Thursday, June 10, 2010

Facebook's Virtual Currency Ambitions

By Niraj Chokshi
The Atlantic
Tuesday, April 27, 2010

Facebook's expansion plans have moved into the realm once reserved for central banks and kings: creating its own currency.

Details on Facebook Credits emerged at last week's f8 Facebook developer conference, although the news was obscured by the network's plans to extend its reach and an ensuing privacy debate. Credits can be used to purchase virtual goods, such as items in games, and at least one company seems to have already benefited. Facebook's mobile payment processor of choice, Palo Alto-based Zong, today announced $15 million in new venture funding.

The marketplace for virtual goods is on a tear. Domestically, it is expected to reach $1.6 billion this year and possibly $3.6 billion in three years, according to an analyst cited by Bloomberg. The founder of the 28-year-old video gaming giant Electronic Arts is much more optimistic: He expects the market to hit $100 billion within the decade.

Whatever the numbers, Facebook is positioned to reap huge rewards from the expanding market. Credits will be the only currency allowed on Facebook and the company will take a massive 30 percent cut of all transactions. Its users currently engage in roughly 800 million game sessions a month, Facebook Credits manager Deb Liu said last week.

For further reading:
"Is This the Dawn of the Facebook Credit Economy?", Ian Schafer, Advertising Age, May 20, 2010
"Stored Value Systems vs. Currencies – Which One is Better for Your Community?", Cha-Ching!, May 17, 2010
"Facebook Faces Payment Feud Down on the Farm(ville)", Karen Webster, May 13, 2010
"Zynga: 'Facebook’s Not Always Going To Be The Answer'", Nicholas Carlson, May 10, 2010
"Offerpal Media launches a virtual money war with Facebook", Dean Takahashi, May 4, 2010
"Virtual Goods: A license to print money", James Grant Hay, May 2010
"Will Facebook Credit become your default payment method?", Yann Ranchere, April 25, 2010
"Zuckerberg: 'There’s Just Going to be One Currency that People Use' on Facebook Apps", Eric Eldon, April 23, 2010
"Which businesses has Facebook just killed?", Andrew Davies, April 22, 2010


  1. Thanks for the link. I too graduated from GWU.

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