Facebook’s Increasing Focus on Credits Prompts Developer Speculation

Facebook has been busy working on its Credits virtual currency plans lately — but what exactly is it doing? Developers have told us conflicting answers. Some say that the company is going to force every application to use Credits as the sole virtual currency, while others say that Facebook has not made any such decision. We’re also hearing conflicting reports on how profitable Credits are turning out to be so far. Note: Most developers we spoke with asked to remain anonymous in order to preserve their relationship with Facebook.

Meanwhile, Facebook itself sees Credits as being in the very early stages, and it has not made long-term decisions about how the virtual currency will be implemented.

The company has been testing Credits in its gift store since 2008, and with third-party applications in May of last year. But Credits have only been showing up widely since last fall, around when we were hearing that the company was talking to big developers about implemention.

Now, clearly, Credits is on the move. Facebook began hiring for a “brand-new” payments operation team in the last few months. The latest home page redesign includes a new left-hand navigation showing dashboards for applications and games, and both the Apps and Games pages show users their total Credits balance. A link to users’ Credits balance now also appears in the top right-hand “Account” dropdown menu.

More and more big developers have begun offering Credits as a payment option partly, it appears, as a result of encouragement from Facebook. Zynga is now running the currency in some of its smaller games, including Pirates: Rule the Caribbean. Playdom has it live in Tiki Farm and (lil)Green Patch. SGN does with (fluff)friends. Playfish has one of the biggest implementations, with Credits live in Restaurant City. Slide has most recently introduced the payments option, to SPP Ranch, Top Fish and Superpocus.

CrowdStar, which saw game-changing growth last fall, has gone the greatest lengths to integrate Credits. The latest game, Happy Island, launched using it exclusively last December — the first big one to, that we know of — and the company has since replaced other payment services with Credits on all of its applications, including its biggest hit, Happy Aquarium.

Do Credits Bring in More Money?

For anyone with a Facebook app that relies on virtual goods, Credits is a big deal. First, Facebook is taking a 30% cut of the revenue, something that we’ve understood to be the case since last May. This is the percentage that Apple takes from developers on its iTunes App Store, but more than the few percentage points that some third-party payment providers, like PayPal, usually charge (though fees with some payment methods, like mobile payments, can actually be higher). Credits is essentially a new virtual currency layered on top of payment services, as the partnership today between Facebook and PayPal illustrates. So the cost to developers is clear. But what about the benefits?

The idea behind Credits – that a platform-level currency backed by the trusted Facebook name should decrease payment friction and increase spending – is very sound. For CrowdStar, Credits is already as profitable as other currencies the company has used, the company tells us. While many developers, especially big social game developers, have made big investments in their own virtual currency systems over the last couple of years, CrowdStar introduced Credits as it has grown in the last months. Executive chairman Peter Relan tells us that his company has had to figure out how to best implement Credits, “but once you get over the hump, it’s great, and just as profitable” as other options — meaning even with Facebook taking a cut.