AMAZON TO DEBUT "AMAZON COINS"

When I heard about Amazon Coins, the company's virtual currency for making Kindle Fire app and in-app purchases starting in May, I immediately grew worried. Amazon's customer focus, something I find sorely absent at money-extraction engines such as airlines and banks, has kept me loyal for years. I'm concerned, though, that the Amazon Coins program is a step in the wrong direction for Amazon customers.

In short, I don't like the inflexibility, costs, changeable rules, and risks that can be attached to virtual currency. I dislike it when there's a special form of money that works only in a limited marketplace, and I dislike it even more when the company operating the marketplace sets the rules for using that currency.

Amazon isn't yet sharing details or answering my questions, so this isn't a final judgement. I'm willing to be persuaded if Amazon's virtual coins are useful and beneficial and if Amazon runs the program sensibly. But my experiences with this idea so far make me leery.

My biggest concern is that Amazon Coins are a way to suck me and my money into the Amazon financial ecosystem and to make it hard for me and my money to leave.

Amazon's coins fundamentally are less flexible than real money, with which I can buy haircuts, groceries, and mutual funds. Amazon's coins remind me too much of company scrip, which mining and timber companies used instead of cash to pay employees. Scrip could only be used at the company store, the economically wicked institution immortalized in the song "Sixteen Tons." With real money, people can spend it where they see fit.

Maybe Amazon Coins will remain in a tiny app-store corner of the company's commercial transactions. But the possibility that they could spread so much farther makes them much more important than other virtual currencies and means we should pay much closer attention to what Amazon does with them.

Anytime somebody tries to persuade you to use their own special form of money, ask yourself why it's worth sacrificing the flexibility of real-world currency. Maybe it's something benign -- lower transaction costs or commerce friction, for example, which can lead to a more vibrant or efficient marketplace.

But especially when Amazon says it "will give customers tens of millions of dollars' worth of free...coins to spend," be very careful.

There's no such thing as a free lunch, and there's no such thing as a free Amazon coin, either.

To read the complete article, see: Why Amazon's virtual coins raise my hackles (news.cnet.com/8301-1023_3-57568116-93/why-amazons-virtual-coins-raise-my-hackles/)

Wayne Homren, Editor

	NBS (coinbooks.org) Web