AgencyUK comment on Virtual Currency | New Media Age

As Facebook prepares to roll out its Credits virtual currency, the social gaming industry is taking an interest. But there are still concerns about its potential for take-up among gamers.

Disney, Google and MTV Networks have recently invested in social gaming, BBC Worldwide is developing projects in this space, and social games publisher Zynga has introduced branded in-game advertising and branded virtual goods. Most of Facebook’s 500m users play games on the network, according to social games publisher Playdom, and as the activity grows, Facebook’s virtual currency, Facebook Credits, is expected to be fully rolled out this month. Offering users just one source of currency across the platform, Credits is designed to simplify online transactions.

Robert Nashak, executive VP of digital entertainment at BBCWorldwide, says, “Our hope is that, just as Facebook made it easy for people to start playing games with their friends, Facebook Credits will make it easier for people who wouldn’t dream of paying to play to start spending on the games they love.”

And herein lies one of the key challenges for Facebook to make this virtual currency work: achieving mass consumer buy-in. Saman Mansourpour, partner at creative agency TheAgency, says, “At the moment people who engage with virtual currency are the hardcore gamers (and some light gamers, but not to a great degree), so getting mainstream adoption is the first challenge.”

Brian Taptich, senior VP of strategy and monetisation at social games developer Rock You, which has just signed a five-year agreement to make Credits its exclusive virtual currency, agrees, saying the company spends “all its time” thinking about how it can increase the number of people buying virtual currency within its games. “This is a big challenge. If you have 10m people playing your game and 9.5m have no interest in paying anything, how can you get them interested in your virtual currency?” he asks.

The question of how much virtual currency is actually worth is also being raised. As Mansourpour says, “I think, at the moment, virtual currency can go up to about seven or eight pounds and people will transact comfortably at that level, and it’ll probably rise a bit. But will it get to £100 on a regular basis? That’s a tall order.”

A shift in strategy

Problems may also arise as Facebook changes its fundamental proposition. “Whether it’s casual narcissism, keeping track of your friends’ latest news or viewing photos, these are all simple behaviours, easy to perform and act out on Facebook,” says James Kirkham, director of digital agency Holler. “Historically, once you try to integrate payment systems or an economy, then you’re also creating a potential barrier to use.”

Yet Facebook developer Deborah Lui writes on her blog: “Our early testing has shown that users paying with Facebook Credits are significantly more likely to complete a purchase than the average Facebook user.”

She adds that by providing a single, cross-application currency, Facebook’s goal is to make transactions simpler, “leading to a higher conversion rate for developers”. But getting developer support might not be without its trials.

“The key challenge for Facebook will be to encourage members of the development community to drop their own virtual currencies in favour of Credits, by demonstrating an overall uplift in user take-up and revenues,” says Oli Madgett, co-founder of social video game specialist We R Interactive.

Ravi Mehta, VP of product for social gaming platform developer Viximo, points out that one social games CEO has anonymously indicated that his company achieved a 25% increase in revenue by adopting Facebook Credits. However, when Facebook released its figures in February, Credits made up just $10m of the $700m generated.

Increasing these numbers and strengthening relationships with developers will be key, but the 30% cut that Facebook will take could also prove to be a stumbling block. Credits is a move away from the stance the social network took when it launched apps in 2007, when it claimed that developers would retain the advertising and transaction revenues they generated.

Despite this apparent change in heart, Shannon Edwards, European director of fashion website ShopStyle (owned by PopSugar), seems unconcerned. The company has recently launched a Facebook game called Retail Therapy which allows players to design, merchandise and sell clothes in their own virtual fashion boutiques. It has adopted Credits as its virtual currency.

“From our perspective, the promotional opportunities from Facebook outweigh the percentage that it takes from each transaction,” says Edwards. She adds that payment methods are likely to still be supported in the game in future – on mobile devices, for example – but having one currency across Facebook “is a plus”.

Extending Credits to Facebook Connect could eventually also prove to be a pull for developers. We R Interactive’s Madgett says, “A lack of Connect integration does create barriers for developers whose games are published on standalone URLs, as well as on Facebook.”

Deal or no deal

If Credits works, there are several opportunities for brands to benefit. Social game developer RockYou is already working with companies in the US within its stable of games. One vehicle is its Deal of the Day ad unit, which sees gamers rewarded with Credits when they interact with in-game advertising. More than 1m people completed the Deal of the Day within four days of launching in April this year.

TheAgency’s Mansourpour questions “false incentivising” of Credits being awarded in games. “How many people click on the ad to get the free coins and then do nothing with it? I would say the vast majority.”

Rock You’s Taptich counters by explaining that targeting will be vital for brands. “The key is having the demographic information about users and what they’re doing across your portfolio of games, to deliver a targeted message to the right person at the right time,” he says. “You have to bring to bear a lot more science than just throwing it out there and hoping it’s a numbers game.”

Other brands will take this simple reward mechanic one step further. Adam Field, head of social media at digital media agency Media Contacts, says those that are clever could start to link purchasing and brand advocacy to Credits. “If a customer buys a product, then give them a virtual reward they can use within a social gaming experience,” he says. “However small that is, to someone competitive it’s the holy grail. Take their online social gaming into the offline world to grow its potential and encourage deeper brand engagement.”

Michael Salmon, head of digital at digital agency Tayburn – which has worked with Chewits on a recent series of games that were integrated into a Facebook application and allow users to compete against friends within the social network – agrees that this more holistic approach presents an opportunity for brands. “The key to making Credits applicable for brands like Chewits is not only to have an environment in which Credits can be exchanged but, perhaps, to use them as a redeemable incentive within promotions, creating something that links the virtual world of the brand to the real world.”

PopSugar’s Retail Therapy game combines the real and virtual, working with brands including Banana Republic, Gap and TopShop. “For brands, there are opportunities to give away Facebook Credits as a reward for purchases or as an incentive to check out their virtual store within Retail Therapy,” says Edwards. “The products featured in the game click through to ShopStyle and then again to the retailers’ websites.

This is another way consumers can engage with brands’ products, even having their avatar try on clothing before purchasing.”

But others believe most brands would be foolish not to forge partnerships with games developers if they’re looking to ride the wave that Credits could create within the burgeoning social gaming space. “I’d suggest that they should be reaching out to Facebook developers who are creating games built around virtual economies that allow their brand to be authentically integrated, and where the user receives an in-game benefit from engaging with the branded element,” says Madgett.

Media Contacts’ Field agrees, but adds that while there could be a role for brands to get involved, there’s more opportunity for credible game developers, such as Zynga and PlayFish, to continue their ownership of the space. “If brands are clever, they’ll leverage partnerships that could incorporate content or product offers,” he says. “A game like FarmVille reached more than 100m active users, so trying to reinvent the wheel would be a big mistake.”