Facebook is quietly making its “Credits” virtual currency a more integral part of the site, and on Friday the most recent Credits test went live. In this test, a new portion of the application directory features apps that integrate Credits as a method of payment, and users will be encouraged to install those applications and buy more credits, according to screenshots taken by software developer Jesse Stay.

Facebook says it’s testing the feature with a very small percentage of users.

Here’s how the new interface looks. Credits are featured in a new drop-down menu on the top navigation bar, which appears on every page of the site. The button lists the number of Credits you currently have deposited in your account, and if you click on it, you can see a menu with a list of options for spending Credits, buying more Credits, or learning more about how the virtual currency works.

If you click on “Spend Credits,” you’ll be taken to the “Credits Enabled” portion of the app directory. You’ll then have the option to install these applications, spend Credits in them, or buy more Credits to use.

Facebook is still only testing credits with a few third-party applications, so there aren’t many apps to choose from yet.

However, the fact that Facebook is linking to apps that use credits from the navigation bar could mean Facebook will be driving a lot more users to look for apps with Credits. Assuming Facebook eventually rolls out this feature to all of its users, developers will have a big new incentive to add Facebook Credits to their payment system.

Facebook has also been busy testing out other virtual currency features. Last week, it also introduced a way for people to buy Credits through their phones, in partnership with mobile startup Zong.

Outside Lands launched a year ago as perhaps the largest music festival ever in the long and storied history of music festivals in San Francisco’s Golden Gate Park. This past weekend, it tried to outdo itself, introducing a version 2.0 loaded with new technology features so music fans could do things like watch shows online and discuss them with friends on social networks. On display: The competition between Facebook, Twitter, MySpace and other web services for the heart of the music industry. Also on display: How broad and potentially confusing all of these options currently are for musicians and organizers.

In what it claimed was a first for a show of this size, Outside Lands organizer Superfly worked with YouTube to create a live streaming channel of shows for all three days of the festival this past weekend. This way, you could watch a near constant flow of live acts at the festival from anywhere with an internet connection. And, before the festival kicked off, Outside Lands’ web site also let you log in with Facebook Connect, create a customized schedule for all of the acts you planned to watch over the weekend, then let you share it with friends on Facebook. For attendees, organizers set up kiosks so you could upload your own photos and videos of the shows Then share them online with friends on Twitter, Facebook and other sites.

I’m still looking for data on how successful all this technology actually was. For example, did more Facebook users buy tickets as a result of being able to see what acts their friends planned to attend? Did more people hear about Outside Lands through all these promotions this year, and will they be inspired enough to show up next year as a result?

The organizers, musicians and technology companies involved were effusive about early results, at least. The YouTube channel received more than 675,000 views as of today. More than 14,000 Facebook fans joined Outside Land’s official Facebook fan page, and hundreds of thousands likely followed the festival on the fan pages of individual acts. Dave Matthews Band, which has 612,850 fans on Facebook, posted on a note on Friday morning telling everyone about their Saturday show, with a link to watch their YouTube live stream the next day. That item got 1,754 likes from fans, 152 comments, and certainly made people more aware of Outside Lands as a concert, and as a live-streaming YouTube channel.

Smaller, newer acts like Silversun Pickups and The Dead Weather also posted about their activities, and got positive responses from their fans on Facebook. Another up-and-coming group, Cambodian/psychedelic rock group Dengue Fever, was especially active on Facebook, using the buzz around Outside Lands to advertise a documentary they screened last night at a nearby movie house. When I asked about numerical results of online music promotion like this at the Outside Land’s press event on Saturday, Dengue Fever’s Senon Williams replied by saying that the group gets a lot of interaction with fans every time they post about concerts and such. In fact, he said, his band has hired specialized online promoters to help handle Facebook posting and other online interaction with fans.

The value of music

Of course, music has been an important part of the web for many years. The technology at Outside Lands is just the latest iteration. Napster at least proved the popularity of free music sharing in the early part of this decade, before the music industry shut down the free part of that service. Facebook rival MySpace saw early growth in 2004 and 2005 through helping indie groups connect with fans online. YouTube arguably gained a lead over rival video services in the middle part of the decade through letting people share music videos, some of which were pirated, and many of which were distributed through MySpace. And, with the launch of Facebook’s developer platform in 2007, iLike established itself as the leading third-party music service on the site, providing a suite of features for music fans to listen to song samples, play music-focused games, share what concerts they were going to, and connect with musicians on iLike’s own music pages.

So Outside Lands this year is but the latest example of how big festivals and touring musicians are experimenting. The difference is its sweeping official deployment of social media. For example, Intel sponsored the media kiosks, and encouraged everyone to share what they were doing at the show. Aside: Intel’s sponsorship didn’t promote MySpace nor Facebook but Twitter, a microblogging service that some top musicians prefer for sharing activities with their fans.

Superfly is also not alone in organizing concerts with an innovate technology focus. C3 Presents, the organizers of rock festival Lollapalooza and live music festival Austin City Limits, introduced Facebook Connect to its web site earlier this year. Similar to Outside Land’s scheduling feature, it let Facebook users log in with their Facebook identities, pick what acts they planned to attend, then share that information back with friends on Facebook — with good results, from what C3 told me in May. After introducing Connect, it saw a 99 percent increase pageviews, a 20 percent increase in the average user’s time on the site. In other words, music fans were likely able to discover more music and more groups they would want to see at the show.

The result visible at Outside Lands is that the competition for the attention of musicians and concert-goers is getting more intense, as more and more big web services try to tap into their users’ love of music.

Facebook is at the front of the crowd, sort of

Facebook is in the middle of this, in some way competing with each of the other big companies, and yet not competing with them. It has its own video service, yet musicians use it to drive Facebook users to YouTube. It has its own status updates, yet many musicians use Twitter instead to do the same thing (“tweets” which can in turn be fed into Facebook). Meanwhile, MySpace has MySpace Music, a joint venture with record labels where fans can stream live music.

Facebook seriously considered a similar idea last year, but it has not acted yet — and may never act on, at this point, from what I’ve heard. Also, iLike, a third party developer, has a larger presence for musicians on Facebook than Facebook, with some 10 million monthly active music fans on the site. And it has applications, widgets and desktop music toolbars, and most recently the iPhone. It offers musicians an online dashboard for managing all of these services from a central place; and, it has just been bought by MySpace. Look for MySpace to try to integrate iLike features with its core music offerings on its Music site.

However, Facebook is by far the largest social network, with more than 300 million monthly active users. It is in a strategic position to become the central site for the music industry. At this point, though, it is trying to create a horizontal platform for anyone — not just musicians, but advertisers, non-profits, various other celebrities, and really anyone else who wants to use its fan pages to reach Facebook users. The features that musicians use on Pages, like photo and video uploads, status updates, threaded comments and such, are generally available to anyone.

For organizers like Superfly, online audiences are looking like a better and better way to make their concerts a success. But how to do it? Should they tailor their web sites to Facebook, to Twitter, to MySpace, to iLike, to YouTube, or what? Given the popularity of online music, expect lots more aggressive yet highly experimental concert venue promotions on web services as organizers fine-tune where they spend their resources. If MySpace and iLike execute well in developing more music-focused services, maybe they will be the social network of choice for Superfly at Outside Lands next year.

Perhaps my biggest takeaway from Outside Lands, as a snapshot of the volatile music industry as it tries to make a business of the web, is that everything is once again about the music — an unintentional throwback to the 60′s, you could say. And after decades of cutthroat deals with record labels, and a decade of digital piracy, musicians now have more control than ever. They have an ever-increasing number of online tools to get people to come to their shows and spread their favorite acts with their friends. This means more ticket sales, more online track sales through digital music providers like Apple’s iTunes and Amazon, and more swag sales like t-shirts.

Going forward, musicians and organizers will need to experiment much more with every web service, tailoring their use of web services to the sites where their fans are, and that offer them the right tools for reaching those fans. Facebook, MySpace, Twitter, and other sites are all themselves developing new products. It remains to be seen if Facebook’s more horizontal strategy will work best, if MySpace Music and iLike’s vertical strategy will work better.

Are you a musician, a promoter or concert organizer with a Facebook or otherwise online success story? Email me at eric (at) insidefacebook (dot) com.

[Outside Lands panorama photo via San Francisco Citizen.]

Last week, Facebook reminded users that when they ignore friend requests the requesting party is not notified, but a new Greasemonkey script lets users know if someone they’re already friends with removes them – another case in which Facebook doesn’t provide a notification.

The updated script, called Facebook Friends Checker, keeps track of when you get removed from someone else’s friend list by regularly checking to see exactly who is defriending you. It’s one of the easier ways we’ve seen to track Facebook defriending, and could also be used for professional purposes to know who’s axed you from their list.

Once someone is removed from your friend list, you are removed from their friend list as well, but you can add them again simply by resending the request. Here’s the full video from Facebook:

While Facebook has created a variety of home page “engagement ad” units for big brands, Facebook is now testing a new kind of home page ad unit that doesn’t drive users to a brand’s Facebook Page, but rather prompts users to complete a direct response form.

The new format, which is currently being tested with an ad for free chicken biscuit samples from Chick-fil-A, is the most integrated leadgen-style home page ad unit we’ve seen Facebook launch. Facebook has allowed third party researchers to place survey ads in the home page ad slot before, but with the the new “free sample” ad, the response form is presented in a popup over the News Feed, and users can easily propagate information they enter in the form to their profile and share their action with friends as well.

The test makes sense for Facebook, as it seeks to offer more performance options to big brands and advertisers. CPG and foodservice advertisers are a great fit for “free sample” campaigns like this one, and Facebook could easily broaden this test to more types of subscription services if it so desired.

Just last week, Facebook announced that more new features are on the way for performance advertisers managing large campaigns through Facebook Ads as well.

[image credit: Matt Zarzecki]

Since Inside Facebook began in April 2006 and Inside Social Games began in April 2008, Facebook and the surrounding ecosystem of businesses reaching customers through the Facebook platform have grown tremendously. Today, Facebook reaches over 250 million people per month, games are becoming more social across the board, and developers and marketers are leveraging the power of Facebook to build tomorrow’s social web. These days, there are dozens of exciting developments happening in our industry all around the world in any given week.

So today, I’m excited to announce that Eric Eldon is joining us as co-editor of Inside Facebook and Inside Social Games. Most recently, Eric was an editor at VentureBeat, where he was responsible for leading digital media and social web coverage. Eric is one of the most knowledgeable journalists and analysts covering our space, and he’ll be helping us deepen and expand our services to you. Eric is making a bold move to IF and ISG, and I’m grateful and thrilled to have him on our team.

Welcome, Eric!

Check out the top headlines and insights this week from Inside Social Games – tracking all the latest developments at the intersection of games and social platforms.

Monday, August 24

• Live Gamer Acquires Virtual Economy Analytics Platform Twofish
• Taking a Look at Second Life’s Q2 Virtual Economy Metrics

Tuesday, August 25

• Piper Jaffray Says US Virtual Goods Market Totals $600 Million This Year – We Think That’s Low
• Arkadium Hoping to Improve Casual Game Monetization with New Products

Wednesday, August 26

• Green Patch Goes Farming, Releases (Lil) Farm Life on Facebook
• BBS Door Games: Social Gaming Innovation from the 1980s

Thursday, August 27

• Konami Play Connects with Facebook
• Shake & Spell Now Connects Across Facebook, iPhone, and Blackberry

Friday, August 28

• Bumper Stars is Live on iPhone with Facebook Connect
• Heyzap Extends Payment Platform

As Facebook’s performance advertising business continues to grow, Facebook is adding new features to help advertisers get the most out of the system. Recently, Facebook added new targeting features, including connection targeting, multi-country targeting, and birthday targeting. Now, Facebook has confirmed to us it is about to start testing an updated Ads Manager and a bulk uploading tool to make managing Facebook Ads campaigns easier.

The new Ads Manager, which Facebook should start rolling out to a few advertisers soon, will make it easier to create, edit, and manage ad creative. Unlike today’s Ads Manager, the new version will include in-line editing and search, which should make campaign management much more efficient for those managing many Facebook Ads.

In addition, Facebook will soon start testing a new tool for advertisers to bulk upload many ads at once, instead of manually creating them in the standard campaign manager or through third party scripts. Agencies, app developers, and direct response advertisers who often want to target and test hundreds or thousands of specific creatives will now be able to do so much more easily.

While Facebook hasn’t said exactly when these features will be rolled out to everyone, some advertisers should start seeing the new features soon.

While most Facebook Pages with over 1 million fans are devoted to performers, celebrities, and brands, FMyLife.com, or FML as it is widely known, has become the first website to hit 1 million Facebook fans. The site is a collection of entries that chronicle the normal and not-so-normal events that make us call into question exactly why it is we get up each day.

The FMyLife.com site already had a healthy following, and the fact that it offers an easy way to share individual posts from the site in news feeds has helped carry that popularity across to Facebook. Posts on FML.com are the perfect viral material, and they’ve been shared and re-shared on Facebook, increasing the site’s popularity with Facebook users.

While FML can be a great way to find a good laugh every now and then, many of the entries are downright depressing. So does the site’s popularity infer that many Facebook users share some sort of morbid curiosity? Maybe not.

As Facebook continues to evolve in many directions, it’s important to remember the core principles of what made it so popular. Facebook is a great way to share compelling content with friends in an unobtrusive and very viral way.

Facebook for iPhone 3.0, which was submitted to Apple 11 days ago, has just been approved and is now available in the App Store.

The new version, which we reviewed in detail last week, brings a bevy of new features to Facebook’s iPhone app, including commenting and likes in the News Feed, full support for Facebook Pages, new and improved navigation, events and RSVPs, video uploading, complete photo management, notes, and more. Push notifications will not be released until version 3.1. Overall, it looks fantastic.

Now that the new version is released, we expect to see many more Facebook Page administrators updating their Pages through their iPhones, many more mobile videos posted to user profiles, and much more feed interaction (comments and likes) happening while users are on the go.

Facebook for iPhone is of the most heavily used iPhone applications ever – nearly 12 million people around the world have used it in the last month.

As a result of its dialogue with the privacy commissioner of Canada, Facebook this morning announced significant changes to the ways application developers have access to Facebook user data. While no specific API changes were announced this morning, the new permissions model will essentially make the way that users will grant developers access to both their own profile information and their friends’ profile data more granular and explicit.

According to Facebook, “Facebook will introduce a new permissions model that will require applications to specify the categories of information they wish to access and obtain express consent from the user before any data is shared. In addition, the user will also have to specifically approve any access to their friends’ information, which would still be subject to the friend’s privacy and application settings.”

In other words, instead of granting access to all of their profile data when engaging with an application for the first time, users will now authorize only specific categories of user data – like interests, gender, or their current city, for example. With the changes, when developers want to access new profile information fields not granted in the original application authorization, they’ll need to ask for explicit permission.

In addition, users will have to specifically opt-in to sharing any of their friends’ data with an application. This means that there will now be more friction for developers who want to integrate users’ friends into the application experience in a way that intelligently takes friends’ profile data into account. However, the new rules will also make it harder for developers or ad networks to create misleading social context or deceptive advertisements.

Essentially, the assumptions around access to user data within the Facebook ecosystem are changing. Now, developers will have to be explicitly clear about what profile information they’re requiring users to grant them access to in order to engage with the application – the rest of users’ profile data will no longer “come for free.”

Ethan Beard, Facebook’s Director of Platform Marketing, says, “We are still very much in the conceptual stages of development and many of the details are yet to be determined. However, we’ve committed to requiring developers to specify in advance what categories of user data they will need. When users authorize an application, they will have the opportunity to opt out of giving certain pieces of information. There may be some fields that, at minimum, are necessary for the application to function. We will make it clear that the user must authorize the required fields in order to use the application. We also anticipate that users will need to opt-in to giving applications access to their friends’ data.”

Facebook says that while they are starting work on the changes now, the company expects the “entire process” will take about a year. Over the course of the next year, Facebook will be developing the specifics of the new user data APIs, and working with developers to make the transition as smooth as possible.

“We certainly sympathize with developers that this will be a process,” Facebook Senior Platform Manager Dave Morin said this morning. “We will work with the developer community to make sure that the changes are as least disruptive as possible and as easy to understand as possible.”

“We don’t think this will hinder developers’ abilities to build businesses on the Platform. In fact, by putting users in more control, we think users will be more engaged over time, and developers will be able to build bigger and better businesses because of it,” Morin added.

In addition to the Platform privacy changes, Facebook said it will also be making a few other updates as a result of its dialogue with the Canadian privacy commissioner, including:

1. Better explaining why Facebook requires users to enter their birthday when signing up for the site (so that it can restrict adults from viewing minors’ profiles, and so that it can limit the site to users over 13).
2. Better explaining account deactivation vs account deletion. (Facebook retains user data indefinitely when users deactivate their accounts, but removes it within a couple of weeks when users delete their accounts.)
3. Giving new users a tour of Facebook’s privacy settings during the signup process.

Developers do not need to make any immediate changes to their applications today, but should be preparing for a Facebook Platform framework in which user data must be requested and granted more specifically and explicitly than it is today.

“This is a constant conversation that we’re having developers with a variety of ways. Being able to have a contextual experience powered by your friends is a pretty standard part of the social web,” Morin says.