Facebook Credits - An Overview

Facebook Credits is a payment system that allows users to purchase items in games and non-gaming applications on the Facebook Platform. One US dollar can get you 10 Facebook credits. Currently, Facebook credits supports more than 80 payment methods in more than 50 countries. It provides users a consistent way to buy on Facebook across mobile, desktop, games as well as non-game apps. Developers get 70 percent of all revenues earned through credits while the remaining 30 percent goes to Facebook. In March 2011, Facebook created an official subsidiary to handle payments namely, Facebook Payments Inc. In September 2010, Zynga announced that Facebook credits would become the exclusive payment method for all games developed by it and hosted on Facebook.

Let’s have a look at the benefits of Facebook Credits from a business perspective:

• It gives you access to an approx. 1 billion person marketplace
• Simplifies purchasing of virtual goods
• Secure payment and billing environment
• It provides you an effective mechanism to convert fans into paying customers of premium or exclusive services
• Gives access to a growing base of merchants who reward customer loyalty and buying with credits. The concept is similar to that of airline miles
• A common currency, thereby consolidating virtual currencies across multiple providers

However, like all new business models Facebook Credits has its fair share of growth inhibitors:

• The 30 per cent transaction rate is considered too high by most of the content providers given the fact that the market still has to determine the ROI
• What if Facebook loses its charm and users switch to other social networks
• Any breach in privacy or security , could create a major resistance for usage of social network for commercial purposes
• There is a group of users who believe that new features like Timeline and news feed advertising are too invasive. This may cause those users to exit the platform. It remains to be seen if Facebook managers to restrict the size of this group and keep the users contented

Facebook credits also find application in improving Ad Performance. It has been found that given two ads – one featuring a discount offer of say $10 and another rewarding the customer with Facebook credits instead of monetary discount, the user is more prone to select the ad that provides Facebook credits. Many studios like Warner Brothers, Universal etc have started deploying movies through Facebook. Users can now buy movie shows online through Facebook credits and invite upto five friends to watch the movie online together.

The benefits are many and like anything new challenges are galore but this model has far reaching implications. Let’s see how it all pans out.

-Rahul Mukherjee

 MDI, 2011-13

Social Gaming

In the Social Gaming context, 2011 will be remembered as the year when Google launched Google+, Facebook credits was launched after the beta stage and the social network game developer Zynga filed for its IPO. With its IPO, a first in the social gaming arena, Zynga expects to raise upto $2 billion to fund its global expansion. Meanwhile developers are still navigating through the Facebook credits model. At the same time Google is pulling out all stops in its effort to launch a serious competition to Facebook as a social gaming platform in North America since the demise of MySpace. In this blog we will take a look at some statistics pertaining to the social gaming industry, browse through Facebook Credits and speculate on the future of social games.

The recent statistics and trends suggest that the social gaming industry is on an exponential growth curve. The US social gaming market is expected to blow past $5.5 billion in 2015.

Source: Morgan Stanley

The Nomura Research Institute says that Japan’s social gaming market will likely be worth 393.5 billion yen (US$5.1 billion) in fiscal 2016, roughly doubling in size when compared with 2011.

Source: Morgan Stanley

In a recently released report Deutsche Bank predicted that China’s social network gaming revenues will double by 2011, reaching $3.5 billion. According to a study done by business and consulting firm Pearl Research, the online games market in China was expected to cross $8 billion by 2014. Although the Chinese gaming market experienced a slow growth initially in 2010, but by the end of the year it had rebounded to 25 percent overall growth, reaching $5 billion in sales. The bright outlook for Chinese gaming is bolstered by the fact that country’s top online game companies experienced another banner year of growth in 2010, led by gaming colossus Tencent, which saw revenue push $1.4 billion. Tencent was followed by Netease at $749 million, Shanda Games at $680 million, Perfect World at $374 million, and Changyou with $327 million. In February 2012, Electronic Arts (EA) announced that the popular franchise The Sims will move into China’s leading social network, Tencent Open Platform.

In India, Social Gaming is a relatively new phenomenon but one which has seen increasing popularity amongst Indians. As per a report by Ficci and KPMG, the social gaming market in India was Rs 240 crore in 2010 and expected to touch Rs 1430 crore by 2014. According to Ashish Khoria, Country Manager of MOL India, a leading payment service providers for online games, over 500mn people worldwide play social games and in India alone, more than 10 million or over 50 per cent of India's Facebook users play social games. Recently, online gaming company Ibibo’s CEO Ashish Kashyap announced that they aimed to increase their market share in the country’s social gaming space to 50 percent in the next two years, from 30-35 percent at present. Given the above facts, it is quite evident that social network gaming is going to be one of the major revenue-generating and profit making businesses.

-Rahul Mukherjee

 MDI, 2011-13