Social media network Kik is on the verge of launching its own ethereum ICO, making it the first mainstream social network to feature cryptocurrency as a core component of its services.
With more than $100m in venture capital invested so far in the company, and what they claim is 15 million monthly active users, the social network that made a name for itself by incentivizing interactions with a points system seems ripe for cryptocurrency adoption.
But this is not the first time someone has come up with the idea, and in spite of what appears to be an impressive number of users, this is still a significant decline from just a couple years ago when it had a reported a total of 200 million registered users.
Among the failed past attempts at similar efforts are no less than Facebook itself, which in 2013 unceremoniously shuttered its own Facebook Credits program after less than two years in existence.
Mindful of the obstacles to changing user behavior, Kik CEO and co-founder Ted Livingston initiated a 2.5-year experiment, called Kik Points, to learn if his social media followers would transact where so many others proved unwilling.
Following the publication of the trial results last month, Livingston explained to CoinDesk why the lessons learned from that data will finally set the stage for the successful integration of social media with cryptocurrency.
The CEO said:
“If we can make this work, we can build one of the largest, most adopted cryptocurrencies in the world, just by integrating this into Kik, and putting Kik Points on the blockchain.”
What the data showed
Founded in 2009, Canada-based Kik raised $120m venture capital from investors including Union Square Ventures, RRE Ventures and others, with then-partner Adam Ludwin of Chain at one time joining as an advisor.
As early as 2011, Livingston said Kik was interested in the potential to use a cryptocurrency to “monetize the consumer community” without having to force advertisements onto their page or sell virtual goods, both of which they have done in the past.
To test the theory, the startup launched Kik Points in 2014 to measure the demand for a product that lets users charge each other for basic services and to learn more about how those users conduct such transactions.
Then, on 11th March, 2017 – exactly months before the announcement of its plans for ‘Kin’, Kik’s own cryptocurrency – it shut down the system.
The published results of the test, which concluded in 2016, shows that Kik users completed 253 million offers for points for doing tasks such as viewing ads, and spent those points on 74 million purchases. On average, 300,000 transactions were conducted per day, with a peak of 2.6m transactions.
“There were two things it was meant to test,” said Livingston. “One is, could digital currency be used to incentivize opt-in advertising? Two is, could we use a digital currency to build an economy? We were trying to test those two things at the same time. What we found it’s yes to both.”
The main differences between Kik Points and Kin are that the tokens are capped, helping to minimize the potential impact of inflation. Additionally, the use of ethereum’s ERC-20 standard means the tokens can be removed from the Kik ecosystem and spent, or traded elsewhere, and eventually cashed out for fiat currency.
Can the success be converted?
In spite of user behavior that seems to support the willingness to use a cryptocurrency-like system, history is in many ways still stacked against Kik.
In September 2013, when Facebook shuttered its Credits program, the social network already had monthly active users including 874 million people, according to a report by The Next Web. That’s about 1,650% more than Kik currently has.
Also, in a 2012 blog post, the director of Facebook’s project management cited the simplified “purchase experience” of using fiat currencies and the increased use of native virtual currencies in Facebook games as contributing factors to the decision to shutter Credits.
While Facebook’s difficulties integrating a native currency into a social network are certainly the highest profile, it is not alone.
After raising over $1m back in 2015 to create a bitcoin-based incentivization token for sending social media messages, GetGems has seemingly disappeared, with its most recent Skype group chat dating back to July 2016.
However, a lot has changed since those earlier attempts to merge social media and a native currency.
Kik’s native currency, Kin, is being built in accordance with the relatively new ERC-20 standard that has helped lead to more than $300m being raised in cryptocurrency via ICOs this year alone.
Also since those early days, companies like Zcash and Ripple have innovated by setting aside a percentage of the total tokens for their own uses – a practice Kik intends to follow.
In this case, Livingston said Kik will hold for its own purposes 30% of the total tokens that will ever circulate.
Perhaps nothing demonstrates the new context more that the fact that, the month Facebook shuttered its Credits service, bitcoin’s market cap was about $1.6bn and ethereum didn’t exist. Now bitcoin is valued about $44bn and ethereum at $33bn.
While Livingston didn’t reveal the current finances of Kik, he emphasized that he hopes the currency will further align the interests of his users and the company, who he says both want to see the products they create generate revenue.
“We really do view this as a new monetization model, not just for the broader ecosystem, but also for ourselves. Our goal now is to make this cryptocurrency as widely used as possible.”
Disclosure: CoinDesk is a subsidiary of Digital Currency Group (DCG), which has an ownership stake in Chain.
Editor’s Note: This article originally stated Kik has 50m monthly active users. This article has been modified to reflect that Kik says the number is 15m monthly active users.
Kik app image via YouTube