Facebook Talking to Developers About New Plans for Its Virtual Currency

facebookcredFacebook first broached the idea of creating its own virtual currency for third-party developers back in December of 2007. The company has slowly rolled the “Credits” product out. First it introduced the currency for buying gifts in its own gift shop last November, then a tweak here and there, and most recently the launch of Credits for third-party applications this past May.

But now we’re hearing new rumors about what Facebook is planning for developers.

Most significantly, we’ve recently heard from multiple industry sources that Facebook has been meeting with a number of large application developers — especially the big social gaming companies that already have their own lucrative virtual currency systems — and talking about making Credits mandatory. Facebook, we assume, would continue to allow other virtual currencies to co-exist alongside Credits, assuming it does generally move in this direction.

Facebook Gift Shop

The Facebook credits program could become a significant revenue generator for Facebook because it’s fee-based — and not a PayPal-like few percentage points, but an Apple-like range around 30%. Note: we first heard this suggestion back in May. Hundreds of millions of dollars are being made on Facebook’s platform through third-party virtual goods sales. We heard in September that the company was on track to make more than $550 million this year, but that’s largely from advertising — its gifts shop is somewhere around $75 million, last we heard. New virtual goods revenue could help the company justify a higher valuation if and when it makes an initial public offering.

The question, of course, is what the impact of an enforced Credits currency would be on the developer ecosystem. Because Facebook isn’t saying much, and because everything we hear is rumors, it’s still all speculation.

If users choose Credits over other forms of virtual currency, developer revenues could be negatively impacted, because Facebook would be taking a larger cut of revenue than what several other virtual currency payment options currently do. Also, companies that have made significant investment in developing their own virtual currency systems would see those efforts become less likely to grow going forward due to due to the existence of a platform-level currency.

Facebook Gift Shop-1

Given the many uncertainties, it’s too early to say how payments services companies might be affected. Offer companies, which make considerable revenue from offer walls that include various forms of direct payments, may find some of those options less relevant, depending on how Facebook integrates payments. However, mobile payments like Boku and Zong or pre-paid cards from InComm will likely have a place helping users get real money into the Credits system. Facebook has notably been doing mobile payment tests with Zong recently. There may also be opportunities for companies to build analytics services around Credits, similar to how companies have built their own systems for buying Facebook advertising.

But Facebook’s move could also increase virtual goods spending on the platform.

First, the Credits currency has the Facebook brand to back it up; users know they have the company in charge directly responsible for their money, so increased distribution of Facebook Credits could lead to more spending by some users. And, Credits is already used by people buying gifts in the gifts store, along with anyone in the 10 or so third-party apps currently testing it.

What’s more, as certain test screenshots have appeared to show, Facebook can make Credits — including the purchase process — an obvious and seamless part of the overall site experience. For example, the screenshot at the top of this post shows the number of credits you have within the top navigation bar on the site. It’s possible that Facebook makes Credits optional, but appealing, using site placement to encourage adoption. You can imagine a portion of the app store that features apps that use Credits, for example, as you can see in the screenshot below.

So we asked Facebook about everything we were hearing. Here’s the official statement: “We’re continuing to talk with developers about Facebook Credits but it’s too early to talk about any details. As we expand our current tests, our goal is to offer a simplified way for users and developers to transact and create an environment with high conversion rates and a great deal of liquidity.”

If Facebook can accomplish “high conversion rates and a great deal of liquidity,” that might be enough money to more than make up for what developers lose when Facebook takes a larger cut. This has at least some of our sources encouraged.

Which leaves the question of when we’ll actually see a big Credits roll-out. Earlier this fall, we heard rumors that Facebook had originally wanted to do something by Christmas, to try to take advantage of the holiday virtual gifting season on third-party apps. But we also heard that the plan got delayed until the the first quarter of next year.

Overall, it is not too surprising to be hearing these rumors. Facebook has been focused on monetization this year — although mostly on advertising, until now. In past years, it was more heavily focused on growth. With the advertising plan showing results already, with months of testing done on Credits already, and with social gaming getting so big, Facebook appears to feel that now is the time to move forward more seriously with the currency.

[Test screenshots via Jesse Stay.]

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Leave a Reply

23 Responses to “Facebook Talking to Developers About New Plans for Its Virtual Currency”

  1. Gregg says:

    If 100% of the proceeds from “virtual gifts” went to charity maybe the concept wouldn’t make me as nauseas.

  2. S*&^t says:

    F*(&$&$ facebook! I haven’t hoped for a company to fail this badly ever.

  3. Noah Robinson says:

    Smart move.

  4. Facebook in Talks About Virtual Currency « Komplett Ireland says:

    [...] the folks at InsideFacebook point out, there are plenty of big apps on Facebook, games for the most part, that boast their own, [...]

  5. Moneda virtual en Facebook | The Inquirer ES says:

    [...] Inside Facebook // SHARETHIS.addEntry({ title: "Moneda virtual en Facebook", url: "http://www.theinquirer.es/2009/11/26/moneda-virtual-en-facebook.html" }); [...]

  6. Wayne Helpard says:

    Awesome, I can’t wait for this to roll out. I think a simplified and straightforward currency is what users need. Any money lost by developers from payment processing fees to Facebook should be accounted for with overall spending as I think more average Joe’s will feel comfortable opening their credit card up to Facebook than a fly by night app developer.

    As well, Facebook has the right to implement and take a cut from the revenue earned on it’s platform…it’s their platform. People are making millions of their viral channel, they deserve some credit for that.

  7. Future Shock: Wo sind die Debatten zur Zukunft? — CARTA says:

    [...] der Linden Dollar in Second Life eher eine Randerscheinung. Wenn demnächst aber Facebook seine virtuelle Währung einführen wird, tangiert dies die Zahlungsgewohnheiten von sehr viel mehr [...]

  8. Facebook planea una moneda virtual « nuevas-tecnologias.generacionyoung.com says:

    [...] propia moneda. Ni dólares, ni euros o dinares, Facebook es otro territorio con su propia moneda. La idea de crear una moneda virtual se esbozó en 2007, principalmente para que los usuarios pudiesen adquirir aplicaciones. La llegada [...]

  9. Facebook establece su moneda virtual (llamada créditos) | Globbos says:

    [...] Facebook cuenta con una base de datos de más de 200 millones de usuarios alrededor del mundo y esta empresa ve el gran potencial que tiene al contar con un número tan grande de posibles consumidores de sus productos y sobre todo de aplicaciones, según explican en el sitio insidefacebook. [...]

  10. william says:

    What a world we live in….Facebook makes hunders of millions of dollars off of member generated content and in exchnage user receive no monetary reward in exchange for the content that they give….I thought that a part of capitalism is to receive a money in exchange for something of value that you create. Clearly the content that members create has value….You only need to look at Facebooks earning to see this..

  11. Game Tycoon»Blog Archive » Articles of Interest says:

    [...] Facebook may require developers to accept Facebook Credits alongside other payment options in their games and applications. Facebook’s cut? An [...]

  12. SearchCap: The Day In Search, November 30, 2009 says:

    [...] Facebook Talking to Developers About New Plans for Its Virtual Currency, Inside Facebook [...]

  13. Emre Gursoy says:

    is there any expectation for facebook’s cut, rates?

  14. Why LinkedIn Should Have A Virtual Currency | Skeptic Geek says:

    [...] news of Facebook discussing plans for its virtual currency made me wonder about the social network where a virtual currency really [...]

  15. Why Twitter shouldn’t pursue an advertising business model « Customer Ecosystem says:

    [...] will be able to pull it off. Smartly though, Facebook is hedging its bets and looking seriously at other business [...]

  16. Facebook’s Playbook Revealed « Digital Strategy says:

    [...] 26, 2009 · Leave a Comment If this is true, it’s a big [...]

  17. CrowdStar Launches Virtual Tourism Game Happy Island, Using Only Facebook Credits says:

    [...] Also notable is that the game only uses Facebook’s in-house virtual currency, Credits. There’s no other payment system currently available. We’ve previously reported that Facebook is planning a major rollout of Credits to third-party apps. [...]

  18. Così l’e-commerce atterrò su Facebook | Apogeonline says:

    [...] tutti da comprendere – come nel caso molto discusso dell’introduzione di una “moneta virtuale” su Facebook, controllata dal social media – una valuta con cui far avvenire [...]

  19. Facebook’s virtual currency conundrum » Troy Cornejo says:

    [...] According to Insider Facebook, Facebook is talking to large developers about virtual currency, and mandatory use of Facebook’s Credits system is on the table. Ostensibly, Facebook would be looking to take a relatively substantial cut of the revenue. Perhaps even “an Apple-like range around 30%” as Inside Facebook speculates. [...]

  20. Facebook Credits: A Paypal in Training? « Just Getting Started says:

    [...] 11/26/09 – looks like things may be happening behind the scenes .  This seems much more like a transactional fee, but I'd bet once it works internal to Facebook, [...]

  21. Facebook Credits Placed Front and Center in PetVille | Frisky Mongoose says:

    [...] Credits in the first place. If anything, this is an added step in a direction that Facebook seems to be rocketing towards – a state where the Facebook Credit is the only, all-encompassing virtual [...]

  22. Facebook Credit: Zuckerberg next Treasurer of the Internet App2User | Laurel Papworth says:

    [...] by being good Facebook citizens. Members trade Facebook Credits for real world items. If you think Zynga are screwed, spare a thought for the Australian Taxation [...]

  23. Facebook Sets July, 1, 2011 Deadline to Make Credits Sole Canvas Game Payment Option says:

    [...] Credits would eventually be the only payment option in social games on the site (although it started saying so to developers months [...]

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