Ann Arbor’s BodegaBid Bets There’s Real Profit in Virtual Currency
Mark Sendo of Ann Arbor, MI, is not into reality. Oh, the founder and CEO of BodegaBid says he briefly tried reality last spring, when his company partnered with a Seattle startup called Beer2Buds and let holders of virtual cash buy their friends a beer in the real world.
But the three-year-old BodegaBid ended that partnership, Sendo says. It’s not that reality wasn’t working out. It’s just that Sendo wanted to clearly define BodegaBid’s niche, and right now it’s all virtual.
“The problem is that it’s off our focus,” Sendo says of his six-person startup’s brief foray into exchanging virtual cash for real beer. “We know what we want to do and we just need to focus on signing game developers and building a marketplace that creates liquidity.”
So, BodegaBid is sticking to trading in virtual goods, enabling social gamers who earn virtual currency in one game to spend it in other games, or to trade virtual goods—like, say, a tractor in FarmVille—for currency that is accepted in other games.
In FarmVille, for example, says Sendo, people spend a lot of time building farms, nurturing crops, watering gardens, and when they’re done in that game…well, they’re done.
“All that time they’ve spent in developing, and money, is wasted,” Sendo says. “So, basically, what we do is we facilitate the transfer of virtual goods from one user to another in a marketplace.”
The thing is, game developers have to agree to participate in Bodega’s virtual currency program. So far, Bodega has signed on Ayogo, a Vancouver, Canada-based game developer, and China-based Memoriki. Ayogo has a game called “City of Ash” for the iPhone and iPod Touch. All of Ayogo’s virtual items can be traded in for “Bodega Credits” on Facebook. Memoriki has a Facebook game called Happy Zombie, whose virtual items can also be traded in the BodegaBid marketplace on Facebook for credits. Bodega credits, in turn, can be used to purchase virtual goods for either game.
Sendo says BodegaBid makes money in the same way big gaming companies like Zynga and Playdom do. Gamers use PayPal, a major credit card, or mobile payments, or complete advertising offers, to purchase or earn Bodega Credits. Gamers then use the credits to trade virtual items in Bodega’s marketplace on Facebook. Bodega also charges gamers a small “transaction fee” for trading on its marketplace.
Sendo hints that more deals with top game developers are coming soon to greatly widen his market reach.
Brian Balfour, founder of Cambridge, MA- based Viximo, which also connects social app/game developers with social networks, says that Sendo certainly has picked a niche with huge market potential. The virtual goods/social games space represents a “pretty attractive, massive, lucrative, and growing audience,” he says.
The problem, Balfour says, is that many social games are still in an immature stage, and developers are focused heavily on grabbing as much market share as possible in the still-infant industry. As a result, they have little interest in reaching out to their competitors to help create a demand for virtual goods. Maybe in a year or two that will happen, but not yet, he says.
On the users’ side, the demand does not exist yet, either, Balfour says. “When they buy a farm in FarmVille, users don’t perceive that as owning something,” he says. “They see it as entertainment value, like I’m paying $4 to rent a movie.”
Balfour points to developers PlaySpan and LiveGamer, which he says first offered, then either scaled back or discontinued, their secondary marketplace in virtual currency.
That said, Balfour says he’s a former Michigander who attended the University of Michigan and that he’d love to see any startup in the state do well.
Along those lines, BodegaBid was named a winner in the Internet category of the TiE20 Midwest Industry Awards presented at the end of October. The company was named one of the most promising Top 10 early stage Internet startups.
Sendo holds an undergraduate degree in economics from the University of Michigan and has launched previous companies in Ann Arbor, including URturn, which rewarded users for spending time on Facebook.
Sendo is open about his past mistakes. Back in the ’90s, when Sendo was, in his words “a kid in my 20s and making a ton of money,” he got into legal trouble with the SEC over day-trading violations. In 1994, Sendo pleaded guilty to charges of wire fraud. He says he never went to jail, but did pay fines. Sendo later called that incident “a train-wreck that would haunt me for the rest of my life.” And it did haunt him again in 2001 in the offering and sale of stock for another company, InternetMoney.com. The SEC accused Sendo of failing to disclose his 1994 wire fraud conviction. As a result, Sendo is barred from any offering of penny stocks. Now, he is into full disclosure.
Sendo says that he made his mistakes and paid his debt to society, and that it’s all in the past. What his legal troubles have done, he says, is to force him to work much harder to overcome the shadow of his past, and to be upfront with people. He thinks it is his hard work to rise above his past that earned him recent recognition at the TiE20.
“I just persevered so much, kept going,” Sendo says. “I have been transparent about my past and have shown that I can still be successful by turning the corner.”
Sendo says he is confident he’s “finally found the right path by launching the first secondary marketplace” on Facebook. In fact, he is so confident in his formula that he is predicting that BodegaBid will add 50 employees in the next year and move from virtual to physical offices in Ann Arbor.
“We’re planning on staying in Michigan,” Sendo says. “We have investors lined up who are encouraging us to stay in Michigan. We like the Ann Arbor community.”
All he needs is more support in the virtual world to make this a physical reality