Digital Currency: Will it take off?

Amazon-Coin

Amazon launched its own digital currency, Amazon Coins, in the UK and Germany this week. The launch kicked off by offering 400 ‘free’ coins (equivalent to approximately 4€) to every Amazon Kindle Fire owner, something which has already caused slight annoyance to other Amazon customers who have not be so incentivised. Those who possess Amazon Coins will be able to use the coins to buy games and apps, as well as buy more coins in bulk at a discounted rate. They have also promised that the coins with never expire and that there will be no fees to use them. However, at present, users cannot use Amazon’s currency to buy other digital items such as eBooks, films and music, though we are told this is just ‘day one’ and to expect expansion into other product lines in the future.

Amazon Coins originally launched in the US in May 2013, with customers reported to have since spent hundreds of millions on the digital currency, representing revenue to developers. For instance, those who are involved receive 70% of revenue spent on their apps using Coins. Sounds like a good deal right? Perhaps, though many have questioned why launch a specialist Amazon-only digital currency.  Unsurprisingly, Amazon Coins can only be used on the Amazon website, making some question why bother creating and marketing sometime which are essentially just ‘glorified coupons’.

The convenience of instant payment is not a new thing though, with many websites carrying and remembering user’s credit card details, and Amazon itself promotes ‘one-click purchase’ whereby consumers can literally click to buy.  Newer, digital payment methods have also primarily been designed for small purchases (such as contactless purchase via NFC or smart credit cards), removing the barriers to entry for many consumers. However, digital-only currency Bitcoin can be used on multiple websites for any amount and is even taken in some real world bars and restaurants as accepted currency. For example, in addition to online vendors such as WordPress and Reddit, Thuisbezorgd, a Dutch company that arranges home delivery an assortment of local restaurants, announced on Tuesday that it is now also accepting Bitcoin as legal tender.  On the negative side though, currency transactions within the Bitcoin network can often not be traced, and so it has also been used in the criminal underworld to maintain anonymity.

A sign above a bar in Germany.

Nevertheless, what do these developments in digital currency mean for advertisers? Well, the way advertisers and clients pay for their communications already occurs digitally, though these transactions go through a central bank and monetary body, who in turn can amend their general monetary and fiscal policy to alter the economy. Amazon Coins and Bitcoin exist outside of these institutions and though Coins is singular to Amazon, Bitcoin and the future of digital, non-government regulated currency is unclear. Bitcoin has become lucrative because many people have invested, therefore attributing value to something that does not exist in the physical world and driving up the price. In the world of advertising, this could mean that in the distant future, we will pay for products and services in a different way, perhaps using a derivative of the Bitcoin concept, or marry it with the current barter system whereby advertisers can pay for their activities through the exchange of products for services. However, some companies have already started to accept Bitcoin mainly because of the ‘buzz’ which is surrounding the exchange. Therefore, it may be that advertisers and their app developers will choose to involve themselves in Amazon Coin or Bitcoin phenomena in the short term in order to take advantage of the current PR surrounding these methods of payment.

In general however, Bitcoin is still incredibly niche and Amazon Coin has only just launched in parts of Europe, therefore we are at the ‘early adopter’ of their life-cycle. Whether these methods will remain niche or go mainstream now depends on public opinion and the positive publicity such methods will generate.

Sources:

http://www.mobileworldlive.com/amazon-coins-come-uk-germany

http://abcnews.go.com/Technology/amazon-introduces-amazon-coins-virtual-currency-buying-apps/story?id=19170199

http://www.techienews.co.uk/973239/amazon-coins-now-available-uk/

http://en.wikipedia.org/wiki/Bitcoin

http://swampland.time.com/2013/11/17/bitcoin-comes-to-washington-mondays-hearing-is-just-the-beginning/

http://www.theguardian.com/technology/2013/nov/25/is-bitcoin-about-to-change-the-world-peer-to-peer-cryptocurrency-virtual-wallet?CMP=fb_gu

http://business.time.com/2013/11/07/3-reasons-why-the-price-of-bitcoin-is-surging/#ixzz2llw3P19p

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