Notes of Note from John F. Ince

Facebook is making a play to become the dominant player in virtual currency — the funny money you use to everything from digital magazines to Farmville turnips. It’s already a billion-dollar business in which Facebook, the world’s largest social network, will face stiff competition from other behemoths like Apple, Google and PayPal.

Facebook already has a big advantage over those companies: a virtual currency, Facebook Credits, that works across different apps rather than being tied to one specific app or another.

Virtual currencies are a promising way to sell because users buy them in pre-paid chunks, rather than plunking down a credit card for each individual purchase, which increases transaction costs. Skype credits are a classic example: Users don’t add just enough credits for each call, as they did with payphones; they re-up periodically with payments of or so.

Right now, most virtual goods are acquired within games, but music, movies, and other forms of content could follow suit, increasing the stakes in the race to reduce the friction affecting in-app transactions.

Sales of virtual goods are projected to reach .6 billion this year in the United States alone, according to an Inside Network report. About half of that will be spent on social games, and the majority of that in Facebook games such as Farmville.

Facebook claims 30 percent of revenue when people buy these credits — the same cut Apple and Google slice off when users buy virtual goods within their apps — but is already the number one app across all smartphone platforms according to Nielsen.

via Facebook’s Virtual Currency Push Hints at Micro-Payments Battle | forexride.com.

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