Facebook has announced that Facebook Credits will be phased out in favour of users using real money in local currency to buy goods/services within the site. The Facebook Credits system started in 2009 for people to buy things within the social network using a shared currency across all territories. The credit system would make it simple for developers to integrate a single payment scheme for their apps and services. Facebook takes 30 per cent of the Facebook Credit sales value as a royalty, which brought in 15 per cent of its revenue last year.
Why make the change?
Facebook says that most games within Facebook now have their own virtual currencies, so the platform-wide virtual currency isn’t needed any more. We in the UK will now pay for goods/services within Facebook in Pounds, Americans in Dollars, Greeks in Drachmas Euros etc. Prashant Fuloria on the official Facebook developer blog explains “By supporting pricing in local currency, we hope to simplify the purchase experience, give you more flexibility, and make it easier to reach a global audience of Facebook users who want a way to pay for your apps and games in their local currency. With local pricing, you will be able to set more granular and consistent prices for non-US users and price the same item differently on a market-by-market basis.”
Facebook Credit balances will be converted to users’ local currency which can be spent in the same way as credits are today. Unused balances and gift cards can still be redeemed and put into the user’s account. The changes will begin in July.
Facebook is also introducing a ready-made subscriptions mechanism for developers to use within their Facebook businesses. “With subscriptions, you can establish a recurring revenue stream and offer updated content or premium experiences for a monthly fee.” That’s another good way to sell the virtual items and services for developers on Facebook. Subscriptions will of course use local currency in line with the above announcement.
More income for Facebook.
With local currency sales on Facebook it will be more attractive for companies to sell things directly through Facebook, not just games and online services. With a lot more shopping traffic directly on the site Facebook has a much better opportunity for the monetization of its users. The recurring subscriptions are better for Facebook too as previously Facebook Credits were usable for one off payments only. The new system will allow Facebook users to input their credit card details once to store on Facebook, just like on Amazon. From then on Facebook users can order very simply, quickly and easily with a one click system. We will have to wait to see the range of products and services this will encourage to be sold within Facebook.
Investors in Facebook stock are most probably relieved at more plans to monetize the huge social network’s clientele. Yesterday the stock was recovering at around the $32 level, well off the $25 lows of a few weeks ago.