How Kik is banking on a crypto-based strategy
- Messenger app Kik is using its home-built cryptocurrency to scale
- While Kik has unique appeal among Generation Z users, challenges include how to reach a largely underbanked customer cohort and how to comply with Apple's rules that don't let cryptocurrency apps reward users for tasks
Messenger app Kik is hedging its future on the cryptocurrency token it built, Kin.
The Canada-based company is trying to become a way for brands to connect with its young users by offering them cryptocurrencies as incentives. (Over half its user base is reportedly aged 13 to 24.) As media companies struggle to monetize based on ad revenue alone, Kik is betting that crypto can fill the gap.
“We tried to monetize through interactive ads, but there’s a [Facebook-Google] duopoly of two companies generating the most revenue from ads. It’s very hard to compete,” said Kin’s vp of product Alex Frenkel. “Kik now doesn’t have to compete with those duopolies anymore, and we can monetize on creating value for users.”
For Kik, the path to monetization includes making money from brands that promote surveys, incentives for content sharing or other activities on the platform, and from the undisclosed amount of Kin that Kik currently holds.
Kik rolled out the home-built cryptocurrency Kin last year on the Ethereum blockchain. The Kin foundation it set up to oversee the development of Kin crypto recently announced that it’s building its own blockchain that’s a hybrid of Ethereum and Stellar. Users could purchase the cryptocurrency on exchanges and use it to buy “stickers” or emoji-like symbols they would use while communicating with contacts on the platform.
Six months ago, Kik let brands offer users cryptocurrency if they answered a survey or performed other minor tasks. The idea is to get Kik users to do these activities to gain crypto that they can turn around spend elsewhere online through Kik’s partners like gifting platform Blackhawk — which effectively opens up redemption opportunities at hundreds of retailers, including Target, iTunes and Home Depot.
“Our goal is make Kin the most-used cryptocurrency in the world,” Frenkel said.
Other transfers of value involving Kin include peer-to-peer interactions like awarding kin as a thank-you or a goodwill gesture. “The way we look at Kin is that it can be the most effective way for users to compensate each other for value they create” — currency that will in turn be spent on brand names they recognize, skirting the problems of being able to find frictionless ways of using cryptocurrency as payment methods.
While advertisers are eager to market to Gen Z, that population isn’t without risk. A third of U.S. teens reportedly use Kik — a group that’s likely to contain a significant unbanked or underbanked population, said Malcolm CasSelle, president of the Worldwide Asset eXchange.
“Kik has a unique problem because most of their users are unbanked or underbanked — teenagers — you can’t expect them to go buy crypto with credit cards. The only way to get crypto in the hands of people is to have them earn it,” he said, adding that Apple’s app store developer guidelines also don’t allow cryptocurrency apps to offer currency to users who complete tasks.
Kik said it’s working with Apple to find a solution.
“We are working with Apple to try to understand cryptocurrency and how to best to regulate it,” said a Kik spokesperson. “We think that they’re putting that [rule] in place to prevent ‘spammy’ behavior — we don’t feel that guideline will apply to us, and we’re still working with them to figure out how that affects us.”