Over the past few days there have been a number of tidbits about Facebook Credits published around the web. The first was the creation of a “Facebook Payment Operations” team, which will be responsible for monitoring all money moving into Facebook. Then later in the week ISG noticed new features being added to the Facebook Credits system as being used inside a few Facebook games. It’s clear that Facebook is ramping up to most likely release the full version of Credits at f8, the company’s developer conference.
The anticipation for Credits is huge as enabling one-click purchases reduces a significant amount of friction over existing payment platforms. While the company has made relatively conservative projections about their Credits system publicly, there’s no doubt that combined with Facebook Connect, Credits could turn out to be a massive success. While it’s difficult to make projections about how much revenue could be generated through the Credits system, there are numerous reports which have projected the domestic virtual goods market to surpass $1 billion this year.
With Facebook reportedly getting a huge cut of all virtual goods sales on Facebook through the impending Credits system, and given that Facebook is the dominant platform for virtual goods sales domestically, Facebook stands to benefit big time. We’d expect the company to easily add one hundred million dollars in revenue this year through the new Credits system. Right now there are plenty of alternative payment methods on Facebook, however things could change dramatically when Credits are rolled out to developers later this year.
While a lot of the chatter is currently speculation, Facebook is making a hard push to open up their Credits platform to developers and developers are thrilled. One social games company founder, Dan Porter, wrote yesterday about his enthusiasm over the Credits platform. Here are the things he was most excited about:
Decreased friction. Facebook has info about you and you are willing to enter information about you. There is nothing that kills conversions like filling in a form. When buying virtual goods on facebook is as easy as Amazon 1-Click, or the itunes store, that’s a win for everyone. You buy before you have time to think about it.
Lower fraud. If Facebook has some investment in me being real, imagine the additional fraud screens based on my activity, and social graph. Chargebacks and fraud are painful. Maybe there’s something in here to attack that by social reputation..
Person to person payments? I owe you ten bucks for that movie, and I’ll pay you on Facebook.
Could be a major force in charitable donations via fan pages, social pressure and ease of use.
The bottom line is that Credits present a massive opportunity for developers and Facebook is working hard to build a team that supports the new service. While there will most likely be a few bumps along the way, Facebook’s ongoing testing of the Credits service should make for a smooth transition once it finally rolls out around April.