Last week, e-Commerce giant Amazon introduced Amazon Coins, its own virtual currency for Kindle Fire owners to buy apps and games. During the introductory phase, Amazon plans to discount these Coins by up to 10% depending on the amount of the purchase; the company expects to dole out tens of millions of dollars in such discounts to stimulate adoption. Amazon Coins are currently limited to the United States, and Coins cannot be redeemed, transferred or resold. With this announcement, Amazon joins players in online gaming / advertising, as well as Microsoft Points for Xbox Live (which will be soon be discontinued).

Amazon Coins, in their current proposed form, are the same as rechargeable prepaid cards. Users prepay for Coins and then use those coins to make purchases over time. The applicable use cases for Coins are very limited at this time, but it’s the future possibilities that make this an intriguing initiative. First, while the stated objective for Amazon is to spur app purchases, the real value to Amazon might be around negative working capital and the not so insignificant failure-to-redeem rate associated with such gift card-type setups. Second, if this virtual currency could grow across all of Amazon’s products, geographies, affiliates and currencies and truly facilitate global transactions, then it *could* actually become a viable parallel currency – although it will still be a regulated one. And finally, how about Amazon’s sophisticated analytics engine using a combination of purchase history and unspent balances to optimize promotions (which can be done via Coins as well), visitor traffic and sales lifts? That should spur other online marketplaces to jump in as well, and so analytics platforms such as Opus portfolio company Freemonee (which currently works with financial institutions as their platform for cash gift analytics) should see additional applications in e-Commerce going forward. So lots of interesting potential implications for the future – let’s hope Amazon paves the way for a more metrics driven and better customized e-Commerce marketplace.

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Players in the internet ecosystem can broadly be bucketed into one of three categories – carriers (aka the infrastructure providers), Over-The-Top content providers (aka the ones that make the money), and end-consumers (the ones that pay). Over the years, one of the carriers’ approaches towards maintaining profitability has been tiered wireless data pricing (also being tried out for landlines), and along the way, this model has also helped keep per capita data consumption from spiraling out of control. That’s until now. Last week brought news that ESPN was in talks with one major US carrier to set up an arrangement wherein ESPN data consumption would not count towards the user’s data plan.

With more than 27 million monthly unique views, ESPN is one of the top 20 mobile content sites currently. The site values engagement with its user base; in fact ESPN tried becoming a MVNO around 2005-2006 in an experiment that failed. In today’s smartphone era, they feel they could re-visit the idea of subsidizing consumption of their content on mobile and by monetizing the correspondingly higher viewership. This might be the first example in recent times of OTT folks willing to pitch in with the carriers, and it will probably work well in the near term for ESPN if implemented. But the big concern is – what sorts of dominoes might this action by ESPN eventually cause to fall. ESPN acts first, other OTT players follow, carriers make some money, consumers watch more content, and a positive feedback loop develops. Along the way, some of the carriers’ new dollars get fed into infrastructure, but probably not enough to counterbalance the increased consumption, and so the spectrum crunch accelerates. Eventually carriers go back to throttling consumers, data prices worsen, and the ecosystem reaches a new ‘equilibrium’. Except, this time, the OTT players are left footing part of the bill.

Is ESPN leading the way in getting all the OTT players shot in the foot? In general, the answer might be yes. A few content providers might be able to monetize better in this new scenario, but most other content providers will likely be left much worse than before. So let’s see if this ESPN deal actually happens. If it does, then look out everyone, prisoner’s dilemma might be coming!

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PayPal, the online payments and money transfer giant, last week announced a new milestone in its partnership with Discover. As of last week, Discover has deals with 50 merchant acquirers to offer PayPal’s service as a payment option at more than 2 million merchant checkout locations by end of 2013. The announcement represents significant progress in the partnership, which was initiated late last year and which has the potential to get PayPal into 7 million locations over time. It also builds on other recent forays by PayPal into POS systems as well as directly into retail stores. This looks like a win-win for both PayPal and Discover. PayPal gets additional physical retail presence to make more off its 110 million user base. Discover gets millions of users for its interchange transaction fee. Both get an opportunity to poach consumers away from Visa and MasterCard.

How far can PayPal reach in this quest? Quite far, really, in one manner of thinking! As and when PayPal decides to become a transactional social network and positions itself for mobile and social commerce, its various partnerships could give PayPal the broad reach that brings credibility with the average, global customer, creating a positive customer acquisition feedback loop. If all goes well, PayPal’s customer base and technology platform could over time become the glue that brings together POS and financial players around high-resolution, itemized purchase data, something that no entity – not Google, not Facebook, not the banks – has been able to achieve so far. And this data could be a gold-mine for offers, promotions and competitive positioning, subject of course to privacy standards and regulatory guidelines. It probably feels great to be PayPal right now (and better than before to be Discover!).

When money is involved, you never know where all the show-stoppers are, but until then, PayPal app-store, anyone?

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