The pros and cons of Facebook Credits for merchants

Are you considering using Facebook Credits in your business? You should probably take a look at the pros and cons, according to a recent report from a merchant's perspective.
Written by Emil Protalinski, Contributor

F-commerce firm Milyoni recently published a 13-page whitepaper titled "Facebook Credits 2012: A Merchant's Perspective" (PDF) to examine the benefits, drivers, inhibitors, and uses of the world's most popular social currency. It also looks at how Facebook Credits have grown in the past few years to become a dominant currency for virtual and digital goods on the Facebook platform as well as how brands are using it to gain or maintain customer loyalty.

The report lists the following nine benefits of using Facebook Credits:

  • Access to a nearly 1 billion person marketplace.
  • Simplified approach to purchasing virtual and digital goods.
  • Consolidation of virtual currencies across multiple providers.
  • A secure payment and billing environment.
  • Global currency available in 47 currencies.
  • Ability to purchase and gift Facebook Credits in many ways (Credit Card, PayPal, Mobile, Retail Stores and more).
  • A growing base of merchants who reward customer loyalty and buying with credits. Similar to airline miles that are aggressively accumulated by consumers.
  • An effective mechanism to convert fans into paying customers of premium or exclusive services.
  • For credit-hungry fans, Facebook Credit distribution can be a low cost promotional effort to increase your brand awareness or customer conversions.

The report lists the following five inhibitors to Facebook Credits growth:

  • 30 percent transaction rate is more that many merchants and content providers are willing to accept until the market demonstrates an ROI.
  • Facebook is introducing several changes to basic interactions of its social network such as Timeline and newsfeed advertising that some users are finding too invasive and may cause them to exit the platform.
  • While it has the benefit of being a global currency, charging 50 Facebook Credits for digital goods is acceptable in some countries but prohibitive in others.
  • Any breach in privacy or security, given the media’s willingness to hyper-cover these issues involving Facebook, could create major resistance to using the social network for commerce.
  • The novelty and enjoyment of Facebook diminishes and users turn to other social networks, like Pinterest or Twitter, to satisfy their needs.

"Facebook Credits are the airline miles for the next generation of social network users that want to purchase digital and virtual goods through a variety of apps on Facebook," Milyoni VP of Marketing Dean Alms said in a statement. "Beyond social games, Facebook users will be able to access online movies, concerts, sports and special events on Facebook using this social currency available around the world to over 800 million people."

Facebook takes a 30 percent cut of all revenue earned through Facebook Credits, leaving developers with the remaining 70 percent. Facebook's IPO numbers revealed that Facebook paid out $1.4 billion to developers in 2011 from transactions enabled by its Facebook's Payments infrastructure. Facebook Credits is growing as a percentage of Facebook's overall revenue, but the majority still comes from ads.

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