Game Boy

He’s recently launched another app, which debuted in Boston and Philadelphia, called LevelUp. It’s designed to build customer loyalty in people like me, who aren’t quite as into games. It works like this: Boloco, say, offers a deal where you get $10 worth of food for $5. Acting on that deal unlocks another in which you get $25 worth for $10. After taking advantage of that deal, you can get $45 worth for $15. I like LevelUp because, although it utilizes Priebatsch’s game mechanics — the dual incentives of advancing levels and gaining rewards — it’s not actually a game. It’s a transaction. And one that Priebatsch thinks will work better for vendors than Groupon has. Groupon’s partners complain not only that the site’s deals don’t always lead to repeat visits, but also that the company typically takes a 50 percent cut of every offering it does with a client. Priebatsch says LevelUp and its tiered system of deals builds customer loyalty, and provides a better arrangement for vendors: It takes no cut on the first level of deals, meaning SCVNGR gets paid only if customers return for the second- and third-level bargains. And rather than 50 percent, the SCVNGR take is 25 percent.

Boloco CEO John Pepper told me he’s happy with SCVNGR and that he’d work with Priebatsch again. LevelUp also seemed to have its desired effect on me: After buying that first deal at Boloco, I found myself trying to convince a group of friends to go back so I could take advantage of the second-level deal. Priebatsch had won — I’d spent my money where he wanted me to.

It’s still early, but “the age demographic for LevelUp is twice as broad as it is for SCVNGR,” Priebatsch says. The male-to-female ratio, he adds, is much more balanced as well.

Whether it’s burritos or the paper game from his keynote address, Priebatsch says he must start somewhere to realize his vision of changing the world. So he’ll begin by flogging products; the do-gooderism is for later. “There’s no way that the product that we’ve built to date maps up with the theory of what I’m talking about,” he acknowledges. “It is a fraction of a shadow of what I think [the company] will be.” If he can build the foundation for the game layer, he believes, then maybe he and others can start to use it as a tool to tackle bigger problems.

The point of all this seems to be that Priebatsch won’t let his own ideas — even the ones that have made him a millionaire on paper — limit him. He’s always looking for the next iteration of his vision, the next game.

Already, LevelUp has evolved. SCVNGR recently announced a major partnership with American Express, allowing LevelUp deals to be linked directly to AmEx credit cards — meaning that to activate the increasing levels of their deals, users will no longer have to print out receipts or show their phone screens to the guy at the register. That’s a smart idea that has so far escaped Priebatsch’s competition.
To survive, to be the one left standing when the bubble bursts, Priebatsch knows he must differentiate himself from rivals like Groupon, with its deep user base, and Foursquare, with its vaunted “mayor” status. Whatever the ultimate fate of SCVNGR, Highland Capital’s Peter Bell makes it clear that he didn’t invest in Priebatsch just because he liked the idea the company is built on. It was, Bell says, “frankly more a bet on Seth as an entrepreneur. The thesis was, This guy will do something very special.”