As bitcoin prices soar, messaging app Kik launches cryptocurrency payment service
- Cryptocurrency will be the primary transaction currency on Kik.
- Kik's implementation of cryptocurrency is relatively unusual because most apps use local currencies for payments.
Messaging app Kik announced Thursday it will use cryptocurrency tokens as the primary transaction currency on the platform — an unusual effort to compete against its behemoth rival, Facebook Messenger.
The announcement comes as and other so-called decentralized currencies are riding a fresh wave of interest. Bitcoin prices hit a record level of $2,500 on Wednesday — a 150 percent surge this year.
The new program means that Kik can now use an internationalized currency for many transactions.
Using messaging apps for activities like listening to music, ordering food or making payments is already popular in Asia, where WeChat is a dominant app for sending messages on mobile phones. That's something platforms like Facebook are hungry to replicate.
"This is something we've been experimenting with since 2014," Kik's founder and CEO, Ted Livingston, told CNBC's "Power Lunch" on Thursday.
"There are a bunch of ways to earn it: You could watch ads, you could host a great group chat, create a great sticker, build a great . So all these different ways as a consumer you could come in and earn value and then spend value. And how that makes money for Kik is, we create a new cryptocurrency for Kik such that there's only going to be so much of it. And we set some of that aside for us. So that if more and more people transact in this cryptocurrency, the value of it grows."
Creating a WeChat-like ecosystem could be a lucrative, even existential, opportunity for other messaging companies like Line and Apple, analyst Ben Thompson wrote earlier this month. Many messaging apps, like Facebook Messenger and Snapchat, offer peer-to-peer payments and transactions with businesses.
The company behind WeChat, Tencent, invested $50 million in Kik with that goal in mind.
Still, Kik's implementation of cryptocurrency is relatively unusual because most apps use local currencies for payments.
Despite bitcoin's association with crimes committed on the so-called Silk Road, technology trend watchers like venture capitalist Fred Wilson, who invested in Kik, have high hopes for cryptocurrencies.
Wilson said at a conference this month that consumers would eventually revolt against the data collection from platforms like Facebook and Google, opting to pay small amounts of cryptocurrencies for a more private experience.
"Historically, you build a community and use it to then sell their attention to advertisers, or use it to sell them stuff, that they either don't want or don't need," Livingston said. "So now with the it unlocks a fundamentally new way to monetize a community."
Canada-based Kik's cryptocurrency, Kin, will be based on a different type of technology, blockchain. Canada is one of the top 10 areas most interested in over the past 12 months, Google Trends data show.
In its announcement, Kik also called out the omnipresence of giant tech companies.
"More and more ... services are controlled by a diminishing number of companies, resulting in a future of less innovation and less choice. Decentralization provides a sustainable way forward," the company said.
Only about 5.8 percent of U.S. internet users use Kik, according to a May 2016 usage study by AYTM Market Research, compared with 38.9 percent of respondents who use Facebook Messenger.
But Livingston said Kik still has millions of users. He added that the tactic could create new ways for Kik to compete with the massive scale of Facebook's free products.
"You live in this world where consumers expect everything for free," Livingston said. "So this is also a new way to build a new ecosystem, where we can use this cryptocurrency and create a rewards engine to pull in other developers to build great services for consumers."