Facebook Credits - Part 2: What’s Here and What’s Next

In Facebook Credits - Part 1, we looked at the history of Facebook Credits and the varying degrees of the many phases of the rollout. Now available in at least 14 applications, Facebook Credits is moving from a small number of test applications to widespread implementation. So what applications are Credits now available in and what’s in the immediate future for Facebook Credits? We will answer those questions in more in the second part of our two part series on Facebook Credits.

Facebook Credits Today

First off, Facebook Credits are now usable within a host of Facebook Applications. The list is shown below and is rapidly growing.

On the majority of these games, Facebook Credits can be used to purchase virtual currencies to buy virtual goods within the game. Happy Island by Crowdstar uses Facebook Credits exclusively for its in-game purchases, allowing you to purchase upgrades for your various Happy Island buildings immediately. The concept of ‘one-click purchases’ is in full effect here, and people who have Facebook Credit balances can make a quick payment without any sign-ups or credit card hassles.

Credits on Farmville

The big news is that FarmVille will reportedly be implementing Facebook Credits. While we’ve been hearing for a year-and-a-half that the Credits system was about to be ‘released’, this is probably the biggest real news so far. Farmville will not use Credits exclusively, but a “Pay with Facebook” button will be located beside the existing payment service offers, allowing you to buy Farmville Coins. I imagine that this is the first step, and eventually, as Zynga always does, they will iterate the shop page to include one-click purchasing options for users. This would involve showing item prices in Facebook Credits and allowing users to purchase virtual goods as well as currency.

Along with the news, we learn a few financial details about the Credits system. Facebook will take a Apple-esque 30% cut of all Facebook Credits profits, and rumors state that FarmVille alone could significantly boost Facebook’s revenues.

What’s Next?

So what’s next for Facebook Credits? News is pretty slim, but with Facebook releasing Credits to their #1 most popular application (at 75 million Monthly Active Users), we can certainly expect them to start releasing Credits to the other top applications as well.

Also, looking to some of their previous experiments, we can see that they have tried peer-to-peer Credit exchanges. For a short while, people could gift “credits” to other users for interesting status updates. This kind of social exchange of credits is a very interesting idea, and I wouldn’t be surprised if they try this more.

Finally, I expect to see some sort of experiment involving Facebook Connect. This has benefits to Facebook Users, Facebook Connect-enabled Site Operators and Facebook itself. Users get the one-click payment ability no matter where they are on the web, effectively bringing their “Facebook Wallet” wherever they go. Site operators increase ARPU by facilitating easier purchases. Facebook wins by of course, selling more Facebook Credits. I feel the reason that Facebook has been taking its time with the Credits system, is because they are envisioning Facebook Credits to become a very important part of web commerce.

Interesting to note is that virtual currencies within games are not exchangeable back to Facebook Currency at all, as that would walk the fine line of the US Unlawful Gambling Act, which states that virtual currencies cannot be extracted for real cash (although there are a few ways to get around that, apparently).

Interested in up to the minute Social Gaming news? Follow me on Twitter here.

Comments (8 Responses)

Matt Ritchie - January 26th, 2010 at 8:28 pm

I don’t see Facebook Credits ever becoming widespread until Facebook decides to stop taking an Apple-sized cut of every transaction and instead takes a more Paypal-sized cut.

At the very least, only items with profit margins at or near 100% (like virtual goods) will be be purchaseable with Facebook Credits. Anything with a real cost associated with it would have to be marked up prohibitively high in order for the seller just to break even, let alone profit.

Neil Vidyarthi - January 26th, 2010 at 9:39 pm

I hear you on this, great point about the non-virtual goods. I imagine Facebook may provide incentives for sales of real-world goods.

John Dough - January 27th, 2010 at 5:36 am

Agreed 100%. As a developer, my intention is to pass the cost on to the consumer and actively direct people to alternative payment options. If I pick up a few purchases with Facebook credits, great, but I don’t see them as being my primary source of revenue. At 30%, I don’t see them being used at all for “real” purchases.

Lars - January 27th, 2010 at 12:37 pm

They are Compeating with Superrewards offerpal trialpay and all the other 3rd party offer systems. Until they bring their cost inline with their competition they wont have huge adoption from developers. 10-15% is the going rate.

gareth smith - January 27th, 2010 at 2:56 pm

so what implications do think this will have for the current players in the virtual currency monetization market like Offerpal, Super Rewards, AdParlor and will they be directly competing with Facebook for applications or will they somehow work and co-exist together?

Jon Matonis - January 27th, 2010 at 5:47 pm

Excellent and timely review, Neil. I mention your Part I and Part II posts on my economics/virtual currency blog, “The Monetary Future” at http://themonetaryfuture.blogspot.com/

I see the “what’s next” issues as being related to peer-to-peer transactions for Facebook Credits. It’s the same issue currently being faced by the MMORPG industry and the recent Korean supreme court ruling on real money trade (RMT) being discussed on Game Payments Group at LinkedIn. Increasingly, gamers (including Facebook gamers) will want to transfer out into real cash and they can do it via 3rd-party exchangers. It is not clear yet if Facebook (a US-based company) is positioned to benefit from that trend.

Neil Vidyarthi - January 27th, 2010 at 7:13 pm

Lars: The question is whether developers and publishers will see a steep incline in user adoption. If my sales triple from one-click payments and I pay only double the fee, my profits increase. I hear you, of course, and appreciate you asking the tough question.

Gareth: It all comes down to how successful the system is with users. If users come to trust Facebook Credits more than doing an external offer or using a virtual currency from a third-party, it becomes tough for the competitors.

joane - February 16th, 2010 at 3:40 am

how do you know how many facebook credits you have? also how do you earn them?