At some point in the next few weeks, Facebook will roll-out a credits currency for games, aiming to double revenue by giving social game users the ability to “Pay With Facebook” to buy virtual goods. According to the Business Insider article, “Revealed! Facebook's Plan To Double Its Revenues,” Facebook will charge developers about 30% per transaction for the service, an amount some experts believe has the ability to exceed the company’s ad revenues.
For most, this seems like an obvious decision for Facebook, and a chance for the company to take back its rightful share of game revenues. In 2009, there was no doubt about the success of social gaming. Even this year the U.S. virtual goods revenue is expected to hit $1.6B with social gaming startups accounting for $835 million of the total. It's no wonder that Facebook, the company that provides the gaming platform and access to 350 million+ users, is seeing dollar signs.
For example, Facebook is beginning to crack down on virality, making the platform less attractive to new, cash-strapped developers. There are also signs that social gaming companies are abandoning Facebook and social networks all together. (Zynga just launched Farmville.com, a sign that the company found its own following outside Facebook). Current market signals are leading many experts to speak out against social gaming; they're calling the market unsustainable and saying the industry has already peaked.
Wherever consumer readiness stands, it's important to listen to those that are already in the game. Alex St. John, cofounder of WildTangent (an online gaming company that uses micro-currency payment systems) and current CTO at Hi5 (a social networking Web site) was recently interviewed in the article, “Socializing Games” on Forbes.com. He believes that, “It will take everyone in the social networking space years to figure out how to do this right. Facebook will launch with some credit card based system. It won't really work. You need to really understand how to make advertising and entertainment work seamlessly.”
What do you think? Can Facebook dominate the virtual currency market? Consider the recent Haiti donation campaign. Zynga was able to raise $1.5 million for the Haiti earthquake appeal by selling limited edition virtual goods to players of FarmVille, FishVille, Mafia Wars and Zynga Poker in just five days. Could they have done the same outside of Facebook?
Contributed by Chantal LeBoulch. Follow her @cleboulch
You pose a great question that gets to the heart of the value of platforms like Facebook. Whether it's Windows or FB, platforms offer scale for developers. However, with that enticement comes restrictions. At times, disruptive innovations can then take root. It's only through hindsight that one can really know when the king is dying and the kingdom will collapse.
Posted by: philg | February 18, 2010 at 11:49 AM