Zuckerberg: “There’s Just Going to be One Currency that People Use” on Facebook Apps

Facebook is sending the clearest message yet that it intends to implement its own virtual currency, Credits, in a way that could be mandatory. This confirms months of speculation we’ve been hearing from developers. Because Facebook takes a 30% fee on Credits purchases, the decision could negatively impact the virtual goods revenue streams of some developers now — at least in the short term. If Facebook’s plan works like it intends, spending will eventually increase and developers will benefit.

At its f8 developer conference this week, company chief executive Mark Zuckerberg told Bloomberg that “‘there’s just going to be one currency that people use’ on all apps.” Later that day, Facebook’s Deb Liu was presenting about Facebook’s Credits plans, and she was asked if Facebook would continue to allow people to use third-party virtual currency services like Social Gold. She replied: “It’s still too early to tell, Credits is still in beta.”

Together with Zuckerberg’s statement, that sounds like it could be simply “no.” Another possibility is that third party virtual currency services can continue to exist, but will just be much less used than Credits, at least partially due to incentives Facebook will give to developers who use Credits – like free marketing.

To be clear, Facebook is also looking to work with third party payment companies for Credits. Liu said that these can include anyone from mobile payment providers to game cards to bank payment systems to reward cards, and it plans to get “100 to 200″ of them as options for purchasing Credits. The company already works with Zong for mobile payments and PayPal for web payments, and accepts credit cards directly. It partnered with Peanut Labs (via RockYou) and Trialpay last week to begin testing advertising offers that can be taken in exchange for Credits, and we wouldn’t be surprised to see it work with more companies there.

We assume there will still be opportunities for other forms of virtual currencies, as most social games rely on dual currencies. Typically, one currency can be earned by actions in the game while the other has to be bought. There are many variations, this system allows some users to advance through hard work, while still incentivizing others to make purchases. It helps keep virtual economy inflation down by allowing developers to weigh the earnable currency more cheaply against the purchasable one. Even though many users might be cranking through games for free, buying currency can save them time and allow them to access otherwise difficult to obtain virtual goods.

What Facebook wants to do is handle the currency that involves real money. This way, it can take a 30% cut of all revenue coming through the system. The company has consistently framed this move as being about helping developers. Liu presented a few reasons why: Facebook can directly ensure the safety of the payment process, it can provide the currency at a scale where many users will have this currency than game or developer-specific ones, it can use its own brand and interface to promote the currency in ways others can’t.

What’s less clear is how Facebook plans to implement Credits as the one currency that people use on apps. We heard as early as November that the company was meeting with large developers and talking about ways they might make Credits mandatory; and, those conversations have continued through earlier this year. Credits now appears as in option in many of the largest social games, including Zynga’s FarmVille. CrowdStar has even been using Credits exclusively since last January.

Finally, there’s been a lot of speculation about Credits becoming not just a virtual currency but a payment wallet like PayPal. Credits as a virtual currency could be a “Trojan horse” to help the company go in that direction, as Dave McClure framed it at our Inside Social Apps conference earlier this week.

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20 Responses to “Zuckerberg: “There’s Just Going to be One Currency that People Use” on Facebook Apps”

  1. Facebook: Credits Will be the “One Currency” on All Apps says:

    [...] > Continue reading on Inside Social Games. [...]

  2. Monedas virtuales | Joost Scharrenberg says:

    [...] Mundos virtuales: Free Realms de Sony, Dofus, Habbo MMO: Bigpoint, Gameforge, Powersoccer, Gamigo Aplicaciones Sociales: Zynga (Farmville, Texas Hold´em), CrowdStar (Happy Island), Pet Society Excelente web sobre monedas virtuales (en inglés): http://www.virtualcurrencyplatforms.com Moneda virtual FB: Facebook credits [...]

  3. DPH says:

    I wonder what this will ultimately do to the successful developers on Facebook in terms of their ongoing focus on FB as a platform.

  4. Jason says:

    While this sucks from a developers standpoint since 30% of their margin just went out the window.. Well rather 27.5% more ( Paypal takes on average 2.5% ) This will be a large problem for big companies who are so reliant on the 2.5% of paypal.. However for newer startup companies the 30% might just be fine.

  5. Tom says:

    Actually, Jason, /smart/ developers will adjust accordingly. “in game” cash has only the value developers assign to it, so if they decide that 1 USD buys 10 “foo” dollars, but paypal takes 2.5%, then a “foo” dollar would be worth 9.75 cents, while a corresponding facebook “token” would be worth 7 cents.

    So, you turn this around: if you feel that, as a developer, you need one “actual” dollar to gain “bar” functionality within the app, you would price this as 11 “myapp” dollars, or 15 facebook credits:

    11 * $0.0975 = $1.075
    15 * $0.07 = $1.05

    I know of one app already that “converted” to facebook credits from their own internal “foo$” – at a rate of 2 FB tokens per in-game foo$…

  6. Jules says:

    So what you are saying then is the cost is passed onto the player. ;)

    Greater expense means fewer transactions, maybe the real relative cost would be +35%, who knows? Facebook are trying to say that they will offer a myriad of extra payment options so you will be able to capitalise on all those people that can’t pay with PayPal.

    However, from previous experience I know the vast majority of players are able to buy with PayPal. More importantly, these are the core pool of players that typically have a job and more expendable income. The sorts of players I found who were not able to pay with PayPal (the sort of players that would benefit from facebook credits wider payment options) were often kids or individuals from poorer countries, i.e. a less valuable financial resource. I don’t see those players will be able to make up the shortfall in revenue because regular players are worth much more. :(

  7. So, Facebook Finally Figured Out How To Make Some Donuts From FB (Games) Apps at Game Producer Blog says:

    [...] Well, they now figured it out. [...]

  8. Inside Network’s f8 Coverage Roundup: The Open Graph, Credits, Analytics, Mobile and More says:

    [...] Zuckerberg: “There’s Just Going to be One Currency that People Use” on Facebook Apps [...]

  9. Inside Networks’ f8 Coverage Roundup: Open Graph, Credits, Analytics, Mobile and More says:

    [...] Zuckerberg: “There’s Just Going to be One Currency that People Use” on Facebook Apps [...]

  10. Noticias 19/04 – 25/04 | Joost Scharrenberg says:

    [...] Facebook credits, habrá una sola moneda en FB (inglés) FAQ Facebook credits en Facebook (inglés) El top10 histórico de YouTube España Inminente la alianza entre Facebook y Spotify Más detalles sobre los promoted tweets kit de herramientas para el periodista ciudadano 10 consejos sobre social media de la abuela (inglés) Curso community managers en Barcelona Facebook credits, moneda virtual FB Facebook registra nuestros clicks para orientar publicidad Top10 juegos Facebook para el mes de marzo (inglés) Consejos sobre juegos sociales del CTO de Zynga (inglés) [...]

  11. Should FTC file Facebook Antitrust? : Marty's Mind says:

    [...] least of these are payment providers.  If as expected Facebook announces later this year that Facebook Credits are the only allowed  payment solution for apps, these companies will go out of business and the application developers who can afford to [...]

  12. Facebook Tests Free Credits Promotion in Games Dashboard, Featuring CrowdStar’s Hello City says:

    [...] It’s the latest move by Facebook to try to promote its virtual currency, even as some developers have resisted it. They’ve complained that between the 30% fee, and non-explicit costs like breakage and lack of control, they are losing a significant amount of revenue that they had previously expected. Tests like this show how Facebook is trying to get more users comfortable using and buying Credits — the company believes it can help offset the cost to developers by bringing in new paying users. Credits, Facebook has previously said, is going to in some form be the only virtual currency on its site. [...]

  13. As Facebook Continues Testing Credits, Developers Worry Over Costs says:

    [...] view, will somehow take a central role in this new ecosystem. The company said in April that “there’s just going to be one currency that people use” on Facebook — meaning Credits. It more recently said that it hasn’t decided if [...]

  14. Is Facebook Strangling the Golden Geese? « Online Alchemy says:

    [...] to rub.  Facebook’s CEO Mark Zuckerberg has said that eventually its Credits will be the only virtual currency available to games on Facebook.  If Facebook exiles all other forms of payment (in a move that effectively [...]

  15. Facebook Credits: Der Weg zur Webwährung » netzwertig.com says:

    [...] momentan Applikationen auch den Einsatz alternativer virtueller Währungen erlaubt. Mittelfristig verfolgt CEO Mark Zuckerberg jedoch das eindeutige Ziel, Facebook Credits als DIE Zahlungslösung für alle Transaktionen auf der Facebook-Plattform zu [...]

  16. Facebook Credit: Zuckerberg next Treasurer of the Internet App2User | Laurel Papworth says:

    [...] Inside Social Games – the social economy will trump capitalism perhaps? Or an uber version of capitalism? Ah well, [...]

  17. 팍스 페이스부카(Pax Facebooka) 2: F-경제의 탄생 | 베를린로그 by 강정수 says:

    [...] 사용하는 ‘단일 화폐(One Currency)’로 발전시킬 꿈을 가지고 있다(출처보기). 그 꿈이 실현될 곳은 2011년 온라인 시장의 지축을 흔들 이른바 [...]

  18. Facebook Sets July, 1, 2011 Deadline to Make Credits Sole Canvas Game Payment Option says:

    [...] at its developer conference last April, Facebook has been publicly saying that Credits would eventually be the only payment option in [...]

  19. Facebook Sets July, 1, 2011 Deadline to Make Credits Sole Canvas Game Payment Option says:

    [...] at its developer conference last April, Facebook has been saying publicly that Credits would eventually be the only payment option in [...]

  20. » Spring Creek Group :: Blog – Global Social: Virtual Payments says:

    [...] popularity, and Facebook seeing a steadily growing revenue stream through credit purchases, the network announced in 2010 that starting in 2011 Facebook Credits would be the only currency allowed for in-game purchases on [...]

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