What Matters: Net Dollars Bought
Kin is a vibrant and growing digital economy. The vision for Kin is to be the means by which everyone is fairly compensated for the value they create online. To stimulate the growth of the Kin economy, the Kin Foundation distributes Kin to app developers for their contributions through the Kin Rewards Engine (KRE) and strategic grants. Initially, the Kin Foundation focused on driving monthly active spenders (MAS) through these incentives. This made sense to start: optimizing for MAS is a straightforward objective for developers. The Kin ecosystem quickly grew as developers and users interacted with Kin for the first time. However, there is a diminishing return for MAS growth. These MAS primarily earn their Kin from developers via the Kin issued through the KRE and other grants. This does not directly drive the demand for Kin in the market.
For the Kin economy to continue to grow, the ecosystem now needs to focus on driving real demand for Kin. This means getting users to want Kin enough to be willing to spend their dollars or attention in order to get it. Most crypto markets are incredibly volatile and driven by speculative demand. Real, sustainable demand is what will be most important for the long term health of Kin.
In order to ensure that the ecosystem is moving towards driving real demand, we at Kik Inc. are looking at several new metrics:
Net Dollars Bought (NDB):Kin Bought for Goods and Services - Kin Paid Out by the Kin Foundation
Specifically, NDB describes the amount of Kin ever purchased (or purchased indirectly via alternative methods such as ads) for goods and services by users, less all Kin paid by the Kin Foundation through the KRE and grants. We call it Net Dollars Bought because most purchases of Kin are done in exchange for dollars. At the time of writing, this figure is equal to roughly -271B Kin (US$-1,350,000) and still decreasing with every Kin Foundation payment.
Over time we would like to see the rate of decrease of this metric slow: the NDB vs time graph should become less sharply steeped, eventually flatten and start pointing upward. An important point to make is that the Kin bought must be for goods and services. More specifically, Kin bought for speculative purposes is not included. It is noteworthy that if NDB is strictly greater than 0 then more Kin was bought than Kin was issued (and possibly sold) which has a net positive impact on demand in the economy.
One can also use the term NDB to describe the outcome of a specific event. I.e. if the Kin Foundation provides a grant of 1,000,000 Kin to Developer Co. for producing a feature which causes users to buy 2,000,000 Kin then (ignoring the KRE and other subsidies) this event would have a NDB of +1,000,000 Kin.
NDB, however, has its limitations as a metric. It is an increasingly negative number. Moreover, it is hard to compare different monetary policies over the long term using NDB, i.e. how much should a developer be rewarded for getting a user to buy x Kin? Because of these shortcomings, we are also examining another metric:
Bought/Issued Ratio (B/I Ratio):Kin Bought for Goods and Services / Kin Paid Out by the Kin Foundation
The B/I ratio describes how much Kin is purchased for goods and services per Kin paid by the Kin Foundation (all time). Unlike NDB which will continue to be more negative while users purchasing Kin ramps up, this number is a positive ratio which should increase over time. This number was roughly 0 at the start of 2020 as little Kin was being purchased with the intent of spending it on goods and services. Some apps have been experimenting with sponsored earning which is driving Kin Bought. So far that has proven to be effective (as depicted below) and we expect this to continue to grow. While this number is small today (at just 0.00005) it is a start at converting MAS into generating real demand for Kin. We want to see this number grow and ultimately pass and sustain itself above 1 in the long term. This will mean positive and sustained demand in the Kin Economy.
Note that μ=1e-6
Like NDB, the B/I ratio can be examined for a specific event. The example above for Developer Co. would give a B/I ratio of 2. It can also be examined for a specific time period or on a per application basis. I.e. The B/I ratio for the Kin Ecosystem for February 2020 was roughly 0.0002.
At Kik Inc. we use NDB to discuss specific events and the B/I ratio to discuss long term policy. For example, the Developer Co. grant described above is best discussed using NDB because it describes the magnitude of the event: +1,000,000 Kin of real demand. Conversely, an event with a B/I ratio of 2 could be anywhere from negligible to profoundly impactful on the economy. The B/I ratio is better suited for discussions about the KRE or looking at the direction of the economy as a whole.
The ecosystem did a good job of driving MAS which successfully got the Kin economy started, but we must now transition to a real demand-driven economy. This means building Kin-powered products and experiences so great that users are willing to spend their dollars or attention in order to get Kin. We believe that NDB and the B/I ratio are the two best metrics to measure this demand.
This post aims to articulate why these metrics are useful and how we measure them. They are an important piece of the lens through which we evaluate the effectiveness of the KRE and will be the basis for any future proposals. By unpacking this rationale, it is our hope that developers in the ecosystem will have a greater understanding of the fundamental metrics that drive the Kin economy so that they can build products that deliver a positive impact on the value of Kin.
