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The Future of Social Payment? Facebook Credits Draw Near
by Christian Nutt [PC]
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April 22, 2010
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At Facebook's f8 developer conference in San Francisco, CEO Mark Zuckerberg and program manager Deb Liu shared details on wide rollout of the program, currently in beta, to offer a centralized payment scheme for Facebook games and apps.
The Story on Credits
According to a VentureBeat report, the Facebook Credits program is currently in beta with over 100 apps, and the company plans to launch the program in June.
Thanks to many different games currently offering their own payment methods, users don't tend to pay in more than one of them, according to Liu. She said, "We built this with the user in mind. The mental hurdle of moving to pay for something is high... Imagine Facebook Credits as more like a euro, which makes it easy to spend money across countries."
The company also intends to reward players in Facebook credits -- in ways such as loyalty programs with credit card companies like Chase, a potential example cited by Liu in her presentation. Facebook also plans to distribute free credits to its users to entice them to start spending in games that use them.
Liu said the goal of Facebook credits is to raise Facebook's current 1 to 3 percent conversion rate to 8 to 20 percent of players paying for virtual items. She also said that fraud will be easier to track across a centralized payment system. And for compliance with gambling laws, it will be impossible for users to cash out or sell Facebook credits.
Zuckerberg's Take: Not Driving Profits?
Facebook CEO Mark Zuckerberg said he doesn't see a tremendous commercial opportunity from selling credits but instead sees it as a way to drive users to pay.
Said Zuckerberg, "You may not believe me when I say this. We are doing it for developers. But it's not a revenue opportunity anytime soon. Ads are a very good business. We are doing this for developers. With credits, it becomes easier for people to buy things across apps... There is a lot of overhead for us doing this ourselvss. It's a lot of hard work. We don't expect it to be profitable for a period of time. We are doing this for developers."
The company is taking a 30 percent share of all revenue generated via Facebook Credits -- a move that resembles revenue share rates taken by Apple in its App Store and Microsoft for Xbox Indie Games. In contrast, virtual payment firm Social Gold charges 7 to 10 percent.
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Even if it were dollar for dollar equivalent, why would FarmVille choose to pay Facebook 30% for something they're doing themselves for much less than that?