Colin Sebastian at analyst firm Baird Equity says that the move will potentially lead to higher conversion and monetization rates for Facebook, and reflect the company's adaptability to change.
The Facebook Credits system did not meet its goal of becoming the de facto virtual currency for in-app transactions, reasons Sebastian, and therefore Facebook's move to streamline the payment process is welcome.
He adds, "With the change, Facebook will clearly not be extending Credits onto other websites, and may pose less of a competitive risk to PayPal. However, Facebook will continue to store user payment information (credit cards, PayPal account) and earn a 30 percent fee on transactions, similar to Apple iTunes."
He also noted that the new monthly subscription system adds flexibility for developers. Those games which do not gel as well with micro-transactions can now make use of subscriptions for offering users premium content.
With all this in mind, Baird Equity is maintaining its Outperform rating for the company, stating that while there are near-term risks and pressure on Facebook, the firm's long-term view is that Facebook will have multiple opportunities to expand thanks to its "unprecedented gravitational pull in social media."
It makes sense to me that a virtual currency does not work well for real-world items, but as a game developer I would think the abstracted virtual currency would sell more of virtual items in the same way that the abstracted poker chip currency makes the gamblers spend more in Vegas.
Hm, it'll be interesting to see what effect this has on users, as something like virtual currency is pretty much entirely about perceived value. I can't imagine in game items being worth ten cents, for instance. The entire, real world values thing sort of goes against video games being an abstraction of reality. Buying items for a few hundred gold feels right, and I can imagine enticing players with large sums of gold for a few dollars, but I can't see '5 cents' next to an item doing anything but making it feel cheap.
Or is Facebook actually doing something differently than what I'm thinking of?
Either way, going to love seeing the results of such a seemly simple change on consumer spending habits.
Most FB devs were not using FBCs for their in-game currency only as a payment method. Instead they use their own virtual currencies (i.e. you used FBCs to buy SpaceBucks which were then redeemed for virtual items) so the "perceived value" benefits will be unaffected for the vast majority of devs and consumers.
Or is Facebook actually doing something differently than what I'm thinking of?
Either way, going to love seeing the results of such a seemly simple change on consumer spending habits.