Monday, April 6, 2009

Monetizing Social Media with Community Currency

Recently, I have been reading a number of blog posts about how to monetize social media. Twitter, for instance, has yet to monetize its service even though it has rapidly become integrated into our social fabric. Despite Twitter’s leagues of users, if they tried to charge for their service, people would likely switch to one of its free and open source competitors (like Identica).

The traditional approach to monetizing social media has been to sell advertising (as on Facebook or YouTube), but this puts the social media providers in a slightly antagonistic relationship with their user base. In addition, advertising itself is becoming less relevant when word about the existence and quality of products can spread so easily. Just look at Yelp! Social media has empowered word-of-mouth over traditional mass advertising, prompting the neo-marketing mantra “the best advertisement is the quality of the product itself.”

This leaves social media providers in a difficult position vis-à-vis monetization, since one of their few viable income streams is rapidly being made irrelevant by social media itself. So what can social media do to be financially sustainable?

To answer this, lets first look at why people don’t want to pay for these services. No social media provider will ever be able to charge for its services in scarce dollars since there will always be free alternatives. But what about charging in a currency that is not scarce by design? What if people had a completely different relationship to the money they had to pay? What if this new money was backed by the reputation of the users of the social media itself? Social media has already empowered user-generated reputation to the point of threatening the relevance of advertising. What if it could do the same to banks’ exclusive monopoly on issuing money?

This new process of issuing money would have to be open, distributed, and transparent. ‘They’ wouldn’t be issuing the money, but rather ‘we’ would. The social media providers would simply be the platforms on which these agreements were tracked and played out.

Traditional advertisements work by generating a sense of scarcity for whatever product is being advertised. When the quality of the product itself replaces perceived scarcity as the primary reason people want to buy, consumerism can, at long last, mature beyond adolescence. Similarly, when money itself is not
kept artificially scarce by a ‘them," a new sense of sufficiency will make the prospect of paying social media providers seem more than fair. For anyone who thinks this would be “funny money,” Facebook is expected to have 200 million users by the end of 2009. If Facebook were a country, it would be one of the biggest in the world.

Imagine a mutual-credit-card without transaction fees and with little to no interest. People could pay for any social media service with the currency they helped enable. Given social media’s colossal user base, providers could pay their expenses with this near universally accepted money. Sounds much better than what banks can offer.


Aravind Jose T. said...

Great insight indeed.
So glad that you wrote it out.

King of the Paupers said...

"when money itself is not kept artificially scarce by a ‘them,"

Jct: money is kept artificially scarce by the demand for more money than was issued in the loan, interest.
And yes, the LETS software does everything you want including keeping a database of goods and services.
Best of all, when the local currency is pegged to the Time Standard of Money (how many dollars/hour child labor) Hours earned locally can be intertraded with other timebanks globally!
In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See my banking systems engineering analysis at with an index of articles at

Alan Rosenblith said...

@King of the Paupers
I appreciate the work you are doing in this field, but this is the third time you have commented on this blog without directly engaging the topic at hand. Instead, you seem to be solely promoting your personal project.

Also: "When I visited Europe in 1999, I paid for 39/40 nights of accommodations with an IOU for a night back in Canada worth 5 Hours."

To me, this sounds like you are trying to promote Community Currencies as a way of getting something for nothing. That is most certainly not consistent with the spirit or substance of what I advocate. If you continue to post these non sequiturs, they will be deleted.


Arthur Brock said...

Alan, I think "monetizing" social media via any alternative medium of exchange currency may be barking up the wrong tree.

I may try to write more about this at another time, but I think the real power of currencies for social media lies primarily in reputation. Third parties are already charting audience influence on Twitter and other platforms. I think there is a strong market for the providers themselves to provide mechanisms for feedback and rating and displays of influence and message spreading power of their members.

This makes certain types of value they provide more visible. And the real power of social media lies in this domain of giving new voice to things. Also, I think the advertisers will figure out how creep into all sorts of niches of this space.

We really have to adjust to the economic dynamics of information and stop treating it like normal goods which are more valuable when scarce. The value (and influence) of information increases as it spreads. Charging for information authoring/publishing/distribution is just like shooting yourself in the foot right out of the gate.

(I'm in part responding to Guilliame's recent series of tweets about using currencies for charging for blogs and such. You may not have been responding to that when you wrote this post.)

Alan Rosenblith said...

Arthur, excellent insights as usual. Two points:

1) I probably should have clarified that I don't think FB or any other social media provider should offer *Facebook* money unique to its service. Instead, I see these networks as portals into an open distributed currency space (such as the meta-currency project). From that context, people will undoubtedly experiment with all kinds of different currencies, exchange or otherwise. So I'm not sure I see any reason why social media providers couldn't be players in this space.

2) This probably deserves its own post. There seem to be two basic types of reputation. One is determined by how often I follow through on a specific promise I made. The second is determined when people decide they like or dislike something about me that I didn't make a promise about. Examples of this second kind could be the quality of my posts, the fact that I recycle at my business, or the number of followers I have. In all of these cases, people like or dislike something about my offerings that I didn't specifically promise. The first kind of reputation seems more closely related to the issuance of exchange currencies. However, I think both are in the process of being deeply integrated into existing social media sites.

epsilon said...

Paula said...

Reputation-based social money is already a reality, albeit a prototype one: Ripplepay

Openworld said...


Greetings - it's been a few years since our rendezvous at Lara's home in Colorado. Glad to see the progress you've made.

I'd welcome inputs on a recent idea I had on potential for new mobile apps to accelerate adoption of the personal currency opportunities advanced by Douglas Rushkoff in his "Radical Abundance" video.

Below are preliminary ideas on how open source mobile apps or mashups might support exchanges of time-based personal currencies.

In short, growth of Augmented Reality functions on cameraphones will enable individuals to size up opportunities for exchange of personal currencies with interested parties. Taking a photo with an AR-enabled phone can trigger essentially immediate popups of related information about the person in focus.

When setting up their personal currencies, individuals would create and upload personal profiles that would be visible (if desired) to other AR-enabled cell phones. These public or semi-public profiles can include a listing of their wants - and of personal offers to make specific kinds of time/skill donations or trades.

When a conversation with another person led to a decision to explore a transaction of time-based services, an AR app or mashup for personal currency exchange would make the related profile information from both parties mutually visible.

Each popup profile could include links to a trusted third party site where one can review or drill into summaries of prior work done and explore feedback ratings earned from past services.

With this information, the parties might agree an exchange rate (e.g. Art Brock’s 1 hour = Mark’s 3.5 hours) and commit to give one another personal time donation vouchers for the agreed number of hours and types of service.

The time-based vouchers could be converted into services by the agreeing parties, or (upon mutual consent before the voucher was given) by transfers to third parties for projects fitting criteria set out by the issuer of the voucher on his or her AR-linked profile site.

2. If the parties disagreed over the “exchange rate” for their respective time donation offers, the AR personal currencies app would offer a potential solution. It would give the parties the option to hold a real-time auction for a given number of pledged time donation vouchers hours on eBay or on a dedicated (Metacurrency-sponsored?) spot auction site.

This spot auction – if successful – would set the market value of the individual’s time vouchers in terms of preferred currencies that other party was seeking.

I’m sure that there are a number of issues (secure data sharing, online dispute resolution, digital notarization, etc) that would have to be rigorously developed in an operational AR-enabled personal currency app. But it seems likely that many of the components are within reach to create a mashup of a working prototype.

Look forward to your ideas on how we might proceed on developing a spec for such a prototype - and on allies who may be interested in seeing it move ahead.


Mark Frazier