By Jon Matonis
The Monetary Future interviewed gWallet CEO Gurbaksh Chahal on February 18, 2010, shortly after Facebook announced the partnership with PayPal. gWallet is a virtual currency platform for social media, operating in social gaming, virtual worlds, mobile platforms, and microtransaction environments.
Jon: Welcome to The Monetary Future, Gurbaksh. In a general sense, where do you think the future of virtual currency is headed? What are the needs of developers and players as it relates to virtual currency?
Gurbaksh: I think there are two levels of direction where it's going to be headed. Right now, anyone that feels like their product is here to stay is probably going to hurt themselves in a few years, because right now what we have is a first iteration of a platform that sits in an offer wall environment. When we looked at the business last year before we launched it we looked at that as an immediate opportunity, because we basically said it's pretty ugly. It's not brand-friendly and only a small percentage of users have access to this offer wall that end up ever going there. It's basically a slapped together product rather than an in-depth product.
What we ended up innovating -- we actually launched our Brand Bar product this week -- is the closest in-game experience that a game can interact with that sits right above the game. Someone can either buy through direct payment or through a selection of brands click on specific offers that they're interested in and after they filled out a survey or watched a video or interacted with whatever they wanted to can go back into the game and it's a totally uninterrupted environment.
We're definitely excited about the future in terms of the innovation that we're bringing in to that and secondly more brands are going to be inside virtual currency. The third category is that it's going to become more and more integrated -- the advertising and virtual currency environment will be quite more immersed, because there are a lot of businesses that tried to do that with in-game advertising on console games but it wasn't scalable. I think this is the first social gaming environment that automatically has shown its scale through companies like Zynga and so forth. The sky's the limit in terms of the amount of people you can reach. Now it's all about reaching them and integrating different ways to monetize.
Jon: How does gWallet address the market sector that is different than its competitors?
Gurbaksh: We focus our business on connecting with brands and developing products that consumers can have a better user experience with. The product that I mentioned, Brand Bar, will allow someone to go ahead and see it 100% of the time. Right now, on offer walls that OfferPal, SuperRewards, Gambit all have created, only 2-4% of the users that go on there ever go to. We're creating products that don't interrupt the gaming experience but at the same time have 100% of the pie for you to monetize. It's almost like 'why force someone to go to the store -- bring the store to you'. Right? You're a lot more impulsive, you're a lot more interactive. We're creating cutting-edge products to increase the pie of virtual currency.
And secondly, the way we're bringing offers to the space is to proceed ethically. I'm sure you read the Scamville scandal that transpired a couple of months ago. We basically harped on that the most by realizing that at the end of the day, you have to do things ethically -- you can't scam the advertisers. There's a huge opportunity here, because you're dealing with people that are spending hours and hours a day on playing these games and that's ripe for brand advertisers to want to be a part of. Advertisers like Coca-Cola, Disney, BestBuy, JC Penney that we're bringing to the equation are definitely a lot more different than what our competitors have.
Jon: What is gWallet's current revenue model?
Gurbaksh: We launched in September 2009 and we raised $12.5 million. We're five months in to this and we've eaten up a lot of market share already. Our revenue model is that we receive a cut of the overall advertising revenue.
Jon: I am sure that you've seen the recent Facebook Credits initiative. In what way does that change the strategy for the virtual currency platform companies and for your company? Even with the 30% fee, preliminary statistics are that Facebook Credits provide a 20-25% sales increase for developers.
Gurbaksh: What we offer is a way for people to fund currency through advertising. While we do allow people to insert payment modules like direct payment that's not our primary business. Our primary business is how can we have brands integrated inside the environment where a brand says 'watch this video trailer and receive 15 cents of virtual currency' or 'fill out this form or become a subscriber to this product that you want and we'll fund some virtual currency'. Ours is an alternative payment method to direct payment so we're not really affected by the decrease in revenue associated with direct payment. At the same time, I think Facebook is doing a smart thing. If they can charge 30% when a credit card only charges 3% and they can increase the pie, kudos to them that they have figured out another model where they can make money.
The way to look at the entire graph of people that play games is: 1-2% of people pay cash for virtual currency, another 3-4% of people use alternative methods, such as offers to fund virtual currency, and 95% that will never pay for anything. We're solving the problem in two ways: (1) increase the pie by putting brands into the offers so consumers actually recognize the brands that are in it; and (2) monetize the 95% of people by allowing them to see the Brand Bar instead of going knee-deep into the offer wall, so at the end of the day we get the ability to monetize up to 100% of the users.
Jon: How does today's Facebook alliance with PayPal as a payment choice impact the gWallet strategy for virtual currencies? Does it change anything for your installed base?
Gurbaksh: No, we work with PayPal. So the fact that PayPal going to work with Facebook Credits is fine. For people that rely heavily on that 1-2% for direct payment, it will affect them. It doesn't really affect our business. At the end of the day, I think it's basically two 800-pound gorillas getting together and realizing that it's probably better to do business together than to compete in that area.
Jon: Does gWallet provide the platform for any of the Facebook games and what games are they?
Gurbaksh: Yes, alot of Facebook games, anywhere from Dogbook, Snowball Fight, Drinks on Me, Nitrous Racing, FooPets, and various others. We obviously work with some of the top ones as well but we're not privy to name those -- it should be pretty easy to figure out who they are.
Jon: I'd like to shift the conversation to the topic of a universal virtual currency. Does a universal currency have any appeal in the virtual goods marketplace or do you foresee isolated pockets of in-game proprietary currencies?
Gurbaksh: I think that if you're able to aggregate greater than 50% of all the social games, then a universal currency makes sense. I think Facebook is trying to solve that with Facebook Credits -- they're tring to become that default cash/currency in that category. They already have that leverage because by default if you're on the Facebook platform you probably want to put Facebook Credits in there. The way we look at the market is that the business is a lot bigger than Facebook only. There's virtual worlds out there that want to adopt virtual currency -- there's MySpace and there's all these other social networks worldwide that are not going to adopt Facebook Credits.
Jon: Well, that's exactly the point. They have probably cut themselves off from that part of the business even if they were able to get it, because now they're isolating themselves to the Facebook world for payments.
Gurbaksh: That's right.
Jon: It was phrased in some ways that they ended Facebook Wallet and went to Facebook Credits.
Gurbaksh: That's right.
Jon: Is virtual currency that is convertible to the outside world an advantage? In other words, allowing two-way exchange, easy in and out, and the things that you see with goldfarming and the MMORPG environment?
Gurbaksh: Yes, I think there is a huge opportunity there in trying to go ahead and monetize that category. Not many people have done it. They're figuring it's more slow to market -- Facebook games and MySpace games were more first-to-market, but I think that's where the learning curve is. There's the international market too. There's so many virtual worlds internationally. In China, for example, which is the largest virtual currency market, it's just a matter of time that they adopt alternative methods to fund currency as well.
Jon: Will virtual currency ever be used to purchase non-virtual goods?
Gurbaksh: Yes, if it gets far enough, it probably will go ahead and have regulation. China, where virtual currency is a multi-billion dollar industry, basically did something where they passed a law that said virtual currency can never be used for real currency. I'm sure that will just be a matter of time. America realizes it's a big enough market and they have to go ahead and deal with it.
Jon: I believe that Facebook partnering with PayPal instead of challenging them opens up the market for a universal virtual currency, because Facebook has abdicated that road for the near term. Can a universal virtual currency have an impact on the fee structure? What is the biggest driver of the fee structure?
Gurbaksh: Basically, it comes down to how much cost can you charge. If you can charge that, are you going to drive more top-line revenue? I think that Facebook's argument has been that they can go ahead and charge more and if they charge more, it's going to go ahead and increase your revenue by 20-25%. So, I think they're directly proportional.
Jon: How is the gWallet partner program working out that you announced.
Gurbaksh: gWallet Ventures. It has worked out phenomenally. We've actually had a ton of interest. We launched it and we got over a hundred applications on the first day. The way we look at that entire ecosystem is that we're funding the money that we have raised, that we'll never use anyway, back into the ecosystem and we're trying to find the next rising star. The crazy thing about this industry is that you don't know who will be the next number one, number two, number three, number four. You're one big hit away from being that big developer. What our focus is is to invest in a few of them so that hopefully we will capitalize on who will be that developer.
Jon: Can you mention any of those yet?
Gurbaksh: Not yet, but we're very close to announcing our first deal there.
Jon: Thank you for the interview today.
Gurbaksh: My pleasure.
For further reading:
"gWallet launches 'brand bar' platform to monetize social games", Dean Takahashi, VentureBeat, February 25, 2010
"gWallet Launches New Format For Virtual Currency Offers; Eyes International Expansion", Leena Rao, TechCrunch, February 25, 2010
"gWallet Launches Fund to Invest up to 1M per Social Game Developer", Virtual Currency Platforms, January 20, 2010
"Gurbax Chahal sees gold in virtual currency", Ajit Jain, India Abroad, January 8, 2010