Facebook disclosed in its filing Wednesday that 15 million of its 845 million users paid for virtual goods on the platform in 2011.
The social networking giant raked in $557 million or about 15 percent of total revenue in 2011 from virtual goods payments and other fees. That is about 1.8 percent of Facebook’s users bringing in 15 percent of the company’s revenue.
Facebook Credits was launched in May 2009, and in July 2011, Facebook made Credits mandatory for social games developers to process payments through Facebook Credits.
The company has been trying a number of promotions such as “Buy with friends” and “Frictionless Credits”. It is also currently running a buy $1, get $4 free offer to drive sales using Credits.
Yesterday it announced an incentive program for developers who drive sales using Credits among European users. Developers who drive more than US$100,000 in sale to European customers in a given quarter will be rewarded with an additional 3 percent related to those sales. The incentive program covers sales from January 1 to March 31. Facebook added that it will evaluate the program at its conclusion and may or may not renew it.
Facebook takes a 30 percent cut of all revenue earned through Facebook Credits. It can be a goldmine for the company if it can get more users to make transactions using Credits.
What is stopping Facebook users from buying much on Facebook? Security concerns.
The same type of concerns people had when online stores first came up. And even though social commerce is expected to reach $30 billion within five years, people are still hesitant.
Harris Interactive did a survey on behalf of Dititas last month, polling 2,630 U.S. adults aged 18 years and older, of which 2,247 were social media users.
Some highlights of the survey infographic include:
- 55 percent of social media users aren’t comfortable giving credit card information via social media, While the other 45 percent are at least somewhat comfortable doing so, especially men within the age group of 18-54 and having an income of $35,000 or more.
- 20 percent of social media users agree that they would purchase products or services from their favorite brands on a social media site.
- 34 percent of social media users agree that they’d be more likely to share info about a purchase they made on a social media site with friends than one made on a traditional e-commerce site.
- 75 percent of social media users agree that they would be more likely to purchase a product or service that a friend openly endorses via social media, than ones that were “liked” or “followed”
- 74 percent of social media users indicate that they would rather use an alternative payment method than use virtual currency, such as Bitcoin or Facebook Credits to pay for a purchase made on a social media site.
Till the end of today, the 30th June 2011, Facebook users will be able to buy game and virtual goods with game credits or Facebook Credits via most credit cards or PayPal. Come tomorrow, all transactions – not only virtual items in social games, but digital goods like movies and music – will take place via Facebook credits only.
Consumer Watchdog filed a complaint with the U.S. Federal Trade Commission over the company’s virtual currency arguing, in a 28-page complaint, that “the new Facebook Credits terms will enable Facebook to maintain and extend its monopoly power over the market for virtual goods purchased in social games.”
In addition, the complaint accuses the social networking giant of restricting competition by prohibiting game developers from offering lower prices to users outside the Facebook platform.
Ten Facebook Credits approximately cost UD$1, and the sale of Facebook Credits is currently estimated to be in excess of US$2 billion.
With its hand on 30% of every transaction that takes place via Facebook Credits, the introduction Facebook Credits as the only virtual currency on Facebook, and without any competition, puts the networking powerhouse on the road to dominance of all online commercial transactions and further extend Facebook’s already overwhelming monopoly power.
Referring to a rumored exemption granted to Zynga, Consumer Watchdog also took a dig at the leading social game developer on Facebook.
“The agreement between Facebook and Zynga, if published reports are correct, would therefore constitute a conspiracy between competitors and further extend Facebook’s already overwhelming monopoly power,” the group said.
Facebook intends to make Facebook Credits as the de facto virtual currency on Facebook and the time is fast approaching.
Facebook has announced long time back that starting July 1, 2011, all game developers on Facebook are required to use Facebook Credits as a payment option.
Nowadays, Facebook Credits are not only be used to buy virtual game items or goods, but also digital goods like movies, music etc.
So, using a single currency on Facebook will provide users an easy way to buy virtual goods, and to transfer Credits between games and applications. It also takes away the hassle of making transactions through various payments options available on various games and applications.
As the social network giant pockets 30 per cent of all transaction that takes place using Facebook credits, game developers have raise their disapproval, but Facebook justified the move saying the single currency will make it easier for players to pay for things on Facebook. Moreover, Facebook will take over the headache of storing players’ credit card information and the various task associated with protecting and preventing frauds.
Facebook have added more payment options for Facebook Credits in 13 countries in Asia and Latin America. Click here for a complete list of the countries and the payment methods through which you can buy Facebook Credits.
Trialpay has partnered with Facebook to offer its new Dealspot, ‘in-game offers’ API, to developers using Facebook Credits. Developers can place a custom icon within their game, which when clicked will show users targeted offers to earn Facebook Credits.
DealSpot, which has been around two months in beta have been integrated into by popular developers like Zynga, Playdom, CrowdStar and Lolapps.
DealSpot offer users with different ways to earn free Credits – purchasing web service subscriptions, signing up for free accounts, buying holiday gifts, watching videos, and more.
Developers can design their own custom in-game icon like “Earn Free Credits” or “Deal of the Day” to attract users, and place it in the games. The icon only appears if TrialPay has deals available. Available deals are shown in a pop-up window when clicked. Users receive credits once they complete the offer, and resume the game where they left off.
By extending the Dealspot offers to developers using Facebook Credits, there is no doubt you will be earning quite a bit soon and not to forget, use of Facebook Credits is becoming mandatory w.e.f July.
No matter what’s the offer, it is just another way of making you spend money on virtual goods, but, wouldn’t you rather buy flowers lady from online store and get 220 free Credits or buy a subscription to People magazine and get 176 City Cash rather than just pay for the virtual Credits? Gotcha!! 
Facebook plans to make Facebook Credit as the sole virtual currency on Facebook.
According to Deborah Liu, Platform Marketing Manager at Facebook, all social game developers have to move over to Facebook credits for processing all virtual goods transactions w.e.f July 1.
In her blog post Monday, she said that more than 350 applications from 150 game developers already use Credits, and that accounts for more than 70 percent of all virtual goods transactions on the site.
As we all know, Facebook charge a flat 30% of all transactions that take place through Facebook Credits. So, needless to say, many game developers are unhappy about it, but Facebook (sensing it I guess) revealed two new incentives the company will be offering:
Frictionless payments – For small payments developers can charge through the API and you don’t need a confirmation page.
‘Buy with friends’ – Developers can set up this feature through which users can share a purchase they made with their friends. More than 50 percent of users actually elected to share those purchases. “We’re innovating on social purchasing.”
Facebook is reportedly on the track to generating $2 billion in revenue for 2010, which is way higher than the previously projected revenue of $1 billion to $1.1 billion.
According to Bloomberg, sources have said the company’s annual revenue would have more than doubled from 2009, where the company made between $700 million and $800 million.
Thanks to its 500-plus million users, Facebook has become an attractive target for advertisers that includes big names like Coca-Cola, Adidas, and JP Morgan Chase. Facebook on the other hand is doing its job well by serving around 50 billion display ads a month, and is looking forward to serve a whopping 1 trillion display ads for 2010.
Facebook is also making a lot of cash through social gaming. With more than 200 million users actively playing social games, Facebook is reaping well with its decision to take 30% of all transactions done through Facebook credits.
Facebook has certainly made great strides in 2010 – from becoming the ultimate destination on the Internet to becoming the number one online ads display site to bagging the best workplace, and its founder and CEO being honored with the title of Time’s 2010 Person of the Year – Zuckerberg and his colleagues definitely has a lot to celebrate for.
Gift cards for Facebook Credits, the de facto virtual currency of Facebook, go on sale in the U.K.
They are now available in Tesco and Game stores, in denominations between £5 and £25.
Facebook credits can be bought with credit cards using various payment options on Facebook. However, Facebook says purchasing credits through game cards were a better option for young users of the site.
“By using Facebook Credits as an alternative payment option, they [parents] can control the budget their teen has to play with games online and also avoid fees or overpayment on their credit card. It’s a real plus in terms of security and peace of mind,” explains a Facebook spokesperson.
These gift cards will also provide an alternative for those who don’t want to share their credit card information on the social network site. Moreover, with the festive season just around the corner, gift cards will also make an ideal Christmas present for many users.
Farmers of FarmVille who are looking to purchase in-game currency will now have a new option. Apart from the previously available options, Credit cards and PayPal, Farm Cash and Farm Coins can now be purchased using Facebook Credits – Facebook’s virtual currency.
This new payment system have been adopted in a number of popular Facebook games like Happy Island, Happy Aquarium and Happy Pets, where Facebook Credits is the sole option for in-game purchases.
This new payment option in FarmVille is arguably bigger for Facebook Credits than it is for the game, with the amount of exposure it will get through the game.
FarmVille has more than 83 million users, making it larger than Twitter. If the Facebook Credit payment option catches up in FarmVille, Facebook could very well cross the speculated $1 billion revenue mark in 2010, taking into account the 30% take on revenues generated through Facebook Credits.
