World’s First Global Currency
Facebook is standing at the foot of a virtual cash mountain. The social networking behemoth recently announced a plan to expand the Facebook Credits program beyond its beta confines. A network-wide rollout of the virtual currency application would streamline transactions online and, in effect, pave the path to the world’s first global currency.
It’s also going to help Facebook scale one of its last major economic hurdles – monetizing its millions of international users. Now translated into more than 100 languages, Facebook will do more than $1 billion in revenue this year. It has surpassed the 500 million member mark, with a surge of interest across Southeast Asia, Eastern Europe and points beyond. In fact, adoption rates have soared exponentially in the last year.
n all, international users comprise about 70% of Facebook’s total user base, but the company has so far lacked a consistent mechanism for turning those more far-flung users into dollars. Banner advertising in most cases doesn’t provide a worthwhile return on investment internationally. At the same time, bandwidth costs have forced the company to take a loss in hyper-growth countries like Indonesia, Malaysia and the Philippines.
Enter the power and mind-boggling reach of Facebook Credits. As Chris Morrison at Bnet and others have pointed out, the full-scale credits program will clearly lower the adoption barrier for millions of international users, who will be able to buy credits from a single point of purchase and spend them on games and apps across the network. Facebook earns a 30% cut of the revenue; there’s going to be a lot of that.
Looking back, the credits program got a bit lost in the privacy kerfuffle that came out of the f8 conference. The implications of rolling out the program may also revive another popular source of frustration for users: playing makeover. With Facebook’s new concentrated push toward virtual currency, could a new layout be coming sooner than expected? Many of the company’s 500 million users are just getting used to the new one unleashed on the public in February.
At the same time, the potential implications of a virtual global currency are staggering, if not difficult to pin down precisely. Facebook users have already shown a willingness to shell out for virtual goods in online games like FarmVille and Mafia Wars. The software company behind these, Zynga, is expected to make more than $450 million this year, the bulk from virtual purchases.
With a beefed-up Facebook credits program, users both domestic and abroad may soon be purchasing real goods through companies that utilize Facebook Connect. It isn’t difficult to imagine going to the Crate & Barrel website and purchasing a wedding gift with Facebook Credits.
Consider what one-click purchasing could do for targeted Facebook ads: Advertisers and social marketers might have unprecedented access to real-time data on spending patterns and international purchases. Mobile carriers stand to benefit, too, as international consumers are increasingly more adept at using smartphones for financial transactions.
A virtual currency could also be a boon to entrepreneurs in developing nations. Consumers could use credits to purchase directly from artisans in Brazil or Thailand. That may require Facebook to ultimately abandon the dollar as its exchange root, but it certainly presents a unique opportunity for micropayments to blossom.
There’s increasing chatter about Facebook giving Google a run for its money. But in some ways it may also carry the torch once wielded by PayPal, which held a similar vision of a truly global currency