I woke up this morning to the following news report from Mashable:
“Remember those real-world merit badges based on the virtual achievements you get for checking in to places using Foursquare that we told you about? They’re approved and on sale now.
The 1.5-inch embroidered badges have Velcro on the back for attaching them to your jacket, backpack, or whatever other fabric you want to decorate. Options include Mari Sheibley-designed badges ‘Local,’ ‘Superstar,’ ‘Crunked,’ and ‘Super Mayor’ for $5.99 each.
It’s unclear whether Foursquare is deriving any revenue from this recent development, but it does demonstrate that there is an opportunity for digital media companies to garner revenue from, don’t say it, consumers.
Generally speaking, there are three sources of revenue for media and entertainment providers: (1) advertising & sponsorship (b) consumer and (c) strategic partnerships, revenue share, etc.
In the past ten years, nearly all digital media companies abandoned the subscription model and with it consumer revenue as a viable and substantial source of income. (Not so their cable programmer brethren who, for now at least, have two sources of revenue – advertising and carriage/license fees.) But for digital publishers – and, particularly offline publishers going online, it seemed that Internet users would not pay for content, and advertising could carry the load for high quality and/or highly popular content.
But Foursquare seems to be learning from the missteps of those before it. Albeit, it is also benefiting from the change in mindset created by iTunes and mobile gaming companies who have conditioned mobile (and iTunes) users to make micro-payments – little payments of 99 cents and up that add up to BIG dollars.
Not only is Foursquare inspiring a (non-subscription) consumer-based line of revenue – 3rd party for now, i.e., the physical patches, but they are also developing high profile, high level strategic partnerships and custom programs with big name brands like Bravo, Intel and Zagat – giving it credibility, buzz, and access to the huge consumer bases of these mega-brands.
Foursquare is an especially exciting platform because it takes social media back and forth between the physical and virtual world and directly touches the retail world. The potential value of the information collected by Foursquare about your day to day activities and the ability of retailers and other businesses to influence consumer behavior immediately and at a relevant, targeted level is immense.
A few days ago, I heard Gary Vaynerchuk lambaste Facebook for letting virtual, social gaming organizations like Zynga make billions of dollars on Facebook’s platform. They should have ensured themselves a piece of that, he said. But Facebook, like Google and YouTube had an idea without a business plan – although it certainly (fortuitously?) worked out well for Google in the end. Dennis Crowley and his colleagues at Foursquare seem to be a little more aware of creative monetization options from the start.
Chris Anderson famously talks about the Fremium model – a cute word for an age-old concept that seemed to have been forgotten or abandoned or not viable for the last 10 years – in the digital world. Is that what these badges are? Well, sure. You can earn a virtual badge for free. But for $6, you can get a real one from Nerd Merit Badges. But, you might say, don’t you remember the Twitter and Facebook pillows? Well, no, I don’t – but I just read about them… anyway, what differentiates Foursquare is the gaming element. That’s what makes a physical merit badge more desirable than a Friend Feed Pillow.
Adam Penenberg, the author of “Viral Loop: From Facebook to Twitter, How Today’s Smartest Businesses Grow Themselves” – and the Forbes.com guy who broke the “Shattered Glass” story, said recently that instead of consumers spending billions of dollars on virtual items in online games, advertisers should be giving us real items for our online accomplishments. (Hmmm… sounds kind of like loyalty clubs, but now we have the platform to make it truly scalable – you didn’t think I could go a whole entry on this topic without saying scalable, did you? – but I digress) Well, he’s on to something, but Nerd Merit Badges has turned Adam’s idea and currently practices on their heads. What is happening is that a virtual game is crossing over the real world. Real dollars are being spent on real goods that are the physical manifestations of virtual items.
It’s all pretty exciting. I hope that traditional media companies are watching and learning.
p.s. Last night I unlocked the “Gym Rat” merit badge for visiting the Harvard Club 10x in the last 30 days. Unfortunately, the club is not a place I go to work out but rather to eat… so I’m probably not getting the physical fitness benefits Foursquare thinks I am.