Kin offers a unique way to earn and spend value while taking part in digital world activities.
Ted Livingston saw the future on a smartphone while he was a Waterloo Engineering student doing a string of co-op work terms at BlackBerry.
Now, more than a decade later, he is determined to both shape that future and make it pay as founder and CEO of Kik Interactive, a mobile chat platform that achieved unicorn startup status - one of six unicorns with roots at Waterloo Engineering - with a US $1-billion valuation in 2015.
Exactly how the affable entrepreneur plans to turn promise into profits - and maybe, just maybe, change the world in the process - takes some explaining.
Getting comfortable in a low-key office in a low-key commercial plaza a few kilometres from the main University of Waterloo campus, Livingston is happy to oblige if it helps highlight what he calls the “best engineering school in the world.”
His laid-back approach, regularly punctuated by a long, hearty laugh, suits a company where a short-haired dog named Albus greets visitors as they step over its stuffed hedgehog toy in the lobby.
But the fact is, this is serious business.
Kik is making a high-stakes gamble that it can not only survive but thrive in a digital mobile world increasingly dominated by a handful of behemoths including Facebook and Google.
“We realized that we just needed to find a different way,” says Livingston, who left school to start the company in 2009 shy of earning a degree in mechatronics engineering. “We needed to change the game. The game was unfair.”
Kik’s gambit involves the creation of a cryptocurrency called Kin to give users a way to earn and spend value while hosting chat groups, dispensing advice and, if it works, taking part in thousands of other activities in a vast digital world.
But before getting into the details of Kin, the first cryptocurrency in the world launched by a venture-capital-backed company of Kik’s size, Livingston feels the need to explain why it is necessary.
In short, he says, it gradually became clear that even while Kik was successfully attracting young chat users and winning tens of millions of dollars of investment as a result, its business model simply wouldn’t work.
The original plan, the same Silicon Valley strategy adopted by mobile startups throughout the industry, was to first concentrate on building a customer base for its free services, then monetize by selling advertisements after sufficient scale had been achieved.
Kik accumulated 300 million registered users and, more importantly, about 15 million active monthly users. It has four offices - Waterloo, Tel Aviv, Toronto and New York - and about 150 employees.
Its single biggest backer, China-based technology giant Tencent, made a US $50-million bet in 2015 that Kik could become its WeChat counterpart in the Western world.
But while Kik was doing really well, the largest players in the industry were becoming what Livingston calls “monopolies” by copying innovative services, then crushing their smaller competitors.
Google and Facebook, for instance, each have about two billion active users and troves of data to target them for advertising customers.
The upshot for Kik and other smaller mobile companies, Livingston says, is that they realistically can’t make money by either selling ads or selling services, which are given away free by their much larger rivals.
“There’s a realization we’re trying to play an impossible game,” he says. “And not only us, everybody.”
Kin is an effort to level the playing field and stake out turf at the centre of a digital mobile world that Livingston, 30, first envisioned when he and other co-op students were given smartphones with full data plans before almost anybody else.
“It was kids in Waterloo who worked at BlackBerry and bankers on Wall Street - that’s who had smartphones in 2007,” he says. “I think that was one of the luckiest big breaks I’ve had in my life. Out of anywhere else I could have been, I was in Waterloo when mobile was getting created.”
After a successful experiment involving a Kik points system starting in 2015, Kin was introduced last fall with an initial offering that generated US $100 million in sales to 10,000 people in 117 countries.
That accounts for 10 per cent of 10 trillion Kin, all that exists and will ever exist - a key to the system that Livingston refers to as “guaranteed scarcity.”
Thirty per cent of the cryptocurrency is owned by Kik, which hopes to make a profit, essentially, as the value of Kin increases over time.
That leaves 60 per cent of Kin for payment to app developers who agree to adopt it as their own currency and drive demand for it by creating attractive new ways for it to be earned and spent by their users.
Known as the “Kin rewards system,” that mechanism will pay out a set amount of Kin each day based on how much developers contribute to the use and, therefore, the value of the currency. The reward fund is mathematically structured in such a way that it will never be depleted.
Consumers stand to benefit from a growing network of mobile services within which they can both earn and spend Kin. App developers will have a new way to monetize by both earning Kin and driving up its value.
And as the facilitator of the entire system, the theory goes, Kik will be in a position to reap profits from its 30-per-cent share of Kin as its value rises.
By early January, even though there were still limited uses for it within Kik, the world-wide cryptocurrency boom meant the value of the first US $100 million worth of Kin sold publicly had soared to US $350 million.
“A year ago, when we decided to go all in on this, people even internally thought we were crazy,” says Livingston. “Today, it’s the next big thing.”
The challenge now is to develop blockchain technology at the heart of the system to enable faster and faster transactions, while convincing app developers that Kin also offers them a lifeline - a profitable way forward in a mobile world of ubiquitous smartphones.
“Unlimited,” Livingston says of the potential. “I think cryptocurrencies - and I hope it’s our cryptocurrency - are going to fundamentally change society and how it operates.”
