Facebook Credits – Part I: The Story So Far

-Pay With Facebook Icon-With rumors that Zynga will soon integrate Facebook Credits into FarmVille, the nature of microtransactions on Facebook is poised to change. The implications of Facebook Credits in abundant usage across the Facebook application platform are made more clear when we see the popularity of paid Apple iPhone applications. Studies of the success of iPhone applications (and iTunes) have revealed that a secret to Apple’s success is ‘one-click purchasing’. In similar fashion, Facebook Credits has the potential to making the barriers to buying an application or virtual good extremely low. Here we look at the long steps Facebook has taken to arrive at this point.

First Release

The first implementation of Facebook Credits occurred in November 2008, when Facebook introduced the credits to help users purchase Facebook Gifts. The gifts first came in $1, $5 and $10 denominations, and allowed Gift makers to price their wares differently from the original $1 USD price point. In early 2009, Facebook began allowing companies to create Sponsored gifts, and reap the rewards from their sales through credits. Around this time, Facebook also changed the value of 1 credit from $0.01 to $0.10 USD .

Applications and Credits

This then led to the large announcement of Facebook Credits being available for use within Applications Facebook began opening the gift shop to non-profits and by September it was opened to a number of other developers. Specifically, applications would be able to accept credits for virtual goods. The advantage here was clear, in that game developers wouldn’t have to ask their users for any extra information at point-of-purchase, and this would foster an environment similar to the iPhone App Store purchasing system. The system was going to be released in mid 2009, but the rollout has been slow and phased. The recent Farmville news is a very big step forward for Facebook Credits, and analysts will be anxious to see how well it fares. Farmville is an excellent testing ground for microtransactions, especially considering the success of Haiti-related virtual goods in Zynga’s latest charity campaign .

Status Update Experiments

In August of last year, Facebook tested an interesting phenomenon at 15 College campuses across the United States. They allowed users to award status updates with “10 credits”. This kind of social exchange of currency is very new, and underscores the importance of Facebook. In a virtual world MMORPG, the idea of paying someone in virtual currency for them to do a service for you is realistic. Perhaps you pay someone a dollar worth of “MMORPG gold” for them to find a certain monster and bring you its tail. On Facebook, is it so ludicrous to send 10 Facebook credits to someone who provided you with an important link or bit of fulfilling wisdom? That was the test, and Facebook has been tight-lipped about the result.

Thoughts

Another implication of the Facebook currency is seen with Facebook Connect. The idea that Facebook credits could be carried over to external sites that leverage Facebook Connect increases the value of the currency significantly. Connect is used by a wide variety of sites, and with Facebook’s 350 million user-base, more sites are signing up to increase traffic. If these users were able to tie their online ‘wallet’ to their Facebook account, and engage in one-click purchasing, we may see increased view-to-purchase ratios.

Stay Tuned for Part 2, where we discuss the current implementations of Facebook Credits and thoughts for the future.

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