Confirmed: Facebook to Launch Virtual Currency Test in Platform Applications Soon
Over the last couple of days, rumors have been swirling about a possible Facebook Platform payments system launching over the course of the next few weeks. Tonight, we have confirmation from Facebook that while it isn’t planning on launching a new payment service for applications in the short term, it is planning on starting an alpha test to let users spend Facebook credits in Facebook applications in the next few weeks.
Currently, users buy Facebook credits (Facebook’s virtual currency) in the Facebook Gift Shop in order to buy virtual gifts to send to their friends. In the alpha tests that Facebook will start running soon, users will then also be able to use Facebook credits to make purchases inside Facebook applications and games. Developers who accept Facebook credits will subsequently be reimbursed by Facebook for the currency spent in their applications we assume, though Facebook hasn’t shared any more details on reimbursement rates or how exactly the program will work yet.
While there has been much speculation about Facebook’s virtual currency roadmap, this is the first time Facebook has confirmed plans to test the beginnings of what some have called a “universal” virtual currency system. Such a system could be a powerful revenue driver for the company, which to date has largely abstained from directly monetizing the sea of applications running on the Facebook Platform. Estimates from executives at top Facebook application and monetization companies we’ve spoken with estimate that between $300 – $500 milion in transactions will happen inside applications on the Facebook Platform in 2009, numbers corroborated by other reports. Global social network Hi5 launched a similar universal virtual currency program in March for developers on the hi5 Platform.
However, at this time it appears Facebook is not preparing to launch new payment services for application developers. When the new tests launch, Facebook credit payments are still likely to continue to happen inside the Facebook Gift Shop or another proprietary Facebook account management page. Currently, Facebook only accepts credit card payments (Visa, MasterCard, and American Express), but there’s nothing to say that Facebook itself won’t begin accepting payments through additional payment providers in the near future in order to be able to accept money from its increasingly global audience.
How does the Facebook credits test affect other virtual currencies operating inside the Facebook Platform? Clearly, a platform-managed virtual currency presents a long term challenge for companies like Spare Change (recently acquired by PlaySpan) who have created alternative virtual currencies for applications. Facebook credits are usable elsewhere throughout the site (including recent tests around currency gifting and branded virtual gifts) and bear the Facebook name, and Facebook will want to have increasing numbers of direct billing relationships with its users over time.
In the future, Facebook could theoretically expand the use of Facebook credits to any Facebook Connect application as well – not just those apps running inside Facebook. Such a system could be a way for Facebook to help publishers around the web monetize through the Facebook credits system – a big idea but clearly further down the road.
For now, Facebook is just starting an alpha test with a few developers. We’ll let you know how it goes.