Facebook Credits Are Dead, Long Live Virtual Currencies

Yesterday, Facebook killed its virtual currency. (Thanks Travis Ross for the heads up.) However, the payment systems behind the FB Credit remain in place, including the outrageous 30% redemption tax, which provided FB with 18 percent of its revenue last year. The difference seems to be one of branding. An FB app can have its own virtual currency and give users a link where they can pay cash to FB (in local currencies - Yen, Euros, whatever Greece decides on, etc.) in return for the virtual coin. The coin then flows through the app back to the devs. The devs then send the virtual money to FB and redeem it again in the local currency (less the 30% tax).This works just like the FB credit, except that the name "Facebook Credit" is not attached to the virtual money. The name is given by the App developer.

So you won't be seeing Facebook Credits, but in an age of seemless, costless translation from one currency to the next, the *name* of the currency no longer matters. The question is now, to what exchange system does a currency belong? What are the transaction fees between it and other currencies? What does it let you buy?

This just keeps getting curiouser and curiouser.


Comments on Facebook Credits Are Dead, Long Live Virtual Currencies:

greglas says:

Very interesting. The page is still live:

https://www.facebook.com/credits/

Apparently, this is seen to improve the bottom line. Maybe it's a tacit recognition that in order to run a working virtual currency, you need to be able to control part of the value obtained from that currency?

Posted Jun 20, 2012 3:39:43 PM | link

greglas says:

Yes, I think that's it -- the problem was that FB credits weren't a real currency in practice, they were sort of an Esperanto currency.

http://www.newstatesman.com/blogs/economics/2012/06/facebook-abandons-its-currency

Posted Jun 20, 2012 3:43:55 PM | link

Edward Castronova says:

A wonderful term: "Esperanto currency."

Posted Jun 20, 2012 3:54:05 PM | link

Greg Costikyan says:

30% isn't outrageous, if you view it as the cost of access to a retail channel, rather than as a transaction fee. E.g., Microsoft takes 30% of revenues for games sold through XBLA, which most developers view as a quite reasonable.

Posted Jun 22, 2012 12:00:59 AM | link

Edward Castronova says:

Interesting. The typical transaction fee to exchange currency is below 5%, so that was my baseline expectation. Viewed as provision of access to a retail channel, its not so outrageous, you're right.

Posted Jun 22, 2012 9:18:25 AM | link

Richard Bartle says:

On CompuServe, we got 8% royalty on MUD1. CompuServe seemed to think that it was unfair that they only got 92% of the income when they owned 100% of the users, but we managed to hold our ground.

Posted Jun 24, 2012 2:42:51 PM | link

Jack says:

How is facebook losing value ? It seems like everyone I know has a facebook profile.

Posted Jun 25, 2012 12:08:34 AM | link

tararadam says:

It is very interesting. It seems FB will not desc soon as many expected.

Posted Jun 28, 2012 11:47:18 AM | link