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This article was published on February 26, 2010

Facebook To Grow Its Virtual Economy

Facebook To Grow Its Virtual Economy

facebookFacebook has announced that it will expand its Facebook Credits system across the site.

Facebook says that this step will help to expand its microtransaction features into more apps. In a blog post, Facebook Product Marketer Deborah Liu said that, “This new option is live in a few applications to a small percentage of users, and will roll out more broadly over the coming weeks.”

This widening of the Facebook Credits program represents Facebook’s desire to take their cut of the booming microtransaction market on their site.

With the advent of Facebook applications, companies such as Zynga and Playfish have included in-game downloadables in their applications as a major source of revenue. These transactions, which often allow gamers to advance in gameplay, are priced low enough to be in impulse-buy territory for most consumers.

The initial problem with these transactions is that there wasn’t a consistent currency across applications. Therefore, if you wanted to buy downloadables in Farmville  and Mafia Wars, you had to enter your credit card or Paypal information twice. With the Facebook Credits system, there’s one currency that works with Farmville, Gifts, Restaurant City and Mafia Wars, among others.

The system is also a huge boon for Facebook. Liu said that Facebook is currently taking a 30% cut of the microtransactions. In addition, Liu’s post cited statistics saying that Facebook Credits users were significantly more likely to buy downloadables than users paying with credit cards, likely because of the Credits system’s ease of use.

Broadening this business model across the site will only help Facebook’s bottom line. As the company’s user base continues to grow, the Facebook Credits system should ensure a steady revenue base for at least the immediate future.

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