards platform allows advertisers to offer virtual cash in exchange for a specific action, for example, signing up for Netflix, or applying for an insurance quote, etc.

Mr Bailey says that Super Rewards handles the entire transaction. It chooses an advertiser from a database of about 4,000, the advertiser pays Super Rewards if an action is completed, Super Rewards buys the virtual cash from the site owner and gives it to the gamer, taking a small cut (of real money) for itself.

"We've been able to help companies move out of their parent's garage and make a lot of money," says Mr Bailey. Many sites are making $20,000 to $30,000, and some are making more than $1 million per month. He says that this approach provides a much higher return than online advertising.

Super Rewards is also targeting virtual worlds, and games found on social media sites.

This got me thinking that this would be a great way to monetize news content. Online news is free but it isn't produced for free and newspapers, magazines and TV have so far failed to find an effective online business model.

The recent Pew Project's 6th annual survey painted a bleak picture of the state of the news media:

- online ad revenue to news websites now appears to be flattening; in newspapers it is declining..

-nearly one out of every five journalists working for newspapers in 2001 is now gone

The problem is not that there isn't an audience for online news, there is, and it continues to reach record numbers, the problem is that online advertising can't generate enough revenue to support news reporting.

The Pew survey soberly states: "It is now all but settled that advertising revenue—the model that financed journalism for the last century—will be inadequate to do so in this one."

Charging for the news through micropayments is a possible solution but micropayments have a poor track record of success.

Virtual currencies could offer the best of both worlds, providing a surrogate micropayments system, and an advertising model that pays more than CPM ads. Local businesses could provide wads of virtual currencies to online newspaper readers, either in exchange for some survey data, or as a complimentary service.

- Local businesses could provide wads of virtual currencies to online newspaper readers, either in exchange for something such as survey data, or as a complimentary service to build goodwill.

- Businesses could also provide virtual cash that could be associated with reading specific sections in a newspaper, say furniture sellers to the "Home" section. Best Buy could provide virtual cash for reading the gadgets pages, etc.

- News sites could reward readers with virtual cash for contributing user generated content, such as a popular column, or for photos.

- Virtual cash could be exchanged between blogs and other online publishers for republishing great content. And there are a myriad other creative ways virtual cash could be used in news media.

The beauty is that the virtual cash would be purchased from the news media publishers with cold, hard cash by businesses, instead of purchasing online ads. And the virtual cash then powers an entire dynamic economy within a news site that helps produce great content and provide other services.

Compare that to buying an online ad that just sits there, usually unnoticed on the side of the page.

How do you set up a virtual currency system? "That's our next product, a tool that manages virtual currencies for web sites, so that you don't have to build it yourself," says Mr Bailey. That would be great for news media sites.

It's these types of monetization technologies, borrowed from other publishers, in this case games publishers, that news media businesses would do well to investigate and adopt. What do they have to lose?

By the way, what should be the name of a virtual currency in the news media world? My suggestion is "lede" it rhymes with seed and it is very specific to journalism, it denotes the first sentence of a news story.

[This is a 2 lede article.]

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Please see:

Why Small Payments Won’t Save Publishers « Clay Shirky

Pew Survey: Online Journalists See Glass Half-Full As 2009 Expected Worst Ever In News Media

25 ideas: Creating An Open-Source Business Model For Newspapers

"Google Devalues Everything It Touches" - Wall Street Journal Chief

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