Real-Time Rewards

Fred Wilson recently made a post about rewards and monetization of the foursquare platform. He writes:

“the most interesting way to reward a checkin is to provide some real value at the moment of checkin. For example, when I show up a my local cafe in the morning and checkin, I’d love to occasionally get a message on my checkin screen that says ‘you’ve checked in for the tenth time and earned a free espresso drink.”

With respect to online communities such as foursquare, I’ve always wondered how powerful the incentive of gaining new badges really is from the users perspective. Sure, it is a status thing and can be addictive, but is it sustainable long-term? Perhaps tech early adopter types hold the value of a certain number of points in high regard, but I don’t think this is generalizable to the general public. Keep in mind that many of these early-adopters are either in the tech business, or hope to be. Active engagement in these online communities, and the building of a significant “web presence” can lead to career rewards.  As I outlined in a previous post, both venture capital firms and startups value people who are actively engaged on the web. However this incentive isn’t something that is generalizable to those outside of the tech world.

But, everyone likes to save money. I think the more sustainable incentive for users is the accumulation of rewards. In this case, rewards are powerful because they are granted in real time, and the user is being rewarded monetarily (through a discount) by using the service. My guess is that we will see a trend of real-time rewards replacing “badges” and “points” as an incentive for usage in many online communities.

However, I think we’ll see real-time rewards limited to national brands, at least initially. National brands provide the most scalable targets from an operational standpoint- one national affiliate can give discounts all over the country. These will be the early adopters, followed only later by “mom and pop” shops. As Chris Dixon recently pointed out on his blog:

The problem is that, for the most part, these local business either don’t think of the web as an important medium or don’t understand how to use it.

So what does this mean? If location-based services like foursquare discover that they can best engage users through real-time rewards then they will quickly move to put in place deals with vendors to give their users discounts. Because of the factors outlined above, I think this will be initially limited to national vendors, meaning a delay in the “going local” trend that many have talked about with respect to these types of location services.

A few weeks ago at the Hackers and Founder event in NYC, Udorse demoed its new iPhone Rewards Camera App (full disclosure: I plan on joining the Udorse team this summer). I’m excited about the product because I think it plays into emerging market signals. Real-time rewards delivered to your phone is highly motivating for users. In this case, I predict that businesses will be willing to pay per action (and provide discounts) for a qualified user of the product.

But the true power of these real-time rewards lies in the sharing of these rewards with a wider social network. The ability of a business to leverage an existing user’s network to pull in new customers through discounts is scalable in an exponential way. The promise (and delivery) of real-time rewards can pull in new users in a way that the promise of new badges and points cannot.

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