Predictions for Facebook Credits in 2012

[Editor's note: This is a guest post by Peter Vogel, co-founder of Plink, which lets consumers earn Facebook Credits for dining out and shopping online. He argues the rise of Open Graph applications will push Facebook Credits beyond social games and one-off experiments to become a major source of revenue for Facebook and developers.] Although Facebook Credits is still primarily an in-game currency, in 2011 we began to see a glimmer of what Credits will look like when it grows up. Movie studios like Miramax, Warner Bros. and Paramount Pictures, not to mention BBC Worldwide began offerings movies and TV shows for rent on Facebook. As an example, in promotion of “Mission: Impossible, Ghost Protocol,” the series’ first three movies were made available for rent on Facebook for 30 Credits per rental. In addition, to promote the launch of “Tower Heist,” Universal Pictures gave away 1 million Facebook Credits ($100,000 value) in an online scavenger hunt. DJ David Guetta began selling MP3s on his Facebook Page (19 Credits per track) and U.K.’s “Big Brother” and “The X Factor” began allowing fans to vote for contestants using Facebook Credits. These examples, however, were few and far between in 2011 and it’s fair to say that even most Facebook users don’t know what Credits are for. 2012 is the year this will change. Prediction 1: Facebook adds subscription billing as an option for Facebook Credits Currently companies who sell virtual goods or products on Facebook can only accept one-time payments via Facebook Credits. For example, a player can use a small amount of virtual currency to buy a new cow in Zynga’s FarmVille. But media companies such as Netflix and Spotify would need a monthly billing plan. Consumers could agree to pay 100 Facebook Credits for monthly access to movies or music and would agree to be billed monthly. Until Facebook adds a monthly billing feature, it will be difficult or nearly impossible for many of the largest media providers to accept Credits. Facebook will continue to improve the Credits platform in other ways as well to make it more functional and profitable for developers to use. Credits is the primary way, if not sole way, most developers generate revenue, so you can be sure that Facebook is truly committed to making Credits as flexible and effective a currency as possible. Prediction 2: Open Graph Partners, including Spotify and Netflix, start to accept Credits During its F8 conference, Facebook announced 17 music partners who would integrate Open Graph, allowing users to share their listening and other behaviors with friends. Spotify initially gave users a six-month free trial. Now, though, the nearly five million new members who’ve been getting unlimited free music will be limited to 10 hours a month and only five plays per song -- not that much for a real music fan. Look for Spotify to add Facebook Credits as a payment option for these new users, potentially even offering special introductory rates to entice users to commit to a year-long membership. In addition, a few notable facts lead me to believe something big is coming from a Netflix/Facebook partnership. Netflix’s CEO Reed Hastings joined the Facebook Board of Directors in June of 2011. Netflix recently signed deals with BBC, DreamWorks and Disney to increase the quality of available streaming content. A piece of legislation cleared the House and is on its way the Senate that would reverse a law enacted in 1998 that forbids public disclosure of video rental records. This would prevent the sharing of movies being watched between Facebook users. Much as users now have “Like” or “Listening to …” labels, it’s widely anticipated there would be a “Watching” tag as well. This increased level of sharing could dramatically increase the number of Netflix movies watched and shared on Facebook, leading to a Facebook-only Netflix plan that could be paid for with Facebook Credits. Prediction 3: The size of the Facebook Credits economy will double every year for the next five years Similar to Moore’s Law, which famously predicted that the number of transistors than could be placed inexpensively on an integrated circuit doubles every two years and Mark Zuckerberg’s Law that (scarily to some) states that people will be willing to “share” twice as much each year, I believe the Facebook Credits economy will double every year for the next five years. This is based on the staggering amount of new ways that people will be earning and spending Facebook Credits over the coming years and the international growth, which will follow innovation in the U.S. This is conservative based on reports we’ve already seen that global revenue from Facebook Credits more than tripled in size from 2010, $140 Million, to $470 million in 2011. By 2016, Facebook Credits could be a $15 billion business. What’s driving this? One example is the efforts by Milyoni, one of Facebook’s leading commerce and video streaming platforms. This year, Milyoni was responsible for hosting the first ever movie available for rent on Facebook, Warner Bros.’ “The Dark Knight,” at a cost of 30 Facebook Credits. Milyoni also hosted the first ever live pay-per-view concert on Facebook, “Widespread Panic” live from Austin, Texas, at a cost of 50 Credits. This year, according to Dean Alms, VP of strategy and marketing at Milyoni, they have deals in place with 13 movie studios and expect to offer 3,000 movies for rent on Facebook. That’s compared to less than 100 films offered in 2010. In addition, the company has plans to stream 40-50 live concert and events available on a live pay-per-view basis, compared to just two in 2010. Multiply this by other innovative companies and you get an idea of what’s to come this year and beyond. Final Take: Facebook has proven that the Credits model can work in social gaming, which represents between 25-30 percent of Facebook users, and will now utilize the same model to first enter the business of music, movies, TV and any other shareable media, before entering larger industries like financial services and health care in the coming years. While still relatively unknown, Facebook Credits will emerge and begin to mean very real cash to a quickly expanding group of first-mover entrepreneurs and innovators who are just starting to get a whiff of the opportunities presented by the Facebook Credits economy. It’s for real and it’s here. Peter Vogel is co-founder of Plink, a Facebook Credits-based loyalty program that rewards Facebook members for dining and making purchases at their favorite restaurants and stores. Reach him via email at peter@plink.com or follow him on Twitter @pvogel.

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Predictions for Facebook Credits in 2012

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