Wednesday, October 12, 2011

Will Facebook Credits Work as a Real-World Currency?

Millions of Facebook users use Facebook Credits to pay for virtual goods inside games like CityVille and FarmVille. It seems that the logical next step is to use Facebook Credits to purchase digital and real-world goods. This has begun to transpire; we are seeing a robust Facebook Credit economy for virtual goods and an early stage Facebook Credit economy emerging for digital and real-world goods.
The overall social gaming market will reach $1.25 billion in 2011 according to Inside Virtual Goods. Consumers all over the web have been using their credit card to purchase virtual goods inside social games.

Facebook Credits: This is the mandatory virtual currency used for games and in-app virtual goods on the Facebook Platform. Facebook takes 30 percent on all Facebook Credit transactions within in-game applications. Facebook Credits can be purchased using a credit card, PayPal, or a mobile phone.
Facebook has launched a set of exclusive product features to support Facebook Credits inside games that developers can use. Though these features are currently available only for in-game apps, they are certainly part of the basics building blocks for a real-world currency.
Buy with friends: This feature enables players to "share" their purchase with friends and let these friends buy promoted items directly from their news feed without having visited the game.
Frictionless payments: The implementation of frictionless payments allows developers to debit a player's balance without initiating the Facebook Credits Payment Dialog, allowing gamers to have uninterrupted game play once they have made their initial Credits purchase.
Get balances: This feature lets developers retrieve a player's in-game Credit balance, to enable redemption of Credits inside the game. It also allows developers to identify players with a large balance of Credits and dynamically price virtual goods in-game to target high value customers, increase purchase, and optimize payment strategy.
Facebook Credits gift cards: In the fall of 2010, Facebook Credits became available in the physical world, as pre-paid gift cards that can be purchased at major retailers in the U.S., Canada, and the U.K. in denominations of $5 to $50.
Facebook Credits as incentives: Facebook Credits are now being used as incentives for shoppers. Mobile applications such as ShopKick enable users to earn Facebook Credits for checking in at retail locations. Consumers can collect kickbucks for walking into participating retailers like Best Buy, Macy's, and American Eagle and turn kickbucks into Facebook Credits. Best Buy has announced it is rolling out the ShopKick app to its 1,300 stores nationwide. Another platform called ifeelgoods allows retailers to offer Facebook Credits to customers as incentives to purchase goods in their e-commerce stores.
Facebook Credits for non-game digital goods: Warner Bros. became the first Hollywood studio to offer movies for purchase direct to consumers inside Facebook; "The Dark Knight" streamed inside Facebook was available for 30 Facebook Credits ($3). This is the first time Facebook Credits were used for non-game digital goods inside the Facebook platform.
Facebook Deals: Launched on April 26 in five cities with the focus on shared experiences as opposed to just discounts. Currently consumers pay for Facebook Deals inside Facebook with a credit card, with PayPal or with Facebook Credits, Facebook's own currency that, for the first time, is being used to buy real-world goods. While Credits is one of the payment options for Facebook Deals, Facebook is not doing a 30/70 split on revenue as it does with developers and Credits inside Facebook Games.
Earn Facebook Credits watching branded videos: Facebook allows game players to earn one Facebook Credit in exchange for watching branded videos inside Facebook Games. This is offered through Facebook's partnership with TrialPay on its DealSpot product.
Not yet launched but could be coming soon, the integration of Facebook Deals and Facebook Credits with mobile devices, Facebook Places, and Facebook Check-in Deals.
With the convergence of social and mobile, targeting the 250 million Facebook mobile users with Facebook Credits for the purchase of real-world goods is the logical next step. Location-based shopping with the help of over 600 million friends on Facebook seems like a good fit. Facebook Credits may change how we think about using social experiences to generate revenue both on and off Facebook.

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