July 23, 2012, 2:56 PM — Which would you rather get as a reward for doing business with a particular company: frequent flyer miles, cash rewards, or two virtual cows on FarmVille?
Major companies like American Express are betting that you pick Farm Cash or some other type of virtual currency.
Peter Vogel, co-founder and CEO of a company called Plink, describes the allure this way: "If someone puts $5 into your bank account, it basically disappears into a pile of money and you have no recollection of what happened with that $5. But if we give you the equivalent of $1 or $2 in Facebook credits, and you can go and buy two new cows for your game, or buy a new crop of cherry trees, you get the benefit immediately and you remember that you got it. We believe that a reward of $1 or $2 in virtual currency is more powerful than $5 in cash."
Denver-based Plink's business model works like this: The company offers Facebook Credits to users who make purchases at Arby's, Burger King, Dunkin' Donuts, Outback Steakhouse, Taco Bell, Regal Cinemas, Red Robin, 7-Eleven and Quiznos.
In order to get the credits, customers must register a credit card with Plink and must use that card to make the purchases. Each night, Plink downloads transaction data and sends out Facebook Credits rewards.
Vogel admits that some customers have privacy concerns about giving up login information to their online bank accounts. "There is a fall-off of people who don't want to do that," he says. "But typically, 20% to 30% of people who join do register a card. We do have national brands on our site who are endorsing us - I think that helps build that trust a little bit."
"Tens of thousands" of users have signed up so far, Vogel says. Each user spends, on average 60% to 70% more money with the retailers after joining Plink than they did before. That's because virtual rewards are more immediate, and pack a stronger emotional punch, than frequent flier miles, cash rewards, and other traditional offers.
Facebook threw a bit of a monkey wrench into Plink's business model when it recently announced plans to discontinue the Facebook Credits program. However, Vogel and others say Facebook's move is just a minor bump in the road. Plink will substitute Facebook Credits for regular money in the form of a Facebook gift card, similar to what you'd get from iTunes or Amazon.