Why Zynga Won’t Be the Last Big Business to Accept Bitcoin
Up until recently, the list of businesses accepting bitcoin was mostly devoid of any publicly traded companies, with the exception of dating site OkCupid, which is owned by Barry Diller’s IAC.
But two weeks ago, Overstock.com CEO Patrick Byrne confirmed that the online retailer, which is publicly traded on Nasdaq, would start accepting bitcoin as a payment option sometime in 2014.
Then, yesterday, Zynga announced on Reddit that it had started a test to accept the virtual currency for in-app purchases in some of its games. As you can see from the screenshot I took below, you can buy farm bucks on Farmville 2 using bitcoin.
And I’d wager a decent chunk of cash — or the one and only bitcoin I own — that by the end of the first quarter, another big business with national recognition will start accepting bitcoin, too.
For big businesses with even a tiny tolerance for risk, the advantages to accepting bitcoin right now simply outweigh the potential downsides.
A few reasons why:
First, any big business that starts accepting the virtual currency in the near future is guaranteed a decent amount of media attention; whether or not it is just a publicity stunt aimed at appearing “innovative” doesn’t really matter. You think that was a consideration for Zynga, whose revenue dropped 36 percent year over year in the third quarter of 2013? Of course it was.
Second, if you’re a business that dreams of a future where you can substitute some credit and debit card purchases — and the associated two percent to three percent fees you must pay on them — for the lower one percent fees that bitcoin payment processors typically charge, accepting bitcoin is the only way to get people to start using bitcoin to buy things.
Third, you may actually add incremental revenue, however small the lift. Let’s say you’re an early bitcoin adopter who paid $10 — or even $100 — for a bitcoin and are in need of, say, a new bookshelf. Why wouldn’t you consider heading over first to Overstock.com and buying that $150 bookshelf for .2 bitcoin, which cost you only $2 or $20 a few months earlier? (Disclosure: I own two bookshelves purchased on Overstock.com and I like them.)
Fourth, the more name-brand businesses that start accepting bitcoin, the more pressure it puts on the U.S. government and regulators to come forward with some real guidance on where they stand on the currency. Even if it’s not positive guidance, at least it will be known.
None of this is to say that accepting bitcoin will be a smart decision in the long run or is completely risk free. The startups processing bitcoin payments are still young. And there are still so many unknowns around the bitcoin ecosystem in general, largely as a result of the volatility of its value. Right now, for example, bitcoin payment processors accept the risk of price volatility on an intraday basis, but it’s not clear if they will continue to if big businesses start generating some real volume on the bitcoin network.
Also — and perhaps most importantly — it’s impossible to know exactly what percentage of people who hold bitcoin would even consider using it to shop right now rather than simply hold it as a sort of investment or speculative bet.
But a statistic provided by bitcoin wallet startup Coinbase provides some guidance. In an interview I conducted recently, Coinbase CEO Brian Armstrong said about 80 percent of Coinbase customers haven’t moved or spent the bitcoin in their digital wallets.
This is obviously disheartening for businesses looking for bitcoin commerce.
That said, there’s a very good chance there are some other big businesses out there that see enough of an upside in one of the reasons I mentioned above to follow in the footsteps of Zynga and Overstock and start accepting bitcoin sooner than later.