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.
Recently, with the popularity of social networks like Facebook, a lot of its users are getting hooked on one of its most important applications: social gaming. Farmville alone continues to increase by more than 6 million active users monthly. Its users are now about 70 million.
Social gaming has simple yet interesting principles, as well as engaging activities. It lets users interact with each other via competition or through invites from other users. Unlike hardcore online games, these social games let users unwind from their usual routine.
There are many developers who create these free games because it is profitable for them. First, they earn through advertisements that go with their games. The more users play their games, the more money the games earn. Secondly, these social games encourage users to buy virtual goods through PayPal or their credit cards.
Virtual goods are items needed to have that competitive edge in the game. Some would have limited holiday-themed virtual goods. Restaurant City, for example, sells the Festive Fridge and Stove. These items allow gamers to prepare food faster. Priced exorbitantly, gamers who lack points or coins would buy more coins from the developer with real cash.
Due to these online purchases, a lot of social gaming startups earned a whopping $600.5 million this year, despite the fact that revenue went down by 36% from last year. Zynga alone earned $180 million in a deal with Digital Skies Technology.
With this hefty revenue, social gaming startups will remain solvent despite the recession. Indeed, the recession is to their advantage because more gamers now prefer the free Facebook games rather than spending a huge amount on gaming consoles and PCs.
