Facebook Credits to burn a hole in your pocket
Last month Wired magazine proclaimed the death of cash. The “cash haters” among us would have it this way. Paper money is dirty, and so very 20th century.
The majors are taking notice: Facebook has Credits, and PayPal is moving aggressively into peer-to-peer transactions. And then there’s Ven, a truly virtual and independent currency created by the digirati to back exchanges of talent and insights.
In the first of our three part set of posts on trends in virtual cash and payments, we look at Facebook Credits. Facebook Credits launched almost two years ago as a currency and payment platform to drive sales of virtual goods. For sure, Facebook is looking at sky-high projections for a growing multi-billion dollar virtual goods market. But daily exchange rates have been tracked and quoted for a variety of virtual currencies for as long as virtual worlds have been around. How many of you can say you’re holding Linden dollars?
Considering the track record of virtual currencies, real cash still feels great in your pocket. Once you buy Facebook Credits, you are limited to purchase only what brands are selling on Facebook. Today, that’s mostly pixels. Consider this:
Real Gifts participated in an understated beta last summer, offering real goods for sale from the Facebook Gift Shop alongside the Shop’s lineup of virtual smiley faces and fake bouquets. Layering in additional complexity, Facebook Credits (FBCs) were the accepted currency. During a session, one might spend 10 FCBs for a virtual smiley face and 500 FCBs on a $50 bouquet of (real) roses delivered offline. The app remains, but with around 100 monthly active users.
One defining characteristic of any currency, real or virtual, is convertibility for use across a wide range of products and services in many different marketplaces. To date, FBCs are limited to a small number of mostly virtual sellers inside the walled garden of Facebook.
With 400 million users worldwide, Facebook certainly could back a currency as portable as PayPal. What if a wide swath of eCommerce merchants started to accept FBCs in their own retail stores? This certainly could be achieved by synching Facebook Credits with Facebook Connect, which smooths out interactions between Facebook and 90,000 Connect sites. Today Connect is a content sharing play mostly for online publishers. Why not open the platform for retailers to share commerce as well?
But there’s no indication that extensibility is part of Facebook’s vision for Credits. The social network just announced that it will continue to encourage the use of PayPal inside Facebook, which implies no plan for world domination (at least regarding currencies).
- Craig Konieczko & Hevan Chan