Facebook’s virtual currency monetization plan – doomed to failure?
By Dave Parrack
Facebook may have an impressive number of users – 175 million at last count – but it’s been struggling to figure out how to turn that user base into revenue for the site. Could virtual currency be the way for Facebook to dig its way out of the financial black hole it currently finds itself in?
Facebook is suffering from the same problem facing all member communities right now – how to turn traffic into cold hard cash. It isn’t alone, with YouTube and Twitter also being in similar positions, with even the mighty Google so far failing to turn YouTube’s traffic into profit for the company.
Facebook already offers a virtual currency of sorts. Users can purchase credits (100 for $1) from the Facebook Gifts store and then use those to buy virtual gifts such as a kiss, a flower, or a cupcake. These can then be bestowed upon another Facebook user for, well, no reason whatsoever. I personally cannot see the appeal but it was worth an estimated $35 million to the company in 2008 so some people clearly like the system.
Now, according to VentureBeat, Facebook is experimenting with expanding the virtual currency system to enable credits themselves to be given to friends. The concept is currently limited to giving a certain amount of credits to a comment or Status Update you like but could easily be expanded and built upon.
The system is currently being trialled on 15 U.S. college networks on Facebook as well as Facebook’s own network. It’s stilted owing to the fact that once given, credits can only be then given on by the original recipient to a new one. In other words, there is no way to convert the credits back into cash. Yet.
In its current form I can’t see any more worth in this than the Virtual Gifts that have been part of Facebook since February 2007. Would anyone really part with real-life cash in order to appreciate someone’s comment? I certainly wouldn’t but then maybe I’m just tight.
On the other hand, if this is just the beginning of a virtual currency system that could grow and expand then there could be some real worth there, both for Facebook and its users. Receiving credits which could then be used to purchase real products or converted back into cash is a lot more tempting.
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April 5th, 2009
Wait…your saying they don’t run these sites because they love us?
Sounds like a daft approach to me so far. Surely they can come up with something better than that? And virtual currencies suck. They should tell it like it is.
April 6th, 2009
I agree, it seems that the company is grasping for straws.