Editor’s note: Peter Vogel is co-founder and CEO of Plink, an online-to-offline loyalty program that rewards members for dining and shopping at their favorite national restaurants and offline stores. Reach him via email or follow him on Twitter.

Startups face an ever-changing series of challenges. Luckily for us, we don’t have to reinvent the wheel every time we face a new problem. There are lots of companies out there that we can learn from, both through their successes and failures—and Facebook’s recent experiment with Credits is a great example.

Facebook made three vital mistakes that doomed the Credits experiment and never gave it a fair chance at success.

Mistake #1: Facebook Did Not Encourage Sharing — If Consumers Don’t Have A Reason To Share, They Won’t

Consumers purchased and used Facebook Credits in a vacuum. Consumers who bought Credits typically used them in social games. This is inherently a social activity, where sharing is encouraged (brilliantly, by Game developers like Zynga); however, the process of buying Credits was practically anti-social. Only the end result was shared: a social gamer had more virtual goods to share with their friends, had advanced to a higher level in FarmVille or now had a more elaborately decorated home in The Sims Social. But gamers’ friends didn’t know that they had bought Credits or used Credits as the currency to purchase those goods.

Facebook could have encouraged users to share Credits purchases by offering purchasers a few free Credits to give away to their friends. Imagine receiving the message “John just bought Facebook Credits and thought you might like some, too” along with 5 Free Facebook Credits. That would cost Facebook about $.35* per friend — a pretty low cost for a new customer starting to use Facebook Credits. The actual cost is probably only a fraction of that, because some of John’s friends would never redeem the Credits. (Five Credits has a value of $.50, but Facebook normally keeps 30 percent when redeemed, so they realize a cost of $.35 for every five Credits redeemed.)

Or, what if Facebook offered a Credits purchaser a 25 percent discount on their next purchase of Credits if the user shared or posted about their first purchase? These are two simple ideas, but the point is that there were plenty of missed opportunities for some innovative marketing tactics on Facebook’s part.

Facebook did experiment with a few ways to encourage adoption by giving away Credits to some users and offering a highly discounted rate on a user’s first purchase of Credits. Crucially, these efforts did not encourage sharing, but instead focused on individual adoption of Credits — getting users to use or buy Credits for the first time, not to share the process or purchase of Credits.

In addition, members are still not allowed to give Facebook Credits to their friends. Credits can only be redeemed in social games or in Facebook’s App Store, not exchanged between friends. Imagine the bounty you could rack up on your birthday if each of your friends who wished you “Happy Birthday!” also gifted you 5-10 Facebook Credits ($.50 to a $1.00). Imagine the revenue Facebook could generate if users regularly started sending each other a Credit for an especially funny comment or great shared picture. Facebook tested this concept at a few colleges in 2009, but ended the test quickly and never publicly shared the results. One can assume that students in that test didn’t care too much about giving or receiving Credits because at the time there was little one could do with them. In fact, if you didn’t play social games, there really wasn’t anything to do with Credits. This is a problem that never went away—Facebook never communicated to users how or why they could use Facebook Credits.

Mistake #2: Facebook Never Made A Case For Caring About Credits

Facebook never made an effort or easy way for users to find places to spend Credits. Why would a user want Facebook Credits if they had no idea what to do with them? Sure, a lot of social gamers probably knew you could use Credits in games to buy virtual goods or level-up faster, but only about 25 percent of Facebook’s users play games. Why would the other 75 percent want Facebook Credits? Unfortunately, Facebook never answered that question.

And there were more ways to use Credits, but members had no central place or listing to discover these ways to “spend” Credits. In 2011 users could have streamed a Widespread Panic concert live for 70 Facebook Credits or watched a variety of movies including The Big Lebowski, Jackass, Dark Knight and several others. In January of 2012, Facebook members could have watched the 2012 International Beer Pong Championships live on Facebook at a cost of 50 Credits. Granted, these examples are not varied enough to be appealing to everyone, but Facebook could have at least provided a central place where users could have found ways to use Credits. Lack of discoverability is one of the reasons why more developers didn’t make ways for users to spend Credits (see below). Why build something if no one will ever see it?

Mistake #3: Facebook Discouraged Its Partners (Developers) From Supporting Credits 

Social gaming flourished on Facebook and became a phenomenon embraced by hundreds of millions, because Facebook provided an open platform where developers could create games and share them with Facebook members, and, as a result, the games spread virally as members played online. The games were easy to find as Facebook then had very loose sharing/posting rules — rules that have since become stricter — that easily allowed members to see what games their friends were playing.

Facebook never created a place where members could find non-gaming ways to spend Credits. They could have placed a category or heading on the user’s home page, such as “Facebook Credits,” which showed users a listing of the various ways to use Credits. Without this central location, members had no way to find ways to spend Credits, except for gaming. And with only 25 percent of users playing games, how could the use of Credits ever reach a tipping point?

A “Facebook Credits” section could also have let users easily view their Credits balance. Currently, in order to see your Credits balance, a user has to click the drop-down menu next to the word “Home,” select “Account Settings,” click on “Payments” on the next page, and your Credits Balance will be listed at the top of the page. Obviously the average Facebook member will never see their Credits balance.

Developers were also discouraged from building ways for members to use Credits by Facebook’s 30 percent tax. Every time a member redeemed a $1.00 worth of Credits for virtual goods or a game upgrade, the developer would get $.70 and Facebook would keep $.30. This model may have been financially acceptable (barely) to developers of social games who were essentially selling virtual goods with little or no actual cost to provide, but this was an unworkable model for companies with a real cost of goods. For example, it would have been great to see companies like Netflix or Spotify offer a Facebook subscription where members could watch movies or listen to music for 50 Facebook Credits a month.

But most of these digital media companies pay royalties or licensing fees to utilize the songs and movies they provide to subscribers; often, there just isn’t a 30 percent margin left over to pay Facebook. Before the IPO, Facebook made a vague announcement that it would consider lowering that 30 percent tax on certain verticals, outside of social gaming, but nothing further was announced. By never making this change or providing pricing flexibility to other verticals, Facebook had limited the use of Credits to social gaming, hamstringing the currency from ever having a chance of becoming universally appealing.

Facebook added to the problem of not encouraging users to share Credits by not educating members on what Credits could be used for, and then put the nail in the coffin by financially discouraging developers from building applications or ways for consumers to spend Credits.

Start-ups would be wise to avoid this crippling trifecta of mistakes.

Article courtesy of TechCrunch

Editor’s note: Peter Vogel is co-founder of Plink, a Facebook Credits-based loyalty program that rewards Facebook members for dining and making purchases at their favorite restaurants and stores. Reach him via email at peter@plink.com or follow him on Twitter @pvogel.

Although introduced in 2009, we’ve only seen glimpses of what Facebook Credits will become when it grows up, and Facebook is about to kick off the training wheels.

So far, Facebook has done little to promote the virtual currency of Facebook Credits and it’s been used almost entirely in social gaming. But even with this limited exposure and promotion, Facebook Credits’ fees already represents $557 Million in revenue or 15 percent of Facebook’s entire 2011 revenue. Even more remarkable is that less than two percent of Facebook users bought virtual goods with Facebook Credits in 2011, yet it still represented 15 percent of Facebook’s revenue, primarily from just one vertical – social gaming. One vertical and two percent of members represented 15 percent of Facebook’s 2011 revenue!

Why hasn’t Facebook promoted the Credits Economy more aggressively? 

Some believe that Facebook has waited to promote Credits as a Facebook-wide currency until after the IPO; a valuation based on advertising revenue is less volatile and less likely to attract concern from investors.

A second theory is that Facebook tends to introduce features slowly and let them develop; even though Facebook’s App Platform was opened in 2007 and hundreds of millions of members were playing games, Facebook did little to monetize the platform until they required game developers to use Facebook to process payments on July 1, 2011, about four years later.

Now, about three-and-a-half years after Facebook Credits were launched, Facebook is ready and they’re going to need the revenue to satisfy shareholder expectations.

What will change after the IPO?

It certainly looks like, post-IPO, Facebook will begin promoting Facebook Credits heavily and will soon be making Credits easier for consumers to use and more profitable for developers.

On the consumer front, we’re predicting that a user’s Facebook Credits balance will be more prominently displayed (still privately) on their profile. Currently it’s hidden a few clicks deep under Home>Account Setting>Payments.  Facebook will also start featuring a list of places where members can spend Credits. Facebook’s new App Center is a great start for this, increasing the ease with which users can find new apps – not just games – some  for free, some for purchase with Credits. Facebook could also feature a new category under “Favorites,” listing recommended ways to spend Credits based on that specific member’s interests, friends, etc.

In addition, Facebook will likely run more promotions offering consumers Credits at a discount, “Buy  $1 in Credits and get $2-3 dollars worth of Credits for free.” This is similar to promotions Facebook ran in games just few months ago, but Facebook will use the same strategy outside of games to attract a wider audience.

Developers will also benefit from all the promotion that makes Credits easier to use for consumers, but for most developers, increased discoverability is key. No matter how great an app or game they build, if a consumer can’t find it, everyone loses. For the Facebook credits economy to flourish, discoverability is essential; increased listings, rankings, categories and a well organized App Center is key and Facebook is already on their way to providing developers with these features.

Facebook has also hinted, with little explanation, that in certain verticals outside of gaming, Facebook will consider lowering the 30 percent tax they typically keep on Credit transactions. This may open the door for Open Graph participants like Netflix, Spotify and the Washington Post, to name a few, to begin accepting Credits for monthly subscription plans, created just for Facebook. Since these partners and more than 50 others and counting are all integrated into Facebook’s Open Graph, already with the ability to share “like’s” “listening to,” and “watching,” the next logical step is to begin accepting Credits as payment. By lowering the 30 percent fee it is now financially possible for these partners to participate in the Facebook economy.

What does all this mean for the Facebook Credits Economy?

I’ve predicted and still believe the revenue generated from Facebook Credits will double every year for the next five year, eclipsing the revenue generated by advertising by 2016.

Credits will emerge from gaming this year and be used Facebook-wide for all sorts of paid apps ranging from dating to entertainment (TV, movies, music and live streaming of pay-per-view events) to more functional utility apps you might be used to buying for your smart-phone.

Facebook Credits is about to grow up fast.

Social gaming was its birth, the new App Center is its first step … and we’re all waiting to hear its first few words. I’m guessing it will be some version of, “Pay… here… always.”

Article courtesy of TechCrunch

Editor’s note: Dean Alms is the VP of Marketing & Business Development at social entertainment company Milyoni. Follow him on Twitter @deanalms.

Roughly 16 billion Facebook Credits were distributed and consumed in 2011. In 2012, I predict that the use of Facebook Credits will soar by three times to over 40 billion Credits spent on virtual goods, digital goods and more. The growth will be fueled by new digital content available on Facebook, use of Facebook Credits to reward brand loyalty and better marketing of a social currency that is still in its infancy.

The following chart shows the growth of Facebook Credits revenue reported by Facebook from 2009 to 2011.

This chart demonstrates that with a growth rate of 300 percent in 2012 (lower growth rate than in prior years) the number of Facebook Credits in circulation will soon reach 47 billion. If 7 billion remain unused in consumer accounts by the end of the year, then 40 billion will have been spent on social gaming, social entertainment and new innovative applications. At 10 cents per credit, total revenue generated from the Facebook Credits market in 2012 will reach approximately $4 billion.

Can Facebook Credits really grow to over 40 billion in circulation in 2012? The answer is yes. Here are some of the key assumptions and business drivers of this new international currency for virtual and digital goods.

• Facebook, seeing the opportunity and its contribution to the bottom line, will put forth a stronger marketing effort in order to communicate the value this currency brings to both merchants and consumers. Facebook Credits are still new and their value can still be hard to understand. Many don’t know much about this currency, where to get them, what they can and cannot use them for, and why they matter. This marketing effort will likely leverage mainstream marketing channels: TV, Radio, and Print to simply get the message out—Facebook Credits are hugely valuable and everyone should use them.
• Retail efforts will pick up steam. iTunes gift cards will face stiff competition from Facebook as young consumers begin asking for these cards for birthdays and holidays instead of a single-brand card like iTunes. The variety of apps with built-in social interaction will create a strong demand for the next-generation of entertainment.
• Hundreds of big brands and thousands of smaller brands will use Facebook Credits in 2012 as an incentive tool. Facebook Credits will be the airline miles of the next decade as consumers are rewarded with Facebook Credits for brand loyalty. Companies will encourage customers to visit online stores and reward customers with Facebook Credits in varying amounts because the online world-of-mouth and viral effects are endless.
• Social Gaming will continue to grow with new games and new audiences playing them. Social Gaming, currently led by Zynga, will make billions of dollars in this market with Facebook taking a fee from every transaction conducted on its social network.
• Social Entertainment will grow in size and significance. In 2012, thousands of movies and hundreds of live events (concerts, sporting events and more) will be available on Facebook for 30 to 100 Facebook Credits each. Today, 89 of the top 100 Facebook Fan pages are entertainment-oriented – music, movies, and sports properties or personalities—and fans always want more content from these pages. In 2012, they’ll be more and more likely to use Credits to access it.
• Facebook Credits are a global currency. My company, Milyoni, has created a number of live and video on demand offerings on Facebook. Many of them have reached fans from over 30 countries using Facebook Credits as the only currency. This frictionless currency conversion experience is a key factor in the global adoption – no need to worry about exchange rates or fluctuating monetary values. Facebook provides seamless currency conversion for 47 currencies, and climbing.
• The Facebook Open Graph. Less appreciated, but very important, is the open graph API’s and Facebook’s support of the platform where people, apps and interactions continuously grow. If Facebook’s team does not meet a specific need, there are other innovative start-ups that will leverage the Open Graph to produce the apps and services that both consumers and merchants need to make this ecosystem thrive.

Given this context, spending 40 billion Facebook Credits or $4 billion in virtual and digital goods is achievable. As music, movies and other entertainment content supplements an already growing base of social gamers, this number may end up being on the low side. The bottom line for all businesses with social media ambitions is: create a strategic initiative to leverage Facebook Credits; ignoring it means missing out on the massive market opportunity they represent.

Article courtesy of TechCrunch

Plink, a Facebook Credits-based rewards program, closed an angel investment round of $633,000 at a $5 million valuation.

Consumers who sign up for Plink can earn Facebook Credits when they use their credit card at brick-and-mortar locations, such as Taco Bell, Quiznos and 7-Eleven. Plink is one of a few companies betting on the rise of the social network’s virtual currency, Credits.

“Facebook Credits are proving to be the missing ingredient that bridges the gap between social media marketing and offline sales,” Plink co-founder Peter Vogel said in a press release.

When Plink launched in January, we applauded how the program connects offline transactions with people’s online profiles without placing additional onus on consumers or businesses. Credits accrue and can be redeemed with ease, similar to Frequent Flier Miles. The idea of Facebook Credits being used as rewards is an interesting one; people who might not see value in spending actual money for the virtual currency can earn Credits through Plink, for example, and then might be more likely to spend those Credits on virtual or digital goods. Brands end up subsidizing transactions that help developers and Facebook monetize.

The dilemma now, however, is that Credits are primarily used among players of social games because Credits are only mandatory for in-game transactions, not other digital goods. Studios that offer movies on the social network can use PayPal, thereby avoiding Facebook’s 30 percent fee. Media companies won’t start offering content for Credits until they see demand, but consumers won’t care about Credits until there is content worth spending them on.

Until Facebook makes a push to make non-gamers aware of Credits and get non-game developers to implement the currency, the efforts of Plink and companies like Ifeelgoods could be the primary drivers of the Credits economy. Ifeelgoods works with brands to offer Credits in return for user actions like watching a video or sharing a marketing message.

Angel investment firm Ahlborg Acquisitions and Matomy Media Group, which offers affiliate marketing and reward-based advertising platforms, participated in the round. Plink says the investment will go toward building the product and developing partnerships with restaurants and retailers. Last week, the company announced a partnership with more than 3,500 Arby’s restaurant locations.

Article courtesy of Inside Facebook

Why have leading consumer brands started selling on Facebook?

The results of an 18-month study on the emerging trend of ‘f-commerce’ conducted by SCT editor Dr. Paul Marsden tells the tale. It provides a critical overview of f-commerce  - selling with Facebook – specifically as it applies to consumer brands and identifies key risks and opportunities for using Facebook as a commerce channel.

It also advocates an alternative solution for brand pages on Facebook – fan-stores selling fan-first/fan-exclusive products for the purpose of promoting brand advocacy.

Five key brand-building benefits are identified and a blueprint for setting up a Facebook fan-store is outlined using an evidence-based 3-point “advocacy activation” formula. The report concludes by outlining emerging trends and new opportunities for consumer brands.

INTRODUCING THE F-COMMERCE ECOSYSTEM

F-commerce started 2009 with 1-800-FLOWERS setting up the first fan-store. Others soon followed – musicians, film and TV shows, celebrities, retailers and brands. Initially, the focus was selling products with e-commerce apps for Facebook pages, but, since that time an evolution has occurred to include a full ecosystem of selling solutions that include the following:

Selling on Facebook

• E-commerce apps for Facebook pages - transactions are conducted without leaving Facebook; examples of brands include ASOS, JP Penney, GNC and others
• Facebook Credits – Facebook’s own currency used for purchases within the social network for virtual goods, digital products.

Selling with Facebook

• Storefront apps for Facebook pages – product showcase apps linked through to stores
• Facebook apps for e-commerce sites - toolset designed to allow businesses to simplify, personalize and socialize both the FB fan-store and retailer’s e-commerce site to enhance customer experience; these include Facebook Social Plugins, authentication mechanisms, API and Open Graph;
• Facebook Check-in Deals – mobile, location-based advertising designed to drive retail store footfall;
• Facebook Advertising – display ads designed to drive traffic to e-commerce sites, footfall to stores or retailer’s fan page.

F-COMMERCE – SIZZLE IN THE SOCIAL COMMERCE STEAK?

• F-commerce has become the “poster child” for social commerce;
• Investment funds are following f-commerce innovation; in the first few months of 2011, over $2bn investment was poured into social commerce ventures;
• Consultants Booz & Co forecast that the social commerce market will drive $30bn in annual sales in less than five years time.

DOES F-COMMERCE WORK?

Reasons from detractors as to why f-commerce will fail:

• Doubts persist around the viability of f-commerce success, comparing it to attempts by brands to sell via Second Life;
• Poor conversion rates cause it to fall into fourth place behind email marketing, search marketing and affiliate marketing;
• Privacy, data ownership and security issues also factor into bearish predictions about the future of f-commerce.

Reasons advocates say f-commerce will work:

There is a small, but growing body of evidence to support its viability. Example include:

• 40x increase in referral traffic from Facebook for Levi’s e-commerce site after implementing the ‘Like’-button in April 2010;
• 100% increase in revenue from Facebook traffic within two weeks of adding the ‘Like’ button for sports retailer Giantnerd;
• 1000 diapers sold by consumer products giant Procter & Gamble in under an hour on its Facebook store.

Considering the reasons proffered by both antagonists and protagonists, it is too soon to tell how much of a role Facebook will play in e-commerce.

Brands should think beyond the use of f-commerce as a transactional medium to one focused on increasing customer lifetime value (CLV) , which the study defines as today’s value of the sum of all purchases that have and will be made by an average customer. It is in this arena that some of the greatest innovations are taking place.

F-COMMERCE FOR BRANDS: FIVE REASONS

• Reason #1: Facebook ROI – f-commerce offers a real solution to delivering a measurable ROI on Facebook
• Reason #2: Brand Experience – f-commerce can help brands deliver a compelling experience in Facebook that beats expectations;
• Reason #3: Brand Insight – f-commerce can help brands better understand their customers;
• Reason #4: Brand Loyalty –  f-commerce can drive loyalty among customers;
• Reason #5: Brand Advocacy – f-commerce can activate brand advocacy through fan-exclusives and fan merchandise.

BRAND BUILDING WITH THE ‘SOLOMO’ CONSUMER

• Conservative brands may choose to wait out this period of f-commerce experimentation until more evidence appears to support its use;
• Learning how customers use social, location-aware and mobile technologies (SoLoMo) are reasons not to wait;
• The SoLoMo consumer is changing how consumers connect and engage with brands;
• A growing body of research suggests that branding today has less to do with what a brand says about itself and more about what other people say about it.

F-COMMERCE: TURNING FANS INTO ADVOCATES

F-Commerce can assist in building brand advocacy by helping brands get new products that are worth talking about into the hands
of the people most likely to recommend them – brand fans.

Example: Chanel selling new cosmetic products from its Facebook fan-store before they reach the brick-and-mortar store – giving brand fans exclusive ‘fan-first’ access and thus something to talk about to their friends.

Advocacy Activators

• #1: Experience – advocacy is primarily driven by salient memories of personal experiences with products or brands;
• #2: Involvement – advocacy is driven by the degree to which we care about something, including products and subjects with which we have high degree of personal involvement and interest;
• #3: Incentives – advocacy is also driven by incentives that motivate consumers to advocate.

Advocacy Activation with Fan-Stores

• Fan-stores provide a channel through which advocacy activators can be put into play;
• Fan-stores enable brands to relate to consumers as product advisors, empowering them to have input on product development;
• Fan-stores can be used to incentivize fans to act as advocates.

Activating Advocacy with Fan Merchandise

• Advocacy can be generated through the use of exclusive fan-first or fan-only merchandise offerings;
• Branded fan merchandise can also be used to promote advocacy; ex: Westin hotels selling branded robes, candles, towels, sheets and spa products.

F-COMMERCE FUTURE TRENDS

1. Systematic ‘fan-seeding’ – consumer brands will use Facebook fan-stores systematically to “seed” new products with brand fans;
2. Viral fan-stores – fan-stores will use viral mechanisms – content appearing in newsfeeds, for example – to promote advocacy;
3. Empowered involvement – using product review and rating mechanisms will get fans more involved, thereby increasing advocacy;
4. ‘Pop-up’ fan-stores – temporary fan-stores will be used to support new product introductions, advertising campaigns, special events and other brand activities;
5. Analytics & logistics – specialized fan-store analytics and metrics will emerge, along with fan-store logistics companies that offer fulfillment and drop-shipping services;
6. Digital and virtual goods – growth in fan-stores will be driven by high-involvement categories offering the instant gratification;
7. of digital downloads: music, movies, TV, gaming, publishing and sports, ticketing, and digital merchandise;
8. Facebook Credits – fan-stores will increasingly allow frictionless fan payment with Facebook Credits for both digital and physical products;
9. Fan-store agencies – agencies that specialize in turn-key Facebook fan-store management will arise;
10. Fan marketing – a new era of ‘fan marketing’ with marketing campaigns and special products designed specifically for brand fans may emerge;
11. Beyond the brand – fan-stores may shift from brand-centricity to interest-centricity; brands become curators of products for non-competitive brands.

CONCLUSION: START WITH THE SMILE AND LEAD

Consumer brands can build advocacy with ‘fan-first’ marketing using Facebook fan-stores to get new product lines and fan merchandise into the hands of those most likely to recommend them – their Facebook fans.

There is no “one-size-fits-all” template. Instead, brands should listen to Facebook fans, experiment with techniques to drive advocacy, adapt to an outcome-driven solution, and continuously develop fan-stores to improve fan experience.

Success depends, not on processes, but on insight gained from fan interaction; making fans “smile” by exceeding expectations should be the number one goal.

Article courtesy of Social Commerce Today

Only about 5% Facebook gamers pay to play freemium games. If Facebook could up this percentage, it and its third-party app developers could make a lot more money. That’s the idea behind a new promotion Facebook announced today where those who’ve never bought Facebook Credits virtual currency before will be offered $4 in free Credits when they buy $1. This gets users to set up their credit card and experience the rush of paying for an enhanced gaming experience.

Years ago when Facebook first launched its Credits virtual currency, it offered free Credits to some users. While this might have got them hooked on spending virtual currency, it didn’t addict them to paying for it.

Facebook needs credit card numbers badly. Apple has amassed an enormous collection after 10 years of iTunes Mp3 sales, which is now helping it easily sell apps and in-app purchases. If Facebook wants to grow its revenue to satisfy outside investors and be a competitive mobile gaming platform, it needs to get users ready to pay.

But like the street corner pusher says, “this ain’t no charity”. Facebook is only surfacing the promotion in sidebar ads, and TrialPay in-game promotions and offer walls to those who haven’t already bought Credits. User than have to set up a credit card or connect a PayPal account and pay $1 to get the extra $4, or 40 Credits. And next time, they’ll have to pay full price. Facebook wisely does not provide any way to reach the promotion directly in order to deter users from trying to cheat their way to free currency.

If you want to claim your own free Credits, your best bet is to play games by clients of Facebook’s official offers partner TrialPay, such as those by Playfish, Playdom, Kabam, Crowdstar, and iWin. These include The Sims Social, Gardens of Time, It Girl, and Kingdoms of Camelot. Then visit the offer wall or click through Deal Spot signs within games.

With any luck, Facebook will be able to up the percentage of users who monetize, and thereby discover new whales — gamers who spend orders of magnitude more than the average payer and drive the bottom lines of both indie developers and giants like Zynga. Call him Ishmael…Zuckerberg.

[Image Credit: Screenrant]

Article courtesy of TechCrunch

What do Taco Bell, Dunkin’ Donuts, 7-Eleven. Quiznos and Red Robin have in common? Aside from serving up food items that may expand your pants or dress size, they now offer virtual currency in the form of Facebook Credits just for making a purchase.

This new customer rewards program is the brainchild of startup company Plink, which, according to the website, is the “first-ever Facebook Credits-based loyalty program that rewards members with Facebook Credits for dining and shopping at their favorite restaurants and offline retailers.”

Risk: Credit Card Data Required

To use the program, new members create an account, then register a credit or debit card of their choice. Plink members then earn Facebook Credits by using their registered card when dining-out or shopping at participating restaurants and offline retailers.

Registering a credit or debit card requires that Plink be given access to sensitive bank account information. For users who are squeamish about risking such data, Plink ensures its security protocols are locked down tight. The site is verified by VeriSign and Truste and uses bank-level data encryption.

Reward: Convenience, Instant Credits, and Low-Cost

Once users register, any time they make a purchase at any of the participating retailers they earn instant Facebook Credits, which can be used to buy premium stuff on social games like Farmville, Cityville, TheSims, or any other game that accepts them.

An additional benefit, one that applies both to retailers and customers, is convenience. Customers no longer have to carry cards or keychain fobs, print out coupons, or use a code to get rewards. For retailers, the program requires no POS (Point-of-Sale) integration, paper coupons don’t have to be collected, or staff trained. There are no set-up fees, print costs or merchandise to purchase either. Participating retailers simply pay Plink a percentage of each sale that occurs from registered members.

Another benefit, especially to retailers, is the low-cost involved with using virtual currency. “The reason virtual currency microincentives work is because they are so cheap to distribute, and users perceive their value as higher than their cost,” said Techcrunch, which added, “Since it essentially costs nothing to drop Credits into someone’s Facebook account, businesses can cost-effectively reward users with just a few Credits, which typically cost $0.10 each.”

Social Games a Growth Industry

While I’ve never been a fan of social games, it is an industry that is experiencing phenomenal growth. A recent study from Juniper Research said that the amount of money being spent on virtual currency via in-game mobile apps will jump from $2.1 billion in 2011 to $4.8 billion by 2016.

This appears to be a win-win-win for all concerned. Customers are rewarded with Facebook Credits they can use on social games. In return, retailers are rewarded with greater loyalty from those customers. And, finally, Plink is rewarded with a portion of each transaction that results from this fast food meets Farmville love fest.

“Facebook Credits is the missing ingredient that’s been needed to connect social media to offline sales,” said Plink founder Pete Vogel. “Now with the ‘glue’ of Facebook Credits our national restaurant and offline retailer partners have a way to tap into the nearly 800 million users on Facebook, motivate them to become loyal customers, and reward them.”

Article courtesy of Social Commerce Today

 [Editor's note: This is a guest post by Peter Vogel, co-founder of Plink, which lets consumers earn Facebook Credits for dining out and shopping online. He argues the rise of Open Graph applications will push Facebook Credits beyond social games and one-off experiments to become a major source of revenue for Facebook and developers.]

Although Facebook Credits is still primarily an in-game currency, in 2011 we began to see a glimmer of what Credits will look like when it grows up.

Movie studios like Miramax, Warner Bros. and Paramount Pictures, not to mention BBC Worldwide began offerings movies and TV shows for rent on Facebook. As an example, in promotion of “Mission: Impossible, Ghost Protocol,” the series’ first three movies were made available for rent on Facebook for 30 Credits per rental. In addition, to promote the launch of “Tower Heist,” Universal Pictures gave away 1 million Facebook Credits ($100,000 value) in an online scavenger hunt. DJ David Guetta began selling MP3s on his Facebook Page (19 Credits per track) and U.K.’s “Big Brother” and “The X Factor” began allowing fans to vote for contestants using Facebook Credits.

These examples, however, were few and far between in 2011 and it’s fair to say that even most Facebook users don’t know what Credits are for. 2012 is the year this will change.

Prediction 1: Facebook adds subscription billing as an option for Facebook Credits

Currently companies who sell virtual goods or products on Facebook can only accept one-time payments via Facebook Credits. For example, a player can use a small amount of virtual currency to buy a new cow in Zynga’s FarmVille. But media companies such as Netflix and Spotify would need a monthly billing plan. Consumers could agree to pay 100 Facebook Credits for monthly access to movies or music and would agree to be billed monthly. Until Facebook adds a monthly billing feature, it will be difficult or nearly impossible for many of the largest media providers to accept Credits.

Facebook will continue to improve the Credits platform in other ways as well to make it more functional and profitable for developers to use. Credits is the primary way, if not sole way, most developers generate revenue, so you can be sure that Facebook is truly committed to making Credits as flexible and effective a currency as possible.

Prediction 2: Open Graph Partners, including Spotify and Netflix, start to accept Credits

During its F8 conference, Facebook announced 17 music partners who would integrate Open Graph, allowing users to share their listening and other behaviors with friends. Spotify initially gave users a six-month free trial. Now, though, the nearly five million new members who’ve been getting unlimited free music will be limited to 10 hours a month and only five plays per song — not that much for a real music fan. Look for Spotify to add Facebook Credits as a payment option for these new users, potentially even offering special introductory rates to entice users to commit to a year-long membership.

In addition, a few notable facts lead me to believe something big is coming from a Netflix/Facebook partnership.

1. Netflix’s CEO Reed Hastings joined the Facebook Board of Directors in June of 2011.
2. Netflix recently signed deals with BBC, DreamWorks and Disney to increase the quality of available streaming content.
3. A piece of legislation cleared the House and is on its way the Senate that would reverse a law enacted in 1998 that forbids public disclosure of video rental records. This would prevent the sharing of movies being watched between Facebook users. Much as users now have “Like” or “Listening to …” labels, it’s widely anticipated there would be a “Watching” tag as well.

This increased level of sharing could dramatically increase the number of Netflix movies watched and shared on Facebook, leading to a Facebook-only Netflix plan that could be paid for with Facebook Credits.

Prediction 3: The size of the Facebook Credits economy will double every year for the next five years

Similar to Moore’s Law, which famously predicted that the number of transistors than could be placed inexpensively on an integrated circuit doubles every two years and Mark Zuckerberg’s Law that (scarily to some) states that people will be willing to “share” twice as much each year, I believe the Facebook Credits economy will double every year for the next five years.

This is based on the staggering amount of new ways that people will be earning and spending Facebook Credits over the coming years and the international growth, which will follow innovation in the U.S. This is conservative based on reports we’ve already seen that global revenue from Facebook Credits more than tripled in size from 2010, $140 Million, to $470 million in 2011. By 2016, Facebook Credits could be a $15 billion business.

What’s driving this? One example is the efforts by Milyoni, one of Facebook’s leading commerce and video streaming platforms. This year, Milyoni was responsible for hosting the first ever movie available for rent on Facebook, Warner Bros.’ “The Dark Knight,” at a cost of 30 Facebook Credits. Milyoni also hosted the first ever live pay-per-view concert on Facebook, “Widespread Panic” live from Austin, Texas, at a cost of 50 Credits. This year, according to Dean Alms, VP of strategy and marketing at Milyoni, they have deals in place with 13 movie studios and expect to offer 3,000 movies for rent on Facebook. That’s compared to less than 100 films offered in 2010. In addition, the company has plans to stream 40-50 live concert and events available on a live pay-per-view basis, compared to just two in 2010. Multiply this by other innovative companies and you get an idea of what’s to come this year and beyond.

Final Take:

Facebook has proven that the Credits model can work in social gaming, which represents between 25-30 percent of Facebook users, and will now utilize the same model to first enter the business of music, movies, TV and any other shareable media, before entering larger industries like financial services and health care in the coming years.

While still relatively unknown, Facebook Credits will emerge and begin to mean very real cash to a quickly expanding group of first-mover entrepreneurs and innovators who are just starting to get a whiff of the opportunities presented by the Facebook Credits economy.

It’s for real and it’s here.

Peter Vogel is co-founder of Plink, a Facebook Credits-based loyalty program that rewards Facebook members for dining and making purchases at their favorite restaurants and stores. Reach him via email at peter@plink.com or follow him on Twitter @pvogel.

Article courtesy of Inside Facebook

German offer provider Deal United today announced it is entering the virtual currency incentives industry with the launch of “Credits Rewards”. The new service allows brands to reward to users with Facebook Credits when they make purchases, registrations, signup for newsletters, enter contests, fill out surveys and more. Because virtual currency is so cheap to distribute and Facebook users may value Credits higher than their actual cost in dollars, they can be a cost effective way for businesses to reward users for following their call actions.

Deal United will be competing with industry pioneer ifeelgoods, a Credits microincentive startup that launched a year ago. The space has plenty of runway, though. As users gain the ability to pay Credits for digital media and content as well as virtual goods, demand for Facebook’s virtual currency will rise and Deal United incentives will become more appealing to users and businesses.

Founded in 2007, Deal United aggregates offers directly from advertisers to provide game developers the ability to let their users pay for virtual goods by shopping. In June 2011, Facebook chose Deal United as one of two European partners that can contribute offers to its official offer walls that are run by TrialPay. The reduced margin associated with having to deliver offers through an intermediary may have pushed Deal United to branch out into virtual currency incentives.

With Credits Rewards, businesses can create a value exchange where they previously had to nag users to follow their calls to action. They can set their own reward value, for example providing two Credits for signing up for their email list, five for following them on Twitter, 10 for filling out a survey, or 50 for making a purchase. These actions don’t cost a user anything, so it’s easy to justify taking a few seconds or receiving some marketing messages in exchange for Credits that help them play their favorite social game, rent a movie, or gain access to a pay-per-view experience.

If the current trend continues, Facebook Credits will be accepted as payment by more and more online companies, and one day they might let users buy physical goods. Social gaming is a booming industry in Germany, with companies like Wooga processing huge volumes Facebook Credits payments. The Munich-based Deal United will be well positioned to attract European brands looking to capitalize on the demand for Credits.

By becoming one of the three companies licensed to dispense Facebook Credits, Deal United has partially tied its fate to the success of Facebook’s virtual currency. If demand continues to rise, and especially if Credits for Websites and HTML5 mobile apps take off, Deal United’s Credit Rewards could become a crucial customer acquisition method.

Article courtesy of Inside Facebook

Facebook has just announced a closed, limited test in which for the first time it will allow websites to process payments for virtual goods using Facebook Credits. Facebook’s virtual currency is currently the mandatory payment method for all Facebook games on the web, a payment option for Facebook apps, and became available as a payment option to mobile app developers last week. The only initial launch partner for “Facebook Credits for Websites” will be online and downloadable games site GameHouse that until now only accepted payments through credit card and PayPal.

During the test, Facebook will closely monitor the demand for Credits as a payment method and the user experience of those that pay though its virtual currency. If a high enough percentage of users make purchases through Credits and feedback is positive, Facebook may expend additional resources to let more websites add Credits as a payment option.

Eventually, Facebook might open the option to all web developers selling virtual goods or digital media, allowing the social network to earn a 30% cut on transactions across the web. In exchange, sites will be able to provide an easier way to buy their goods and media than punching in credit card or PayPal details. Facebook has provided a signup page for developers that want to try Facebook Credits for Websites if the test is expanded.

GameHouse users that sign in to the site with their Facebook login will only see Credits as a payment option, not credit cards or PayPal. If they choose to buy virtual goods or proprietary in-game currencies, Facebook Credits will be deducted from the same account that Facebook canvas and mobile games pull from. Similar to within Facebook, users without an existing balance of Credits will be able to purchase a bundle within the payment flow.

Unlike on Facebook where Credits are the exclusive payment method for games, GameHouse may still offer other payment options. However, Ian Fliflet who handles corporate strategy for GameHouse tells me that those signed in through Facebook won’t see the option to pay with a credit card or PayPal account. This could anger some long-time GameHouse users that try signing in through Facebook for the first time only to find their preferred payment options missing. This could negatively skew feedback on Credits for Websites.

If the test does indicate a demand for Credits as a payment option outside of Facebook.com, its unclear whether Facebook would require developers to use its virtual currency exclusively. It could simply make them an additional payment option, the way Credits currently are for Facebook.com apps as well as mobile apps and games. However, it might extend this test model where sites that want to use Facebook as an identity and login provider will also need to use its taxed virtual currency.

We’ll have more analysis on the how the Credits payment flow works for websites and what Credits for Websites could mean for the social gaming and digital media industries shortly.

Article courtesy of Inside Facebook