Seth Priebatsch believes puzzles and challenges have the power to change human behavior. A lot of very smart tech investors believe Priebatsch and his Cambridge company have the power to change the world.
In the fall of 2007, Seth Priebatsch headed off to Princeton and, a few weeks after arriving on campus, learned about the school’s annual business-plan contest. Before Priebatsch even entered, he likes to boast, he knew he would win it.
There was good reason for his optimism. Priebatsch was 12 years old when he started his first company, Giftopedia.com, a price-comparison website that helped users locate good deals. (He found the site’s programmers while on a family vacation to India.) At least twice while at school, he had to run out of class to deal with server outages. “I explained to my teachers calmly that I really had to leave and take care of this,” he recalls. Priebatsch sold off most of the company when he was 15, and the Web address when he was 17. Then, as a high school senior, he launched his second startup, PostcardTech. This one created and distributed promotional CDs for universities and tourist destinations. He rented out a factory in China — which is “way easier than it sounds,” he says. “Do a bit of research, get the right numbers, fire up Skype, dial.” (He still owns PostcardTech, though he has no involvement in running it.)
For the Princeton competition, he decided on a proposal for a company that would use text messages to lead mobile-phone-based scavenger hunts. After hashing out the idea with a professor, Priebatsch drew up his plan. And, as he’d predicted, he won. When the $5,000 prize came in the form of a giant poster check, Priebatsch ran to the nearest Bank of America and made a big scene of trying to jam the check into an ATM. It was a grand time, he says, until “they called the police and we had to leave.”
Three years later, Priebatsch’s freshman-year business plan has blossomed into arguably the most-talked-about young tech company in the country, the Cambridge-based SCVNGR. These days, Priebatsch, who is 22, is as well known for his engineering wizardry as his, um, youthful energy. He rides a scooter around his office. He unloads Nerf guns on his unsuspecting employees. He always wears orange sunglasses and, like a cartoon character, dresses himself in the same outfit every day: an orange shirt (an ode to Princeton, and without a doubt a branding ploy as well).
He is often barefoot, too. He greets friends barefoot. He greets journalists barefoot. He even greets clients barefoot. That’s the type of thing you get to do when you drop out of one of the best schools in the country after just one year to start a company that quickly scores VC funding from high-roller investors like Highland Capital Partners and Google, and today is estimated to be valued at $100 million. You also get to call yourself “Chief Ninja” instead of CEO. And you apparently get to use vowels only when you want: SCVNGR is pronounced “Scavenger.” Finally, you get to deliver one of the keynote addresses at the 2011 South by Southwest tech conference — the same keynote given three years earlier by another Ivy League dropout, Facebook founder Mark Zuckerberg.
Priebatsch’s company produces smartphone apps designed to draw people to businesses and then build consumer loyalty. Basically, the SCVNGR app is meant to engage users in games and challenges — at, say, a local bar — that earn customers discounts and freebies. The idea is that app users will eventually become regulars at the bar.
Priebatsch spends nearly every waking moment thinking about SCVNGR, and rarely leaves his office near Kendall Square. When I go to meet him there, he bursts out from behind a wall — “Hey!” — and strides toward me much too quickly, as if he’s competing in the Olympic power walk. Leading me on a tour of the office, Priebatsch shows me the spot under his desk where he routinely unfurls a sleeping bag at night. He doesn’t have an apartment, so he spends his evenings at either SCVNGR or his parents’ house in the Back Bay, where he sleeps in his childhood bedroom, complete with glow-in-the-dark stars on the ceiling. For a man who gets people at bars to play games, he does not have much of a social life. His father, Norman, says he’s not sure what Seth’s up to on those nights he doesn’t make it home, but “all I can tell you is, it ain’t with a girlfriend.” The son, though, shrugs it off, noting in his faint South African accent (Norman is from South Africa) that female companionship “lessens efficiency.”
Priebatsch’s single-mindedness stems from his absolute conviction, shared by many others, that what SCVNGR is building will do nothing less than change society’s behavior. He starts to unpack this thought as he shows me SCVNGR’s main conference room. It’s an airy space, with openings at the corners of each of the four bamboo-paneled walls and a round table in the middle. A shiny black globe, tilted on its axis, sits at the center of the table. Priebatsch thinks SCVNGR can grow to be a billion-dollar company, and seems to be only half-joking when he says the conference room “is used to plot world domination.” Indeed, Priebatsch is on a very specific mission. He will not stop, he says, until SCVNGR “builds a game layer on top of the world.”
So just what is a game layer, and why does the world need one on top of it? Priebatsch explains that the past 10 years have been dominated by social media providing people with a way to have the social interactions they already want. Facebook, for example, makes it easier to connect with your Aunt Edna in Kentucky or keep up with your college buddies. The next iteration of social media, Priebatsch believes, isn’t about helping people do what they want — it’s about influencing them to do what you want.
So how do you do that? Priebatsch has devoured the academic literature on game mechanics, identifying individual dynamics that can affect behavior. Some are as simple as what he calls the “appointment dynamic,” which involves giving people a reward for being in the right place at the right time, such as with a happy hour. Others are more complex, like the “variable interval rewards schedule” dynamic, which holds that rewarding people on an irregular basis will keep them working at a more consistent rate than rewarding them on a fixed schedule. The game-dynamics theory boils down to this: A little extra motivation can influence your behavior in ways that perhaps you don’t even realize. Leveraging those dynamics properly, Priebatsch believes, can do everything from improve education to help solve global warming.
For the moment, though, SCVNGR is focused on driving commerce. Let’s say I’m walking down Mass. Ave. and open up the SCVNGR app on my smartphone. The app figures out where I am and displays all the nearby dining deals. B.Good, for instance, would pop up as one option, and, if I selected it, the app would display several games I could play there to earn points toward discounts and free stuff. Just checking in — announcing to other SCVNGR users that I’m at B.Good — earns me one point. Checking in while with another SCVNGR user gets me two. It goes deeper from there: If I locate an employee named Jimmy and take a picture with him, that’s five points. Making up a name for a burger gets me two. Earning 25 total points earns me a free burger. If I want, I can even design my own games for other users to play. And if I’m doing that, then B.Good hopes it’s got a new regular.
Major corporations and institutions also contract with SCVNGR to design custom games. Jewelry stores have partnered with the company to lead couples on races to find diamond rings hidden in cities. The U.S. Navy, Warner Bros., Coca-Cola, the Patriots, the Celtics, and MIT are among SCVNGR’s 1,500-plus clients. The top ones pay the company $250,000 to $500,000 per year. (Full disclosure: This magazine’s marketing department has a SCVNGR challenge. I’ve never played it and can’t say whether it’s any good.)
The SCVNGR app has been downloaded more than a million times, and Priebatsch reports that revenue is increasing at a rate of about 20 percent per month. Tom Hopcroft, president of the Mass Technology Leadership Council, a sort of chamber of commerce for the tech set, says that what Priebatsch is doing is “a really clever idea. I don’t know if the gaming layer is the next big thing, but he’s certainly a presence.”
Indeed, for all the business’s promise, SCVNGR and its Chief Ninja face ever-larger problems. Ted Morgan is the CEO of Skyhook Wireless, a company that makes the technology by which mobile phones locate themselves. Skyhook is a third-party operative for many operators in the daily-deal tech sector. He says that for SCVNGR to really grow its business, it needs a large ad campaign. And it won’t have that until “it has 5 to 10 million downloads.” Complicating matters is the fate of the social-media/daily-deal sector itself. It is, many analysts believe, effectively sitting in the middle of an economic bubble. Umair Haque, director of the Havas Media Lab, wrote in the Harvard Business Review last year that any connection created over social media is weak and artificial, and not prone to prove a lasting relationship for either party. What’s worse, the quickly converging daily-deal space is overloaded with industry leader Groupon; wannabes such as Gowalla, LivingSocial, BuyWithMe, and ScoutMob; and initial forays into the market by behemoths Facebook and Google. All of these companies are dying to cash in with deals that are likely too good to be true: A recent study from Rice University found that 32 percent of Groupon’s vendors lost money and 40 percent of them said they wouldn’t partner with Groupon again. Even investors in mighty Facebook dumped more than $1 billion in shares off the secondary market in April, for fear that the company, and the sector it spawned, is overvalued. The consensus in the tech world is that if and when the bubble bursts, only a few of the current players will survive.
All of this uncertainty raises a very big question for SCVNGR: Can Seth Priebatsch, a guy who barely leaves the office and goes shopping only when he needs an orange T-shirt, get everyone else to spend their money the way he wants them to?