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Amazon.com, Inc. (AMZN): Is This Actually That Smart?

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Back in February we found out Amazon.com, Inc. (NASDAQ:AMZN) was launching Amazon Coins, a new way to make purchases from Kindle Fire devices. Yesterday, the new coins system launched, and if the short history of the Internet has anything to say about it, Amazon Coins are already doomed.

Coins don’t make cents
Amazon.com, Inc. (AMZN)First, let’s talk about what these coins are and why Amazon.com, Inc. (NASDAQ:AMZN) is pushing them. Amazon Coins can be used to buy apps, games, virtual gifts for friends and even song collections inside certain apps. Amazon is likely trying to lure more developers to its platform by using the coins to boost in-app purchases. Amazon has said developers still receive 70% when customers make purchases with coins.

Amazon.com, Inc. (NASDAQ:AMZN) has already given every current and new Kindle Fire owner 500 coins, which is equal to $5. And users who buy coins in bulk will receive 10% off the purchase of those coins. By offering Kindle Fire users a way to buy and earn the coins, it’s trying to keep them entwined into the company’s Kindle ecosystem. There’s no problem with wanting users to stay connected the Kindle device and making purchases — all companies with a virtual ecosystem should be doing the same. The problem lies in getting users to accept the currency system and believe that it’s better than using money.

Keep that in mind, it has to be easier than using money and users need to believe they’re getting a better deal than paying with real money.

Been there done that
That’s where two tech companies have gone before Amazon.com, Inc. (NASDAQ:AMZN) — and mostly failed. Microsoft Corporation (NASDAQ:MSFT) launched an online currency system called Microsoft Points several years ago. The points were used to buy Xbox games, extra features inside of games, movies and TV shows. Sounds like a good idea, right? But with the launch of Windows 8, Microsoft started phasing out the use of points for the purchase and rental of music and video content.

Microsoft Corporation (NASDAQ:MSFT) still uses the points for Xbox users, but while beta versions of Windows 8 used the points for video and purchases and rentals, the latest version of the software defaults to regular credit card purchases. Some have noted the conversion rate for the points — $1 for 80 points — confused Microsoft users. Therein is one of the major problems of virtual currency, users have a hard time knowing how much they’re paying for something, which isn’t a great way to make people feel like they can trust the payment system.

Facebook Inc (NASDAQ:FB) also tried its hand at virtual currency starting back in 2009 with its Facebook Credits for game purchases and virtual goods. The company even sold physical cards in some stores to redeem the credits. Rumors swirled that Facebook Credits would become the new way for making purchases online. But at the end of last year, the social media giant phased out credits and went back to using local currencies for online purchases. Some have said Facebook Inc (NASDAQ:FB) didn’t market the credits enough, or that developers didn’t receive enough compensation when Facebook users made purchases with Credits.

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