Facebook Adding Offers to Payment Options for Credits

Facebook has been expanding payment options for Facebook Credits, its universal virtual currency used in Platform applications, in recent months. Today, it is partnering for the first time with two offer providers so users can earn Credits without having to pay directly.

For users, this means another way to get Credits without paying — this may increase spending on Credits for social games and other applications on Facebook. For developers, that means Credits might be able to bring in more money than they have to date. And for other offer providers, Facebook is now more of a direct competitor, although the payment option is only in early beta testing at this point, and the company’s long-term plans are not yet clear.

Offers are simply online ads, usually drawn from ad networks elsewhere on the web, that let users buy subscriptions and goods, complete surveys, or take other actions in exchange for virtual currency. They were a key early way for social applications to monetize on the platform, although direct payments currently comprise the vast majority of app revenue today (check out our Inside Virtual Goods report for more details on the social gaming payments ecosystem breakdown). Monetization services companies have typically included offers in an “offer wall” as a separate page in apps, beneath direct payment options like PayPal and mobile payments.

However, in the early days of the platform, most offer providers and game developers did not effectively filter offers for quality. So, many of the scammy ads you see on other web sites — quizzes that trick you into mobile phone subscriptions, surveys that craftily collect your personal information, etc. — were commonly found on Facebook. Many established brands stayed away from the ad product as a result; the scammiest offers were often the most lucrative, and so the most popular with many developers.

Facebook began cracking down on low offer quality last summer and fall, especially after widespread media exposure of low offer quality. While developers and monetization providers have worked to filter out bad offers and provide more good ones, Facebook’s move today is going a step further.

The New Offers Test

The current two partners are TrialPay and Peanut Labs, both of whom have made notable efforts to provide higher quality offers for the industry. They are providing the relationships with the offer advertiser, as well as other back-end support, like customer service. The first three developers to test Credits-offers integration are CrowdStar, Playdom and RockYou. Facebook is not disclosing the revenue share with its offer partners.

Offers will be available around the world. The number of Credits that can be earned is dependent on the type of offer, as usual, but ranges from 1 to well above 100.

Ethan Beard, head of Facebook’s developer network, tells us that Facebook has hand-picked specific offers from the partners to run within Credits, using offer quality standards that are higher than what it requires of third parties. All offer payments will be instant (or close to it); excluded offer categories include ads for credit reports, auto-recurring magazine subscriptions and most other recurring online and mobile subscriptions. “We wanted to take a conservative approach with this test” he says. “We work hard to make sure all advertisers and other providers are in compliance.”

Beard sees this test as an early, relatively simple step in understanding how the company can help provide more value to users, developers and advertisers on Facebook. “What we do in the future will be determined based on the information we gather here,” he tells us. “We want to get a better understanding of how we can help our developers be more successful in driving business on the platform.”

We first heard rumors about Facebook testing offers a few months ago, and others have heard the same quite recently. “We’ve been looking at offers, and working with providers as part of broader platform for quite a while,” according to Beard. “Think of this more in light of Credits being in beta beta, as a logical evolution of [already] having credit card, Paypal and mobile payments”The company has been widely testing Credits with developers since last year, and some, like CrowdStar, have made games like Happy Island (see screenshot) that exclusively use Credits instead of other virtual currencies.

Facebook has also been busy cutting deals with third party monetization partners, including mobile payments company Zong and more recently, payment service PayPal. While Credits currently amounts to a fraction of Facebook’s revenue stream, we expect it to grow in the coming year as the service becomes more full-featured and widely available on the platform.