How Social Currency Is Driving Identity, Trust and New Industries

Editor’s Note: Markus Barnikel joined as CEO in 2011, in order to expand into new countries and make carpooling a convenient transportation option for all. Barnikel has also held various leadership positions at Yahoo, including as Chief Sales Officer in Australia and Global Director of Sales in the U.S.

As our lives increasingly move to the digital realm – whether it’s what we read, what we watch, photos that once sat in frames now uploaded to a server farm somewhere in the rural United States, or even the 140-character thoughts we share with the world ­­– comes the very reconstitution of our identities online. A German artist named Tobias Leingruber recently took this concept to its logical extreme when he produced physical identification cards based on Facebook profiles (this attempt at satire was executed so well that Facebook sent Leingruber a cease-and-desist letter three days later).

Between the lines of Leingruber’s satire, though, is a very real, emerging concept. What Leingruber hit on is something I refer to as social currency. Social currency essentially refers to the idea that every person has an online identity formed through participation in social networks, websites, digital communities, and online transactions. Our everyday activities — web searches, status updates, ‘likes’, tweets, and comments — they all leave a trail of data behind which we tend to see as ephemeral or throwaway.

Today, however, these fragmented bits and bytes collectively form who we are, our very essence, and are increasingly being used as a powerful form of authentication on the Web. Previously intangible aspects such as trustworthiness and reliability can now be measured and tracked. Although this presents disturbing implications for online privacy – as the recent controversial trend of companies requesting job seekers’ Facebook login credentials demonstrated – it also means that as users of the Internet we are more accountable than ever before.

Social currency also fosters an unprecedented layer of trust by encouraging people to behave according to the rules, whether it’s laws, community guidelines or other unwritten social mores. On e-commerce sites, such as eBay and Amazon, people understand that the way they behave online will impact their ability to maintain a presence on those sites as well as perform all sorts of transactions in the future. If you’re on eBay and you’re not honest about an item you’re trying to sell, you will get a poor rating. And each time you get a poor rating, your ability to sell something at a good price drops by 10 percent. This happens because you have lost social currency. Or, in other words, you have weakened your reputation as a trustworthy and reliable user.

Social currency enables people to connect and collaborate like never before. Take the example of carpooling. As the CEO of Europe’s number one ride-sharing network, people always ask me, “But how do you get into a car and share a ride with a complete stranger?” I always find this question a bit of a misnomer because, today, when you step into a car through, you already have a lot of information about that person with whom you will be sharing a car.

You certainly don’t have that same level of information when you step onto train or bus, or even climb into a taxi. Just as we have moved the stuff of our physical lives to the digital realm, there is also a new digital overlay on everything we do “IRL.” You can see this person’s picture. You know the make and color of the car. You can see the star rating of the user and what other people said about them. Are they a good driver? Did they make frequent stops? Was it a pleasant ride? These are all things that you will know before even meeting them.

If you think about it, you’re actually more accountable when you share a ride with someone than if you stay in a hotel. If you stay in a hotel and you leave the place in a real mess, who’s going to know? Not your friends, not your colleagues and certainly not the next hotel you’re going to stay at. Okay, they might charge you for damages, but it’s not like there’s a where they can give you a one-star review to be read by other hoteliers (well, at least not yet).

It won’t really affect your online reputation. With, on the other hand, if anyone behaves in an inappropriate way, it’s going to be very hard for them to get their ride filled the next time around because all the other users will be able to easily access that information and avoid accordingly.

It’s clear that online behavior has changed radically in the past 10 years and this has opened up lots of new business opportunities. When we first started in 2001, ridesharing was more of an edgy subculture for students and environmentally conscious hipsters. Today, more than two million people actively use our site each month and the majority of our users are actually professionals who rely on ridesharing for their commute. It’s really becoming a viable form of transportation for the masses. Technology has made that possible, just as it has for other collaborative consumption companies like Zipcar and Airbnb, which rely on a similar set of checks and balances to regulate its community and users.

As operators of these businesses, we need to take the lead on continuing to make social currency as accurate and legitimately powerful a tool as possible and encourage our users not to misuse it (e.g. a negative testimonial posted by a bitter ex-lover), so that our digital and social identities actually reflect reality. The metrics used for social currency must be meaningful: Marketplaces must define clear rules for rating other users and ratings should only be allowed after social interactions truly occur; if bad behaviors occur, they must be eliminated quickly. On the other hand, good behaviors should be rewarded in such a way that it positively impacts a user’s social currency. Finally, above all else, there should be absolute transparency to whatever systems social currency producers like myself put in place.

While social currency may never replace a firm handshake, it’s clear that it’s becoming increasingly important as we move our business and relationships further online. Moving forward, the ability to quantify a person’s overall reputation, and contextualize their relationships across multiple marketplaces, will undoubtedly become a crucial metric for the 21st century, creating new models of both personal behavior and business. The question is, are you ready?

Image credit: Tightmixblog