Amazon Coin Launches to Muted Fanfare

Amazon.com launched its new virtual, digital currency this week.   Amazon’s customers can  now use Amazon “coins” to purchase games and apps from the online retailer.

Digital virtual currencies have come to the fore in recent months with the explosion of interest in Bitcoin and its meteoric rise in value.   Although Amazon is not the first retailer to create a virtual digital currency; both Facebook with its Facebook Credits and Microsoft with its Microsoft Points have announced that they’re looking to phase out their own currencies.  Microsoft announced in October that it would ditch Microsoft Points for Windows 8 whilst Facebook plans to switch Facebook Credits for local currencies and in-app subscriptions.

To mark the launch of Amazon Coins the company gave all its US Kindle Fire owners 500 free coins, each worth $0.01.  Although Amazon Coin is initially only rolled out to its American customers, it’s likely that if it proves successful it will be rolled out into other geographic markets.

But the question is what benefit, if any, does Amazon Coin give to the consumer?

Although with bulk purchases of Amazon Coin consumers will be able to get up to 10% off –  the retailer is offering 500 coins for  a 4% discount; 2, 500 coins for an 8% discount and 5,000 coins for a 10% – that’s about as far as the incentive to use them goes.   It appears little more than a way for consumers to budget or save in advance for future Amazon purchases.   And although Amazon Coins do not expire there’s nothing to say that Amazon might devalue the coins in the future. 1,000 coins today might not necessarily be worth the same amount a year down the track.

Customers taking to forums and reviews made it clear that they felt there was no advantage in using Amazon Coin.  Many complained that the types of items you could purchase was limited, and that it was easier and quicker just to use real money!

It’s worth noting though that it’s only early days.  And Amazon Coin will most likely look very different six months from now; as highlighted by Amazon themselves:

“We will continue to add more ways to earn and spend Coins on a wider range of content and activities – today is day one for Coins.”

What does this mean for Amazon?

Could this mean Amazon expanding Amazon Coins into a type of loyalty programme, gamification model.  Where cash-back is given in the form of Amazon Coin (much like the trading stamps of old – Green Shield for example),  drive the promotion of particular items with “1,000 free Coins”, or even offer Amazon Coins for each review written or encourage marketplace sellers by offering them coins for every item they list – might fees likewise be payable in Amazon Coin?

App developers will also earn the standard 70% revenue share when Amazon customers purchase their apps using Amazon Coin, though it’s difficult to see how this might create the “new opportunities” for developers that Amazon suggests it will.

Unless Amazon does have grander plans for Amazon Coins, such as suggested above, is this little more than a simple way of boosting cash-flow – hoping thousands of customers will simply pay up front for Amazon Coin and not spend them?

James Barnes, StatusCake.com