Some Game Developers Don't ‘Like’ Facebook's New Virtual Currency
Facebook Inc. has been rolling out its own currency, to be used by members to buy virtual goods in games and other applications. But the move has rankled some game developers, who say the new monetary system comes …
Context & Ripple Effects
Per the Wall Street Journal's June 15, 2010 report, Facebook Inc. has begun rolling out Facebook Credits, a proprietary virtual currency members use to buy virtual goods inside games and other applications — a shift that puts the platform between developers and their paying users.
The friction is immediate rather than retrospective: some game developers say the new monetary system rankles, meaning the dispute over who controls pricing, payment flows, and the take rate on virtual goods surfaced while the currency was still being introduced, not after.
First-order effects
- Game developers on Facebook now route virtual-goods sales through Facebook Credits instead of their own payment systems, ceding control of pricing presentation and transaction handling to Facebook Inc.
- Members gain a single wallet across games and applications, while developers whose revenue depends on small repeated purchases absorb whatever terms the Credits system imposes.
Second-order effects
- If developers find the Credits economics unattractive, the largest social-game studios gain leverage to negotiate special treatment or push back collectively, splitting Facebook's developer base between incumbents with bargaining power and smaller shops without it.
- Any perceived platform tax on virtual goods raises the relative appeal of distributing games off-platform, giving rival social networks and standalone web games a pitch built on better developer economics.
Third-order effects
- A pattern in which the platform owns the payment layer would convert virtual-goods revenue from a developer's earnings into a shared pool subject to a platform-set cut — making the fee schedule, not the game catalog, the central point of contention between Facebook and its developer ecosystem.
The trend: Social platforms are moving to own the currency and payment rail of their application economies, turning every virtual-goods sale into a negotiation over the platform's cut.