Time to Credit Facebook?

There’s good news for Facebook’s application and games developers: Facebook’s credit program will soon be expanded to act as a broader payment method.

Facebook Credits, the internal tokens that have only been used for a number of games and the authorized store, will soon be open to the general developer community to adopt as an accepted method of payment.

Until now, Facebook allowed application owners to manage an internal “token” system and to collect money from users via an assortment of methods in order to acquire more tokens for a game. Each application had its own tokens and points.

Users will soon be able to maintain an authorized credit account, which can be used in thousands of applications, without having to pay separately or load the money through a separate site. This announcement came less than a week after Facebook announced that it now supports payments through PayPal, in addition to credit cards and cellular payments.

Through this process, Facebook is implementing something that game distributors have already been doing for a while. There is no need to pity Facebook for just now realizing how its users were transferring money to game distributors. The fact is that Facebook has been benefiting from the companies’ ongoing advertising aimed at attracting new users.

Companies such as Zynga have invested enormous amounts in advertising on Facebook, as they benefited immediately from huge audiences which became addicted to their games, bought chips, or purchased tools and seeds for digital farms.

Virtual tokens are not new. Many applications on the Internet run local tokens in order to make it easier for the user to manage a fund or wallet within the game. An internal fund enables easy payment for routine actions and small sales, without the need for a new purchase, simply by subtracting from the tokens in the fund.

My daughter, aged 6, manages her fund on Webkinz with impressive efficiency and the simple purchase routine masks the financial aspect of each action.
Up until this point, everything is straightforward. But what happens when the game user is not content with paying for the game, or is lacking an authorized payment method and is therefore unable to fill his or her virtual token wallet?

This is where companies such as Offerpal, Super Rewards, and Matomy enter the picture by offering gamers an alternative method to receive tokens without any sort of payment. At least not directly.

With these methods, agreeing to download a ringtone, for example, will charge the users’ virtual wallets and allow them to play freely. Some compensation for the download will be transferred by the cellular company to the game developer. If the user is already a consumer of ringtones anyway, then the user will benefit from this and the game will seem to be a free bonus.

The companies mentioned above already amassed hundreds of millions of dollars using such alternative methods and succeed in aggravating TechCrunch chief Michael Arrington and many others. According to Arrington, users are not aware of the true cost of their actions and this is exploiting their financial naivety. It is possible that thousands of game developers who use this alternative payment method do not agree with it. Based on the quantity of updates and responses – the business is still thriving and driven by emotion. Although the CEO of Zynga has declared that they have made a mistake and it is in his interest to remove such alternative offers from his games (an estimated annual loss of a mere 70 million dollars!), the trend will not stop, and is set to become even more established.

This brings us back to the Facebook credit scenario. Facebook wants to lead the revolution in virtual tokens and to redefine Internet business models. Now take a deep breath. Facebook is aiming keep a whopping 30 percent of the transaction value for itself. This is a substantial surcharge, yet it is likely that whoever adopts the method will still benefit. Who knows, it is possible that the credits will catch on so well that they will become an accepted currency outside of the site, maybe even for real merchandisers like Amazon or the local supermarket.

Eldad Ben Tora

VP of Product Management