Facebook’s High Expectations for Credits Revenue Imply Its Commitment to the Platform

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By Eric Eldon Comment

In case you thought Facebook wasn’t interested in the social gaming ecosystem on its platform, the company is actually hoping to make a large amount of money from it. At the TechCrunch Disrupt conference last week, former Facebook president Sean Parker said that he thinks that Credits, Facebook’s new virtual currency, will account for a third of the social network’s revenue over the next 12 months.

Some developers have been cynical about Facebook’s goals for gaming, given changes it has made to the platform that have led to major recent traffic declines. Yet, if Facebook is planning to make this much money from Credits, the implication is that the company is trying to make the platform very successful overall. Otherwise, if it kills the platform, it will  not be able to make a third of its revenue from Credits.

Facebook could make up to $1.1 billion this year without factoring in Credits, according to our estimates; other reports have put the total number as high as $2 billion. Parker didn’t state what he thinks the company’s revenue will be, of course. But going by our outside numbers, he could mean somewhere around $350 million.

That money is coming in the form of a tax, at least for now. We’ve previously estimated that social gaming (mostly on Facebook) will contribute $835 million to the $1.6 billion US virtual goods market for 2010. This is where the Credits revenue will be coming out of — and sometime soon.  Within the last couple of months Facebook has publicly confirmed that it will take a 30 percent fee out of Credits transactions, and make Credits somehow mandatory for all developers on its platform.

If Credits is to account for a third of Facebook’s revenue in the next 12 months, like Parker said, another implication is that the mandatory roll-out is coming sometime very soon. Either that, or Credits is going to be so wildly possible that it doesn’t roll out for months, but somehow still accounts for a third of Facebook’s revenue.

The big catch here is that while some developers may currently see Credits as a big tax on their businesses, Facebook doesn’t.

The company’s vision, as it described at its f8 developers conference, is to have Credits help all developers make more money. It thinks it can provide more than enough payment options, convenient interfaces, volume and other benefits to make up for the fee. Developers who see holes in their finances should at least take comfort in the fact that Facebook is confident about its plan working well enough that Credits won’t significantly hurt the platform.