- About Us
- Client Portal Login
Facebook Currency Rankles Some
By Sarah E. Needleman Facebook Inc. has been rolling out its own currency, to be used by members to buy virtual goods in games and other applications. But the move has rankled some game developers, who say the new monetary system comes with high fees and creates competition for developers who have their own virtual payment methods.Facebook's currency, called Credits, is being sold for 10 cents apiece and can be applied toward the purchase of virtual items, such as a "karaoke machine" for a game in which players run a virtual nightclub.For every credit a merchant redeems, Facebook is taking a 30% cut. "Thirty cents off of every dollar adds up," says Robert van Gool, founder of 10-employee San Francisco firm Gonzo Games, who says he had considered selling virtual toilets on Facebook for a racing game until he heard about the new credits. He plans to put the game on a different platform where he also expects it to receive greater exposure. "For a small company, the piggybank isn't that big," he says.
Deborah Liu, a Facebook manager overseeing the Credits initiative, says the 30% fee "is line with industry standards." Apple Inc., for instance, collects a 30% fee from merchants who sell games and other applications through its "apps" store, as well as virtual goods sold within those applications, according to an Apple spokeswoman.Facebook says it hasn't yet determined whether its new currency—being tested by about 100 partners—will replace credit cards and other services to become the only payment option on the site. Facebook doesn't take a cut out of any of these other payment methods, the most popular of which, credit cards, charge fees as low as 3%.Facebook rival MySpace doesn't offer its own currency for virtual goods but is exploring such a service, according to a spokeswoman. People close to the company, which is owned by News Corp., publisher of The Wall Street Journal, say game developers would be charged a fee below 30%.The move by Facebook to install its own currency comes as demand for virtual goods, while still small, is rapidly increasing. The U.S. market for virtual goods is currently estimated at $1.6 billion, with social-networking sites accounting for around half—or double as much as a year ago, reports research firm Inside Network Inc.Some developers say Facebook's new currency conflicts with their own virtual money systems. "If someone spends $5 to buy our currency, they can only spend it on our games," says Russell Ovans, founder of Backstage Technologies Inc., a 16-employee developer in Victoria, Canada, that has seven games on Facebook, including a version of the TV game show, "Family Feud." But a user who spends $5 on Facebook Credits can use it on any of the site's more than 550,000 games and other applications.Zynga Game Network Inc., maker of the most popular game on Facebook's platform, "FarmVille," is one of the outfits testing Facebook Credits. The San Francisco company, which recently announced a new five-year "strategic relationship" with Facebook, declined to comment on the CreditsA number of the game developers that have so far been invited to experiment with Facebook's currency system say they like it and are seeing positive results, ranging from larger concerns such as Playfish and PopCap Games Inc. to smaller ones like Crowdstar International Inc. and Arkadium.Facebook's Ms. Liu says the new currency system benefits sellers because it creates a simple system for users to buy virtual goods, without having to fill out different payment forms for every merchant. Facebook Credits—which users can purchase using credit cards, mobile phones and PayPal—also relieve merchants from such issues as fraud and returns, adds Ms. Liu.Two-year-old CrowdStar began accepting Facebook Credits in December for virtual goods sold through its five games, which are exclusively on Facebook. Sales of the Dublin, Ireland-based company's virtual items—which range in price from 50 cents for a rainbow-colored cat to $129 for a mystery box containing a dragon—have since doubled, says Peter Relan, chairman and co-founder. Kenny Rosenblatt and Jessica Rovello, co-founders of New York-based Arkadium, say roughly 10% of users who play the company's three games on Facebook are buying its virtual goods with the platform's signature currency, about three times as many buyers who use other payment methods. "With Facebook Credits, when someone wants to buy on an impulse, they can do it immediately," Mr. Rosenblatt says. "They don't have to leave Facebook to go fill out a form on another site." Write to Sarah E. Needleman at firstname.lastname@example.org