Facebook Launches Prepaid Cards for Credits with Target

By Eric Eldon Comment

Following recent efforts by Zynga, Playdom and other social gaming companies to launch pre-paid cards for virtual goods in stores, Facebook is going direct — starting this Sunday, it will allow users to buy pre-paid cards for its virtual currency, Credits, within 1,743 Target retail locations across the US and on Target.com.

Cards can be purchased in $15, $25 and $50 increments, similar pricing to what you’ll see for a wide variety of other pre-paid game cards already available in Targets and other stores around the country.

Facebook itself is also helping to push the new integration, by including a Target store finder on its official Credits splash page. When users click on the “Redeem Gift Card” in the Facebook Credits gift cards section of the Credits page, they’ll see a popup window asking them to enter the scratch-off number on the back of the Credits card. Clicking “Redeem Now” will add the amount of Credits purchased to their Facebook account.

Social gaming companies have increasingly experimented with stored value cards as an alternative payment method for virtual currency and virtual goods over the last year, with mixed success in different geographies around the world, we hear. MMO game developers, iTunes and many other digital goods sellers have already used these cards. Facebook is going through GMG Entertainment, a card provider who is already partnered with gaming and virtual entertainment companies like Stardoll, Three Rings, NBC Universal and more, and a variety of retail chains. Zynga and Playdom have partnered with InComm for card distribution services; they and other developers have been going through a variety of retail partners, too, including 7-11 convenience stores, coin exchange kiosks, and other options.

The company has repeatedly said that it aims to provide hundreds of payment options for Credits through partners, so expect it to continue expanding with real-life card sales as part of that effort. It already offers Paypal, mobile payments through Zong, Rixty cash machine exchanges, Malaysia-based MOL Points payments, gift card exchange through Plastic Jungle, and a variety of other options.

The virtual goods market is expected to reach $1.6 billion in the US alone this year, according to our Inside Virtual Goods report, with $835 million coming from social games alone. Meanwhile, Facebook itself has moved to make Credits the exclusive payment option in all platform applications, by the end of this year. We expect these cards to begin making money for the partners immediately, and should contribute to the volume of Credits on Facebook — a way that the currency will make more money for developers. So far, Credits are being used in 150 games and other applications, made by around 70 developers.

One final note: we haven’t gotten the chance to try these cards yet, so it’s not clear if this is the best value. Credits normally redeem at a $0.10 to 1 Credit rate, but certain payment methods sometimes extract a larger fee that reduces what users get. Facebook also offers bulk discounting in games, so you can pay less for larger amounts of Credits purchases. [Update: Facebook says that the Credits conversion rate is 1:10 as usual for these cards, and it also reiterates that the payout to developers is the same regardless of the payment method.]

To dig deeper into the social gaming market, check out our recent report: Inside Virtual Goods: The Future of Social Gaming 2010.