As Facebook continues to experiment with its universal virtual currency, Credits, some developers continue to tell us that the product is going to lose them money — even as others say the opposite.
One issue is the flat 30% fee that Facebook takes from all Credits transactions on third party applications. But there other potential costs, that some in the industry say increases the total percentage to around 50% of their revenue, versus what they are bringing in now.
Facebook, however, believes that Credits will be a net win for developers, and not just a big new revenue stream for itself. Before we get into the details of what the real costs (and benefits) of Credits might be, here’s some more background.
The Place for Credits
The virtual goods market has boomed around the world in the past decade, mainly in Asia — but Facebook quickly becoming a leading platform for growth of companies based on the virtual goods model after it launched its developer platform in late May of 2007. Many people who use third party social games and applications, it turns out, are willing to pay for digital products in order to do things like win a competitive game or more beautifully decorate a virtual space.
This year, we expect the virtual goods revenue model in social games to bring in around $835 million within the US alone, with most of the money coming from Facebook apps. See our Inside Virtual Goods report for more research on the market.
For most of the history of the platform, Facebook has not taken any fee from developers on its platform. When it launched the platform, the company even told developers that they would be able to keep all of the revenue they generated from applications.