As Facebook Prepares Credits Rollout, Here’s a Look at the Virtual Currency in Social Games

pay-with-facebookWill Facebook users feel more comfortable trusting their credit card information with the company instead of social game developers and other payment providers when they go to buy virtual goods? If the answer is yes, we may see a new surge in revenue for developers, and for Facebook.

The question is closer than ever to being answered, too. Facebook is planning to more fully release its virtual currency, Credits, on third-party apps in the coming weeks. In the meantime, here’s a look at which games are already running Credits, and how they’re going about doing it.

Here are the games integrating Credits that have been announced so far, sorted by developer and noting the Daily Active Users (DAU) for each game:

There are two basic implementations seen to date:

  1. Buying in-game currency with “Pay with Facebook” as an alternative payment method along with credit card, pay pal, mobile and offers
  2. Buying in-game items directly with Facebook credits

Most of the developers opted for a simple implementation, just adding Facebook credits as another in a laundry list of purchase options for users:

zynga-pirates-pay-with-facebook2

Once users select Facebook Credits, they are presented with the option of using their existing credits if they have enough. Otherwise they are presented with options to buy with the credit card on file (if there is one), their mobile phone, or to select a new card.

robinhood-credits-paymobile

In general, Credits are 10 for USD $1, but if you buy with your mobile phone, there is a pretty standard (and somewhat sizable) 43% haircut taken to help cover the carrier fees. There are also some subtleties in implementation, such as Playfish only implementing Facebook Credits for the purchase of coins, but not Playfish cash.

Crowdstar has been the only one of the developers listed above to do the in-game items directly, with slightly different implementations. Happy Aquarium actually reserves specific items in its store to be purchased only with Facebook Credits – ostensibly now offering item exclusives under three different currencies:

crowdstar-happy-aquarium-credits

And more interesting is Crowdstar’s implementation of credits to buy upgrade items directly in recently launched Happy Island, as we covered yesterday. For a user who already has Facebook Credits, this is an extremely simple purchase process as detailed in these three steps. happy-island-process2The only issue so far is that the upgrades don’t appear in the game immediately – in this early stage you seem to need to refresh the game for it to display.

From a developer perspective, there is definitely some trepidation in relying on Facebook solely for purchases. Besides several operational and redundancy considerations, direct relationship with paying users is really valuable. The larger developers have created user accounts, letting you take currency across games (like Playfish) or at least save your credit card info to make it easy for you to pay across different games. The other major benefit from a direct relationship with end users is cash flow: with credit purchases going through the Facebook credit system, developers now have to wait for Facebook to remit the funds to them.

As Zynga has one of the broadest bases of players, and thus presumably some of the most control to lose, they have been aggressively pushing discounts on buying in-game currencies. Since Thanksgivng, both Mafia Wars and FarmVille have been offering discounts on the respective game currencies, often seen as pop-ups touting a special limited time offer to buy one of the usually $10 or more valued bundles. This kind of promotion is fairly typical in retail and in e-commerce, providing incentive to users to increase the size of their average order (from experience, a majority of users only buy the smallest currency bundles, typically around $5). Judging by the frequency of Mafia Wars and FarmVille promotions (indiscriminately hitting both previous buyers and non-buyers), it must be working.

mafia-wars-discounted

In addition, Zynga may be pushing users to set more direct accounts with Zynga to buy in-game currency and help solidify itself against potential pressure from Facebook or users to add Facebook Credits options to all of its games.

For now, Crowdstar is taking the lead as far as exposure to users and integrating in deeper ways – as a newer entrant among the top developers they have the most to gain from innovating and integrating Credits into their games. Yet with every potential streamlining of the end-user experience, there are still several things that need to be proven over the next few months.

Summarizing the Pros and Cons of Implementing Facebook Credits

Pros:

  • Easier customer experience, especially when users never have to associate dollar amount with the purchase decision (as in the Happy Island example where item are purchased with current balance of Facebook Credits) – any time you can make a purchase decision more frictionless, it’s easier for people to buy more.
  • Removes barrier of user having to go get their credit card  — they already have it file with Facebook (an increasing base of users due to Facebook’s gift shop and third-party gifting applications)
  • Customers may trust their credit card to Facebook more than to a game developer and that developer’s choice of payment provider(s)
  • Implementation of Facebook Credits API eliminates need to get a credit card processor and/or a mobile payments provider

Cons:

  • Still an untested platform, especially in regards to scale; Facebook’s issues with its core platform have been a source of concern for developers already so it’s hard to trust your payment system to to it, until there is more of a track record
  • Developers may still want an alternative credit card processor so they have redundancy in case the Facebook Credits system goes down, or to have protection in case Facebook processing fees get exorbitant
  • Developers may still want to offer alternative payment methods like PayPal, prepaid cards and offers (none of which can currently be used to buy credits) or to cover mobile territories Facebook does not cover
  • If users don’t have Credits or a credit card on file, not really much more of a value-add than putting a user through credit card.
  • Ceding a direct paying relationship with end-users to Facebook and having to wait for Facebook to remit funds to you versus receiving directly from end-user
  • Integrating Facebook credits into direct-purchase items a la Happy Island may limit some of the ability to do promotions and manage your virtual economy