The world of mobile games was not enough for Kiip.
In 2012, when I last checked in with the San Francisco startup, it focused on helping developers of smartphone games earn extra money by building brand-based “reward moments” into their games. For example, successfully moving up a level in a game like Get Set Games’ Mega Jump might earn a player a free Pepsi, while at the same time earning Get Set and Kiip a promotional fee from the company. Kiip argued that these moments, when gamers feel good about something they just accomplished, were the ideal times for companies to reach out with marketing messages.
Developers love the idea: 2,000 apps now have Kiip rewards baked into them. Kiip-enabled apps are installed on 70 million phones around the world, triggering more than 2 billion reward moments in 2013. Companies like it too. Kiip has signed up more than 500 brands, from Pepsi to Walt Disney to Procter & Gamble.
But Kiip’s original plan of relying just on games has proved to be difficult to sustain.
“Games rise and fall very quickly,” says Kiip CEO Brian Wong. Indeed—just look at the short life of Flappy Bird, which was released in May 2013, surged in popularity in December, became the top free iPhone app in mid-January, and was pulled from the app store by its creator in February. Popular games come and go so fast that “there needs to be a steady supply of games for that to work” as a business, Wong says.
To compensate for the ups and downs, Kiip needed to diversify. So the company now provides rewards tailored for five other categories of apps: fitness, food, music, productivity, and sports. The to-do-list app Any.do, for instance, offers Kiip-mediated rewards when users cross items off their task lists. Rewards have included free product samples from Propel Water, digital coupons from Naked Juice, $2 Amazon MP3 credits, and $20 Uber credits.
“With a to-do-list app, it’s very consistent. They are going to use it every day,” Wong says. “The combination allows us to be very even and predictable and more efficient.”
The new strategy has been a big success. Together, the five new app categories provide half of Kiip’s revenue, much of it from new brands that weren’t attracted to the gamer demographic. And the startup’s future, Wong says, is about infiltrating almost any daily activity that involves a smartphone. Do you use an alarm-clock app to wake you up on the morning? Quaker Oats may want to be there to reward you with a coupon for a free box of cereal for not hitting the Snooze button.
“It’s less about owning the achievement moments [in games] than it is about owning your everyday victories,” Wong says. “I want to be there throughout your entire day as you’re experiencing these moments.”
Whether that future sounds enticing to you or a little creepy, you have to hand it to Kiip for single-mindedly pushing beyond the old banner-ad model and offering app builders a new, potentially more user-friendly way to earn money. Wong, 23, has long been one of my favorite young CEOs to track here in San Francisco. That’s partly because he has the unbounded enthusiasm of a puppy, coupled with the acumen and confidence of a card sharp. And it’s partly because he was starting Kiip just as I arrived in 2010 to set up Xconomy’s San Francisco bureau. I knew Kiip when it was a one-man, seed-funded company. I wrote about its early funding, and I’ve followed it as it’s grown all the way to its current complement of 55 people (twice its size at the time of my 2012 story). The company has now raised $15 million from a large group of angel, venture, and corporate investors, including American Express.
Though every Kiip reward is wrapped in a very clear brand message, Wong thinks of his company’s system as the antithesis of advertising. “Ads drive people away,” he says. “The only way you can truly make a lot of money is when you have loyal, engaged users.” Wong says Kiip not only rewards users for the small victories like getting out of bed in the morning, but also can reinforce desired behaviors like exercise, and keep users coming back to their apps day after day.
He says the company collects the data to prove that. Kiip deliberately refrains from giving rewards to a randomly selected group of users, so that it can measure differences in activity between what are, in effect, treatment and control groups. “In the dashboard for developers, we can show them just how many of their users they retained over time, and show the differences between someone exposed to a Kiip reward and somebody who was never exposed,” Wong says. “There’s no way an advertising company can say ‘My video ad made your players want to stay.’ But there is literally no question anymore that our rewards work.”
In a 2012 study with a University of California, Berkeley, researcher, the company found that the amount of time app mobile game users spent during a typical session doubled when the app included Kiip rewards. Users spent 68 percent more time overall in Kiip-enabled apps than in non-Kiip apps, and they opened Kiip-enabled apps 31 percent more often.
It’s up to developers to decide what behaviors they want to reward, and it’s up to Kiip to match those opportunities with appropriate brands. Say you’re browsing a cookbook app and you bookmark a casserole recipe. Wong says you might see a pop-up window offering a coupon for a free can of Campbell’s cream-of-mushroom soup. In a fitness app, the reward moment might be finishing a run; in a music app, adding a song to a playlist; in a sports app, watching your favorite team or player score a goal.
Users seem to like getting Kiip rewards. Hundreds of thousands of app users redeemed offers for free samples of Sour Patch Kids candies last year, and many were so happy they tweeted about it.
Just as with banners and other more traditional forms of mobile advertising, app users are free to ignore Kiip reward offers when they pop up; Kiip only charges advertisers when users redeem an offer. The company says that 5 to 7 percent of all offers are redeemed, which is at least an order of magnitude greater than click-through rates on typical mobile banner ads.
Kiip makes redeeming an offer as easy as possible. A gamer who has just leveled up in a game like Unblock Me, for example, might see a reward notification for a free Sour Patch Kids sample. They’d tap the notification, get a message from the brand congratulating them for their achievement, and
submit their e-mail address. That prompts an e-mail from Kiip that lets them enter a shipping address. Other rewards, such as Amazon MP3 credits, are instantly redeemable online.
For the developers and brands on its platform, Kiip translates the redemption rates into a number it calls “cost per lead.” The psychology of rewards is complicated. It’s hard to measure how an app user’s behavior toward a brand changes after he has redeemed a reward. That means Kiip’s cost per lead can’t be directly compared standard measures of advertising costs in the Web and mobile worlds, such as CPC (cost per click) or CPM (cost per thousand impressions). But Wong thinks brands will adjust over time to new ways of thinking about their marketing spending.
“We would definitely like to see a normalized, standardized, moments-driven” measure of marketing costs, Wong says. “Once we have some more education and the market gets to a bigger size, I think we can begin to define more of that language. Google was basically able to create the worlds of search engine optimization and search engine marketing. Facebook created social media marketing. To the extent that we can be the provider of serendipitous rewards in the marketer’s toolkit, we can begin to own that.”
After Kiip masters fitness, food, music, productivity, and sports, Wong has several other app genres in mind, including travel, personal finance, and education. “Mint would be perfect,” he says, referring to the home budgeting app. “Say you underspent on your budget goal this month. Here’s a reward. Brands can feel good, knowing they are not targeting someone who is blowing their credit-card limit.”
And Wong says Kiip will adapt to the changing nature of mobile computing. If wearable devices such as smart watches or Google Glass become omnipresent, for instance, it would provide triggers for more types of reward moments linked to users’ daily activities, such as entering a store or traveling to a new location. Wong says, however, that Kiip is sensitive to the danger of “moment spam”: the company already employs frequency-capping algorithms to keep app developers from numbing users with too many reward offers. There’s no hard limit, but Kiip said in a statement that “we work closely with our brand partners to marry the relevance of their brand with the timing of our moments.”
Whatever the platform, Wong says Kiip’s real expertise will always be finding the moments in device owners’ lives when a marketing message feels welcome, not intrusive or distracting.
“Brands will always have something they want to show you,” he says. “Unfortunately, the status quo is that they’ve been showing it without being sensitive to any of the emotions or situations you are in. By helping brands understand that, we are making the experience that much more valuable.”