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