My last blog post boldly questioned the future of EntreCard. My intention was to encourage us to take a look at the amazing growth EntreCard has experience thus far, and question if such growth can be sustained (economically, not technologically). It has sparked some excellent discussion and I thank you all for your comments and emails. I was especially delighted to receive an amazing and brilliantly articulated response from non other than EntreCard's founder, Graham Langdon. Instead of leaving it as a comment on the previous post, I felt it deserved its own post so I could share it with all of you.
Below is Graham Langdon's response to my post entitled "Warning! This Information Could Destroy EntreCard!"
To fully understand this debate, it must be understood that the EntreCard economy is based on an age old concept of backing your currency in something that has value.
A long time ago, the US backed every dollar in its economy with gold. It was called the gold standard, and as you can see, the second this backing was removed, and the Fed was granted the ability to print dollars out of thin air, the us dollar tanked in value:
http://upload.wikimedia.org/wikipedia/en/d/d7/Value_of_US_dollar.gif
Now, right now, every credit in the Entrecard economy is backed in something that has value: a visit (or a click). Credits can not be earned without people visiting each others sites. And that simple action of visiting someone's site will ALWAYS have value, because in the grand internet economy, traffic and visits translate into money. Traffic is the reason why TechCrunch makes $200k per month. Traffic is the reason John Chow makes $30k per month etc. And the unit of traffic is the visit which, to come full circle, is what Entrecard Credits are backed in.
Now, considering that our chief domestic product is advertising (on over 5000 blogs), most of the credits in the economy get spend here. Well, this advertising is "taxed" at a rate of 75%. So 75% of all the credits that are spent on advertising simply get cleared out of the system, leaving the publisher with 25%, which he or she will then take, and spend on advertising yet again.
Now we throw into the mix our growing shop. A year down the road, there will be many times more items available in the shop than you see today. Most likely, there will be thousands as we are going to focus on this area of the site to grow moving forward.
The the eventual scenario in which the credit is used to purchase advertising on thousands of blogs, and buy thousands of products and services needed for bloggers, the credit will increase in value as it can be spent in more and more ways.
So, dropping 300 cards per day isn't any more detrimental to the system than working a full time job in any economy, and thus maximizing your earning potential. After all, you're still providing the core unit of value - the visit - to our members. Their posts still can catch your attention, draw you in, and turn you into a reader.
Now, on our end we have to create clever credit sinks to keep removing as many credits from the economy as possible. We're releasing two features that will serve us well. The first is a paid rank, where members simply bid for the top spots of the "paid rank" category. Another one is a classified board where members can post links and promotions by paying a flat credit fee.
In the end, if blogs become to expensive to advertise on, that actually is an indication of scarcity instead of weakness, and scarcity means your currency is valuable. Looking over all the priciest blogs, it seems there are long lines of members just waiting to pay their price. When people actually can't afford them, then we'll have something to worry about.
On a final note, think of everything like this. A coca cola used to cost a nickel back in yesteryear. Now it costs a dollar, but people make hundreds of dollars per week, instead of just 20. So maybe the prices of blogs will go up, but more people will be dropping cards on you in the meantime, increasing your passive income on the site.
EntreCard truly is a gift to us all. I want to thank Graham the time he spent crafting such an amazing response. He has definitely restored my faith in the future of EntreCard. How about yours?
Jeff
