Rewind: Keith Smith, BigDoor CEO, on the economics and future of gamification

Keith Smith in the KIRO studios (Erynn Rose photo)

Our guest this past week on the GeekWire Podcast was Keith Smith, CEO of BigDoor, a Seattle company bringing the principles of video games to the world of online publishing, with badges, leaderboards and other rewards for users of traditional websites. He talked about the company’s new deal with Major League Baseball, the underlying economies of gamification, and addressed the question of whether gamification is a fad or a lasting phenomenon.

If you missed the show, or just prefer text, continue reading for edited excerpts from our conversation.

For people who may not know, what is gamification, how do you describe it?

Smith: Gamification really is just the act of adding a layer of game mechanics onto a non-game site. Sites that want things like points or levels or leaderboards, social rewards programs, those kinds of things. That’s what gamification is really all about.

BigDoor was in the news this week, in part because you struck a partnership with Major League Baseball. That would be a good example for our listeners, to describe exactly what you’re doing with Major League Baseball.

Smith: We’re very excited about that — it’s obviously a big name for us. We’re all sports enthusiasts, so it was even more special, but what MLB wanted to do was they wanted to get more people to MLB.com and they wanted to get more of their fans actually watching Game Day Live, the app that they use that shows stats and real-time activity for, and so we power the badges system now for Game Day Live, and so if you’re watching Game Day Live, and the chosen player for the day happens to get the offensive stat that is assigned to them, you earn their badge. It’s a great way to have a collection mechanism that really fits in with the analogy of a baseball card.

This is a hot area, and there’s a lot of competition. Badgeville is out there, there are several other companies out there. …

Smith: It’s emerging, and having other companies in the space actually legitimizes the space, it gives all of us momentum. It creates a thing that we couldn’t really do on our own. So it’s actually a good thing that we have competitors. And for the most part I think they’re good competitors. Where we view the market very different is that we think gamification for publishers should be a profit center, not a cost center. When we come in and do an implementation, we want to be able to provide technology for free, and we want to be able to be writing checks to the publisher because we want to be providing an incremental revenue channel, rather than charging for technology.

Other companies in different areas of gamification locally include Mindbloom, and Bobber Interactive. Is this an actual, lasting phenomenon, or is gamification more of a fad?

Smith: I think if it was all about badges, if it was just about very superficial things for users, then yeah, it’s likely to be a fad. If we can figure out how to crack the nut on actually figuring out an additional revenue channel that is going to complement the existing subscription and advertising and revenue models that are out there, and make it more engaging for users, then absolutely it’s going to be here to stay, and that’s what we’re trying to do.

So your service is free. How do you make money?

Smith: We call it the engagement economy. Users are coming to a community and we want to figure out how to engage them better, and work with the publisher to engage them better. So there’s a series of actions that a user might take that is going to be valuable to that community. Maybe they’re going to ‘like’ that website, maybe they’re going to share, maybe they’re going to upload content, maybe they’re going to dive deep into content within the site. And each one of those actions that a user takes is going to earn them virtual currency. When a user earns virtual currency, we take a rev share of that virtual currency, just a small piece. At the same time, if advertisers want to get access to those users, then they can come in and provide offers to those users, and if those users watch a video or interact with a brand within the community experience that they’re having, then they’ll also earn virtual currency, advertisers pay us, we rev share that back with customers. And so we take a little piece of the action every time a user is earning or spending that virtual currency and then we settle up with the publisher in order to generate actual cash.

How do you revenue share virtual currency?

Smith: Each branded virtual currency will have an exchange rate. So there is a value that is set. So if you take Feld Gelt (used on the site of BigDoor investor Brad Feld) as an example, there is a value that he has assigned to each one of those actions.

Listen to the full show below or subscribe using this RSS feed (feeds.feedburner.com/geekwirepodcast). Subscribe in iTunes or Zune. Here’s the MP3 file for this week’s show.