Facebook mulls over adding virtual currency as coin of its social realm

Gareth Davis, Facebook's gaming guru, today confirmed rumors that the company is "looking at" adding virtual currency to its hyper-popular social networking site. Translation: Facebook is actively developing the feature, but reserves the right to abandon the project.

"Clearly, it's something that is a large undertaking," Davis said in an interview at the GamesBeat conference in San Francisco. "So it has to be done carefully."

In Web games such as Club Penguin and Maple Story, players pay real dollars to get virtual currencies they can use to buy online outfits, homes and pets. Analysts estimate that consumers have spent more than $1.5 billion worldwide on virtual goods.

Though Davis declined to elaborate on Facebook's plans, he touched on a number of potential issues involved in adding the feature.

The con: Virtual currencies are vulnerable to fraud. If Facebook sells currency, it would have to police transactions to prevent scams.

The pros:

• A Facebook currency would let its 175 million active users buy virtual items and game features more easily. Right now, users need to fork over their credit card information every time they want to spend money with a different application developer.
• Like iTunes, the currency program could turbocharge sales by allowing one-click purchasing, which would result in more money flowing to third-party developers. Facebook also could decide to take a cut of the sales.
• A system of virtual currency could make sales of as little as 25 cents viable since the currency would be purchased in chunks of $10 or $20, then spent in smaller increments over time. Currently, a single credit card transaction for a few pennies would cost developers more money than they would make.

What do you think? Do the benefits outweigh the hassle of setting up a virtual currency? Sound off in the comments.

-- Alex Pham

Comments

[Mark Homer]

I think that virtual currency will need to bridge across platforms at some point. Right now it's mainly app specific, but iPhone 3.0 just started allowing virtual currency per se with in app purchasing. So if I buy virt. currency in a game on iphone it is not transferrable to facebook, etc.
Also, what is missing in this article is the recognition that a lot of virtual currency dollars on sites like facebook are coming from cpa (cost per action) links via networks like offer pal media. Incorporating advertisers in this model just makes sense and will really grow the volume and visibility of virtual currency. Getting mainstream advertising dollars in cost per action links built into virtual currency enabled applications is going to do more for virtual currency than any particular platform enabling it across apps for their platform.

[Nicolas Beique]

As the article mentioned, the main problem is fraud. Whenever you aggregate credit card payments, not only do you take on the risk that the card might be fraudulent, you are also responsible if the seller does not deliver the services purchased (because chargebacks would be made against Facebook).

[Virtual Currency]

Facebook will certainly have to go through a learning curve to mitigate fraud. However, Virtual Currency has been part of the gaming business for years. Best practices have been published, conversations are taking place, and the movement toward improved security continues.

Basically, the pro's will absolutely outweigh the cons :)