Facebook, Zynga Sign Long-Term Virtual Currency Deal

Despite recent rumors that Facebook and FarmVille developer Zynga were gearing up for a legal battle, the two announced yesterday that they have signed a five-year agreement over how virtual currency will be used. Quoting: "The source of the conflict ... comes down to Facebook's decision to introduce Facebook Credits, an over-arching currency system to be used in all games on its platform. This allows users to purchase just one type of currency for use in Facebook games, rather than buying directly from individual developers — a lack of direct control over its monetization that became a major point of contention for Zynga. Also likely an issue is Facebook's decision to take 30 percent of revenues gathered from credits, with 70 percent allocated to the developers."

Comments

Monetize

[Thanshin]

I pity the guy who has to find a way to monetize the virtual currency of a game that's inside a social network, inside internet.

I wonder if he has found a strong enough soap to remove that constant slimy sensation.

Re:Monetize

[WrongSizeGlass]

I pity the guy who has to find a way to monetize the virtual currency of a game that's inside a social network, inside internet.

I hear it was virtually impossible ;-)

I wonder if he has found a strong enough soap to remove that constant slimy sensation.

There isn't a shower hot enough to make someone feel clean after that.

Re:Monetize

[KDR_11k]

The whole business model of the game is to make money via selling stuff for real money. The game itself is free to play but it's designed to encourage players to draw friends into it and to spend real money on it. Or do you think they're running Farmville out of the goodness of their hearts?

Re:Monetize

[shadowknot]

The game itself is free to play but it's designed to encourage players to draw friends into it and to spend real money on it.

So it's actually a very sophisticated and subversive MLM (Multi Level Marketing) program that rewards participants with a video game. Having never played it I didn't realize this but whomever the genius is who came up with that deserves every cent they make!

Re:Monetize

[somersault]

I pity the guy who has to find a way to monetize the virtual currency of a game that's inside a social network, inside internet.

Somehow I doubt he'll care when he's a millionaire..

Re:Monetize

[Thanshin]

I agree in the analysis and disagree in the resulting conclusion.

At some point I stop seeing an insightful, astute, marketer and I start seeing someone who bases his income on the stupidity of the most stupid.

The guy you call genious, from my point of view is just as repugnant a person as a tv fortune teller.

Re:Monetize

[sopssa]

You may think such games and spending on them is stupid, but if it gives some value to the user (fun, feel of accomplished, whatever), what's wrong with it? People like different things.

Re:Monetize

[rhsanborn]

Since Zynga is raking in ~500 million - 1 billion USD a year, I'm pretty sure he can get over the slimy sensation. I hear hundred dollar bills act as a good balm...

Re:Monetize

[complacence]

I pity the guy who sells help with documentation sold with a virtual product running on sold hardware that is built from sold compartments that are made out of sold microchips that comprise sold integrated circuits that are made out of sold natural resources and were designed using documentation to a virtual product running on hardware that is built from...

Wait, is that slimy at all?

Re:Monetize

[Rogerborg]

It's worth considering that for many people, Facebook is their internets. Facebook has achieved what AOL could never do - build a garden so compelling that people never wonder what's outside the wall.

Re:Monetize

[MiniMike]

Is there no advertising revenue? I know they try to make money off of selling game credits, but I would be surprised if that were their only source of income.

Re:Monetize

[WrongSizeGlass]

At some point I stop seeing an insightful, astute, marketer and I start seeing someone who bases his income on the stupidity of the most stupid.

Insightful, astute marketers make their living finding the stupidity in people. You know who said "a fool and his money are soon parted"? A marketer, that's who.

Re:Monetize

[Devout_IPUite]

I'd say about 5% of the people who I know who play MMOs do it in a healthy way.

Re:Monetize

[shadowknot]

I don't judge the product. I despise those who work on finding ways of monetizing the product, even at the expesnse of offering an inferior product.

Fair enough, I don't like Microsoft's products but I will not begrudge them their profit, that's the free market. Consumers will not always make the smartest choices but it is up to them to make that choice be it wise in your eyes or not. Anyway, what's wrong with making money?

What leads to a fool proof society is the idea of solving dangers by forbidding them, instead of using them as indicators of where the education, or public information, systems are failing.

Wow, way to show your despotic cards. Let's examine that statement, you think that "forbidding dangers" is a solution that leads to a "fool proof society"? Who, pray tell, is the arbiter of these "dangers" and who enforces the actual "forbidding". I'm not a smoker but I don't believe I, or anyone else, has the right to tell smokers that they can't smoke. Smoking, as we all know, is extremely hazardous to their health and by applying your logic to my example we arrive at the conclusion that it should be "forbidden". Do we empower the police to do this or some form of other force to curb this "forbidden" behavior? I'm just curious how long it takes you to reach the inevitable conclusion that your type of anti-liberty thinking leads to.

Re:Monetize

[Thanshin]

What leads to a fool proof society is the idea of solving dangers by forbidding them, instead of using them as indicators of where the education, or public information, systems are failing.

Wow, way to show your despotic cards. Let's examine that statement, you think that "forbidding dangers" is a solution that leads to a "fool proof society"? Who, pray tell, is the arbiter of these "dangers" and who enforces the actual "forbidding".

I wasn't clear. I meant "fool proof society" as your "society of rounded corners"; something that doesn't work.

I'm not a smoker but I don't believe I, or anyone else, has the right to tell smokers that they can't smoke.

Using the smoking example, my point was that forbidding smoke is useless and that people smoking is an indicator that the information given to the population about tobacco was insufficient or wrong.

An even clearer example is that of drugs. Prohibiting them, instead of making sure that everybody understands their dangers, has the effect of concentrating the negative effect on the less educated population and still doing very little to stop their spread.

So, finally, what I implied was that, while I despised tv fortune tellers (or other businesses based on taking money fro the uninformed), I'd not stop them from continuing with their job. I'd rather use them as pointers to where is the education/information system failing.

Re:Monetize

[Stratoukos]

Yeah but their App Store policies are atrocious.

Oh! Wait a second... I thought you said Apple. Nevermind.

Re:Monetize

[shadowknot]

So, finally, what I implied was that, while I despised tv fortune tellers (or other businesses based on taking money fro the uninformed), I'd not stop them from continuing with their job. I'd rather use them as pointers to where is the education/information system failing.

That seems completely reasonable to me, the ambiguity of discussion forums clearly caused some misunderstanding here!

Re:Monetize

[Thanshin]

Indeed, and my last response was so careful because I'd have answered just as you did, had I interpreted what you did.

Cheers.

Re:Monetize

[Monchanger]

Really? I can get my pr0n on Facebook?

Re:Monetize

[PopeRatzo]

I pity the guy who has to find a way to monetize the virtual currency

Because that's what the world economy needs today: virtual currency. Like we don't have enough types of currency that aren't real.

When can I start trading in derivatives of securities that are based on virtual currency? Or futures of derivatives of securities that are based on virtual currency?

Fuck's sake, can we please go back to trading in beads? Or tulips?

Re:Monetize

[Fnkmaster]

If FarmVille is the most compelling thing you can find online, then I don't think I want to be your friend. Facebook or real-life friend.

Re:Monetize

[stg]

There is the slightly worse factor that for many MMORPG, they have to pay monthly. At least for Farmville (never played the other Zynga games), you only have to pay if you want to, or if you feel you need the cute extras.

I don't really see such a distinction from regular downloadable games and online games like Farmville... The only real difference is that Farmville is much better geared toward making you invite more people. Many of the "regular" games have now started to monetize on extras, although most try to avoid giving obvious advantages for players who spend more money.

Re:Monetize

[Maxo-Texas]

I 'play', if you could call it that. Farmville isn't really a game but it makes for nice downtime conversation and has reconnected me with some of my friends.
It also gives you a chance to have secret little side conversations about nails and puppy chow.

The premium items work like this:

You can have a Barn for 5,000c in game coins you earn in game.
But you can have a COW PRINT Barn for 17 FV (about $1.70 cash.. or maybe 0.17c cash.-- I think it is 10 cents per FV tho).

You can get a pond for 5,000c. Or you can get a LAKE for 57FV.

Having gone through EQ... I swore I'd never spend a dime on this game. And there are ways to scam it... recently there was a glorious bug which allowed us to send unlimited gifts as long as you logged out/back in to facebook between each gift sending attempt. I eventually ran out of my alloted database slots for gifts (looks alike about 200). It was fun- as one friend said, "it feels like it's raining $100 bills".

The more you have, the worse your performance is however (and I mean for a 200 item farm, you are talking a 3 minute load time). It seems to help to exit and log back into Facebook and when I looked it dropped about a half a megabyte of memory (899,xxx to 217,xxx) so I suspect that Flash is terrible at garbage collection or has a huge memory leak.

They also try to get you into other games by offering cross game promotions (play "Mafia Wars to get the special tractor").

I've learned that most people never look at your farm- they stay zoomed in tight (to speed up the visit). Several friends have burned out recently so I imagine I'll cut back/stop myself.

Oh the worst thing recently was the stupid dogs. The 15,000c dogs had to be fed every 24 hours or they would run away. I started mine at 11:00 at night- so I had to get on and feed it every night. Now that it's done, it will harvest all my rabbits with one click on the dog. The 30ishFV dogs would get unhappy but not run away.

Oh oh.. and now they let you "FIND" a locked gift box which you can get the password to if you give them more private information. I just treat it as another decoration.

It's not a game- and I try to limit myself to 30 minutes a day max.

Re:Monetize

[CyborgWarrior]

Okay, I have to put a bite in on the Anti-Microsoft plug. I'm sorry, but as much as microsoft products suck, most everything else sucks more for consumer software. Microsoft provides integration between their products, they are supported and fixed. Very few products in other realms come close to that.

Apple's products are better to some degree because they provide reliability through simplicty, but nobody has ANYTHING as good as the office suite that works with the rest of their stack.

OOo? It feels like I'm back in the '90's every time I use it! Seriously, Microsoft Office '95 feels more polished than that! And crashed less too when I was running it on Windows 3.1. Sure I can submit a bug report on Open Office, but it doesn't change the fact that the stuff is still behind the times comparatively.

I agree on the rest of your post, so I'm trying not to be aggressive here, I just get aggravated when everyone just puts Microsoft out there as the big bad evil source of everything sucky. I agree that in the server market, I prefer Linux products and open technologies, but the real money is almost always in mass-market areas and that's where Microsoft does an insanely good job.

I still firmly believe that a better product could dislodge Microsoft, but that product has not shown up yet and it's because of naivete. Software isn't just about the pretty code. It's about usability testing, support services, marketing, integration, distribution, training. I'm sure there are more parts to that, but I'm only a developer, I don't have to manage that part of it most of the time. As far as customers are concerned, those are all equally as important as the product itself and rightfully so. If more groups got their s*** together and developed a full platform for the product like that, it could do well!

A market has begun to develop around professional support for these products. How do I find professional support for Open Office? I look at this: http://bizdev.openoffice.org/consultants.ods - a long, UGLY and hard to play with spreadsheet file! They won't even put up a webpage so i can select my area and they tell me a consultant? This is abominable!

Okay, lunch break is about over, no more time to rant :(

Re:Monetize

[LordArgon]

Mod parent -1, Elitist Jerk

You really think people who spend money on entertainment are stupid? Because that's all it comes down to.

The game maker has a world where you can have fun/power and, if you spend real money, you can have MORE fun/power. It doesn't float my boat, but I certainly wouldn't put somebody in the "most stupid" category because a game was worth a few bucks a month to them. I see no real distinction between these games and most MMOs.

Re:Monetize

[Qzukk]

If you've made the right friends...

Re:Monetize

[LordVader717]

I agree. It's actually one of the oldest tricks in a salesman's book.

Over the years people have been hailed as business or marketing geniuses for the seediest of tricks such as:

1) Lying to people about your product being healthy
2) Making people feel insecure
3) Using market power to target and undermine competitors

And over and over again people fall for it.

Re:Monetize

[LordArgon]

>people smoking is an indicator that the information given to the population about tobacco was insufficient or wrong

This is pretty naive. I used to think the way you do about smoking and drugs. "Why would anybody ever do that? Don't they know how bad it is for them?" I said that once around an occasional-smoker friend who simply corrected me with "It's not about whether they're bad for you; it's about how they make you feel." It's not fundamentally an "education about drugs" problem. It's something much more complicated.

Those of us who spend most of our time intentionally processing and analyzing stuff with our brain forget that there are a lot of people who don't (and don't know how to start). You can't just throw information at people and expect them to draw the right conclusions; you have to teach them to think. That's the hardest part of all.

Re:Monetize

[martin-boundary]

Eeww! What are you suggestin? Direct meatspace contact?

Re:Monetize

[mgblst]

This is not different to any other game, except for most games you pay up front, not knowing if you are even going to enjoy it.

Zynga builds on the same fundementals that keep all game players coming back.

Re:Monetize

[EdIII]

Realllyyy?

So... um... can I be your friend on Facebook?

Wait a minute... this is Slashdot so your probably a dude. Never mind.

Re:Monetize

[EdIII]

At some point I stop seeing an insightful, astute, marketer and I start seeing someone who bases his income on the stupidity of the most stupid.

You can replace marketer, with just about every other profession too. Just about everything in this world is about taking advantage of people that don't have access to the information that you do, or the skill sets to understand and apply that information.

The asshole that sees a $1 million dollar antique and buys it for 50c at a garage sale is just as repugnant as any advertiser.

That is really what it comes down to now. Taking advantage of people unfairly, being rewarded unjustly, is quickly becoming the "right" thing to do. That applies to every single piece of pond scum involved in the housing collapse, the Wall Street parasites that have a left a desolate wasteland in Main Street, the politicians playing us while serving their true masters, the corporate lobbyists.

Where have our heroes gone? Where are the people that truly exist to protect the weak?

You're right. The guy that figured out how to get $100 million dollar plus rich of stupid people is being lauded as ingenious and so many people are trying to repeat his success.

Whoa morons.

[unity100]

30% ? what kind of whacked out rate is that ? loansharks' ?

are they aware that, if zygna wants, they can now just set up their servers with farmwille and draw their 85 million players to it ?

i bet that last bit was the thing that forced fuckerberg to sign a deal.

btw mark, youre fuckerberg for me from now on. your numerous failures in regard to privacy policies and flops with pr earned you an f in place of the z in your last name. enjoy.

Re:Whoa morons.

[KDR_11k]

That's the rate online game stores (Steam, XBLA, etc) tend to charge. It's their cut as the retailer of the game, for providing the infrastructure, advertising, etc that their service offers and many people accept that trade-off. For comparison, I believe the indie license for the Unreal Engine is something like 50% of your revenue.

Farmville cannot separate from Facebook, it requires the social propagation system it has on Facebook where Farmville players effectively spam their friends with advertising for the game.

Re:Whoa morons.

[will_die]

Except facebook does not do any hosting, they direct the players to servers running the application. Facebook does get all the spam, 3Gb/sec at peak, according to reports.
Steam, microsoft games, market stores for various products,etc all provide hosting and other features which based on brick/motar distribution would give the them 25-50% of the money paid by the customer. Facebook is just offering a microtransaction service.

Re:Whoa morons.

[Culture20]

btw mark, youre fuckerberg for me from now on. your numerous failures in regard to privacy policies and flops with pr earned you an f in place of the z in your last name. enjoy.

I used to call him that as a joke. Maybe now Dumbfuckerberg would be more apropos?

Zuck: They "Trust me"
Zuck: Dumb Fucks

Re:Whoa morons.

[ampathee]

Stan Marsh? More like Stan Darsh..

Re:Whoa morons.

[magus_melchior]

30% ? what kind of whacked out rate is that ? loansharks' ?

It's about the rate of a very high APR credit card. Payday lenders and the like can have effective rates that are in excess of 100%-- they'll never admit as much, because they use several accounting tricks to wring more money out of the people they loan money to.

And the next thing you know, Facebook will spin this as, "See? We're not as bad as payday lenders." *facepalm*

Re:Whoa morons.

[DDLKermit007]

And I wish Zynga the best at trying to transition their players over. Most people who use Facebook often don't bother going to other sites outside of checking Facebook, and email. It's Facebook's ball. Zynga would lose a whole lot more than 30% on building hardware & bandwith out, not to mention much more than 30% of their paying userbase.

Virtually Understandable?

[WrongSizeGlass]

Facebook wants to control all the virtual currency on their platform? Not a surprise at all. They want 30% for letting other companies make money of Facebook's platform? Just as greedy as Apple. I just wonder, if people were handing out virtual personal information instead of currency, would Facebook want in of the action? Is a "Second Life" type of virtual world in Facebook's future?

Re:Virtually Understandable?

[Aladrin]

30% does indeed sound like a lot, but if you RTFA it says they plan to use that 30% to improve the game interface and features, as Zynga has been requesting for a while. So it's not all profit for them.

Re:Virtually Understandable?

[somersault]

It is all profit after they recuperate the costs of the upgrade, which I doubt will take long. And then it is all pure profit, forever, with no work necessary.

Re:Virtually Understandable?

[RobertLTux]

i hate to bring this up but

SecondLife is partly a 3d Facebook

in fact if you wanted to you could buy a plot of land and have a FaceBook type wall that is an actual wall.
And just to really freak you out with SL 2.0 you can have that wall show your public facebook wall.

name a face book thing and i can name something in SecondLife that does the same thing.

Re:Virtually Understandable?

[kestasjk]

Because systems serving tens of millions of people run, maintain, and develop themselves..

Re:Virtually Understandable?

[somersault]

They're already doing that, so if they're already making a profit then this is just extra profit.

Re:Virtually Understandable?

[Permutation Citizen]

Say, a large and growing user base ?

Re:Virtually Understandable?

[WrongSizeGlass]

Because systems serving tens of millions of people run, maintain, and develop themselves..

somersault is on target here. It's similar to Google adding YouTube to its infrastructure. They're already in the business of shoving dump trucks worth of data out the door so YouTube didn't add that much to the overhead when compared to their current operation.

Re:Virtually Understandable?

[kestasjk]

Extra profits, which means extra R&D, which means better services, which means a larger user-base, which generates opportunities for a more diverse set of Facebook-app development companies, which means extra profits, which means extra R&D ...

It's a good thing for everyone except FarmVille, and who cares about them? (And you could even argue that their loss is short-term with a long-term benefit)

Re:Virtually Understandable?

[RobertLTux]

okay im going to have to concede that one but if Linden Labs would cut back on the drinking during the meetings where things are being decided then we could actually see this.

psst btw if you want most of the features of SL 2.0 but not that interface then check out Emerald.

Re:Virtually Understandable?

[somersault]

My point was that this system is simply pure profit for no effort. It's a tax made possible by Facebook's monopoly-like status.

Yes, profits can be put back into R&D but that's not got anything to do with what I was talking about. I was simply stating that after a short while of recouping development costs, this 30% tax on game tokens is all profit for Facebook.

Re:Virtually Understandable?

[kestasjk]

Okay, assuming that is true (i.e. no maintenance costs or inevitable overhead involved with money management), how is it a bad thing?

I don't see how it is unfair, and even assuming that FarmVille loses out (i.e. they don't recoup costs from the tighter cooperation with Facebook that'll follow from their sharing a common revenue stream), is that a bad thing for end-users if Facebook now has the incentive to promote a more diverse set of games and applications?

Re:Virtually Understandable?

[somersault]

My point wasn't whether it was good or bad, my point was that it's pretty much pure profit. 30% to me just seems like it's going to be a *lot* of money, I bet it only would take 1% or less to run the servers (of course that depends how popular the service becomes). 10% seems to me like a fair-ish cut, 30% is just greedy.

Re:Virtually Understandable?

[kestasjk]

That's a bit touchy-feely; 30% sounds big, 10% doesn't.
If Facebook are the ones dealing with the sales and disputes, preventing money laundering and credit-card fraud, putting a bigger brand behind the virtual currency making it less suspect with better protection, keeping things legal across multiple countries and sets of laws, that juicy 30% might sound like a lot less all of a sudden, compared to 70% straight up, dealing with one company.

Also it's profit that someone is making. I really doubt FarmVille are going to go down without that 30%, since that wouldn't benefit Facebook or FarmVille; so if it's 30% Facebook is making vs FarmVille I don't see why it's greedy for Facebook to get it but not FarmVille.
You can't argue Facebook is being a parasite on FarmVille's success without acknowledging that FarmVille is a parasite on Facebook's success too.

If Facebook were really greedy and ruthless they would clone FarmVille, block FarmVille, promote their clone, and take 100%. (Doing it in a sneakier way to avoid the inevitable anti-competitive issues, perhaps by killing FarmVille by judging it as being too viral and spammy, or by changing the platform too quickly for FarmVille to keep up: The possibilities are endless when you control the platform your competitor uses.)
It's not that they're nice guys so they're only taking 30%, but that this isn't the height of greediness but greed taken to a point which won't ruin anything.

I guess for me the fact that they signed a deal on it means that the deal is in the best interests of both parties, whether or not Facebook had more bargaining power they have worked out an agreement; there will be winners and losers, but going forward the fates of the two companies will be more closely tied.
This means less Facebook vs FarmVille, and more Facebook, FarmVille, and all the other apps pulling together based on mutual interest, which is a much more stable and efficient relationship for everyone involved, than one built on these tensions and infighting.

As if credit cards are bad

[will_die]

The highest credit card only charge in the 5-6% range and facebook wants 30%. At the max paypal charges 2.9% with a small fixed fee.

Re:As if credit cards are bad

[TaoPhoenix]

I completely don't understand your statement. Credit cards charge all the way up to 21% and more!

Re:As if credit cards are bad

[KDR_11k]

I think he's talking about the cut per transaction, not the interest on loans.

Re:As if credit cards are bad

[Inda]

There are adverts running in the UK that state 2450% APR. 50% is nothing!

Re:As if credit cards are bad

[robthebob]

He's talking about the cut that credit card companies take from retailers, not the interest they charge to consumers.

Re:As if credit cards are bad

[kestasjk]

Yeah and only 0.1% of a credit cards total mass is the magnetic stripe! That's an even smaller percent!

It's totally unrelated to a platform fee, but then again so is an interest rate..

Re:As if credit cards are bad

[will_die]

The percent is the fee credit card companies charge each time a customer uses a credit card, aka transaction fee. Interest for the borrowers is extra.
You can get in the double digit transaction fee range if you are a very small company so you don't qualify with the credit card companies. Then you have to go through 3rd party companies and they charge double digit percent fees.

Re:As if credit cards are bad

[ducomputergeek]

Actually, the default rate for online card not present rates is $.25 + 2.4%. Usually you can get that down to $.15 + 1.85% if you are willing to pay the sales game. And with some of these games, they'd qualify for Interchange pricing and could probably get that knocked down to $.10 + 1.5% per transaction if they are processing more than $50k per month.

Re:As if credit cards are bad

[rjstanford]

You need to be moving a lot more than $50,000 a month to get that kind of pricing for card-not-present, even as a well-established business. That's generally the "teaser" rate and doesn't include amex, rewards cards, international cards, etc etc. A blended rate of 2.25%-2.5% at the end of the day is actually pretty good.

Understatement of the week

[MK_CSGuy]

Also likely an issue is Facebook's decision to take 30 percent of revenues

No sh*t sherlock... that was the main contention point.

Virtual Currency? this is just wrong!

[lagi]

it is only me or there's something very wrong with the term "Virtual Currency" ? people pay real money for virtual money? there's no other word to call this except a big scam.
if one pays 10$ for 100 virtual bucks. and in theory Zynga (zynga is not a bank as far as i know) take your 100 VM and multiply it by 10,000, this makes you rich? no, it probably makes you very stupid.
now i totally understand the deal when it's related to gaming, it's OK, you pay for content, and it does worth something.
but think what would happen when an evil Facebook will use this in entire site. after taking the normal life of 400,000,000 people and turning them in virtual, now they are ready to take your money and make them virtual.
guys (who still has FB account), please, quit facebook, delete you account, don't give a hand to this evil to spread. facebook just makes stupid people more stupid then they already are.

Re:Virtual Currency? this is just wrong!

[Rockoon]

people pay real money for virtual money?

"real" money? You mean like Gold?

Re:Virtual Currency? this is just wrong!

[somersault]

people pay real money for virtual money?

People transfer one essentially worthless measure of value into another, yes. Real life money is almost no use by itself, it's only because of a strange kind of social contract that we regard it as having any value. People obviously must perceive value in virtual currency or they wouldn't buy any. So it's a kind of meta-currency - slightly less useful than real money, but still valuable to the individual.

Re:Virtual Currency? this is just wrong!

[kestasjk]

guys (who still has FB account), please, quit facebook, delete you account, don't give a hand to this evil to spread. facebook just makes stupid people more stupid then they already are.

Says the guy who considers DLC credits "evil" because a journalist called it "virtual currency"..

Re:Virtual Currency? this is just wrong!

[Mouldy]

Buying virtual currency is no different to buying credit tokens in an old-fashioned arcade. It's no different to buying chips at a casino. It's not quite the 'scam' you claim it to be.

Social games need their user's money to survive. Companies won't (and can't) make games for free. The traditional "you buy a game, then you play the game" business model doesn't work on social networks. People are used to games on the web being free. So the only way to make money from the free games is to offer special content that you have to part with real money for. Social games companies now have a "you play the game, then you buy stuff to play the game more/better" business model because it works. Facebook already make a lot of money off the back of 3rd party app developers. Do you think so many people would stick around on facebook if there weren't games to idly pass the time? Of course not. The apps keep people on facebook for longer, giving facebook more ad-time. Asking 30% of developers only source of income is very cheeky in my opinion.

How/why I know what I do;
I work for a games company, and I develop most of the company's social games (with other people, of course). Trust me when I say it's very expensive to not only develop and host the games - but to keep them working. Facebook & other social networks move their goal posts a LOT. We have to be on top of all their changes so our games keep working. Unlike console games, for example, we can't just release a social game and leave it.

Re:Virtual Currency? this is just wrong!

[rumith]

What is "real" money, my friend? Money is an abstraction, a convenience. Money works only because we have agreed to use it.
If you only consider money real if Walmart accepts it (I'm exaggerating, but I think you understand my point), please reconsider: there are literally hundreds of different currencies in the world, all printed by recognized governments and some even fully backed by national gold reserves, that you will not be able to purchase anything somewhere other than the country of that money's origin. If governments can do it, why can't companies (provided they have enough customers for it to make any sense)?
Disclaimer: I do not play FarmVille or similar games. Actually, I do not use Facebook at all, although I do have an account there.

Re:Virtual Currency? this is just wrong!

[ledow]

A currency, by definition, exists only in the mind of the users anyway. The £10 note I have in my pocket is only worth £10 because people will happily exchange it for goods / services / other notes to a value of £10. If there's a nuclear war, it'll be worth ABSOLUTELY NOTHING if I survive that. A few tons of food, a working car, or a nugget of gold, on the other hand... and even the last one is questionable that it would have value until civilisaton was rebuilt.

When Zimbabwe's currency became almost valueless and therefore useless because nobody wanted to accept Zimbabwe dollars (or whatever they were called), the currency was abandoned and people used dollars because other people would *happily* accept dollars. It was still a legal tender, but it was useless because nobody was willing to accept it for the value it purported to hold.

My £10 note also holds a peculiar legal status as it is only a promisary note to the value of £10. It says on it "I promise to pay the bearer, on demand, the sum of £10", and it's signed by the "Governor and Company of the Bank of England". Other notes in other countries have similar legal status. If I go to Scotland (technically the same country, because they are both in the UK), I stand a good chance of being given a similar note by the Bank of Scotland in my change. Both are legal, have identical "values" as they have agreed to track the Bank of England values - but try getting a London cabbie to take one. It's still just a piece of paper, at the end of the day, that costs WAY less than £10 for the government to fabricate. The same for coins.

A cheque has similar legal status. It's "virtual" in that the currency doesn't actually exist in a tangible form. But each time I write one, that's a binding legal contract to give someone something of that value. In the past, cheques have been deemed legal when they were written on a cow. The Bank had a legal requirement to accept it as a binding contract at the time.

Historically, when coins actually started to be worth more than their face value, they were melted down and sold to people for more money than they represented. Any currency is only a representation, or a promise, of the value written on it. Sometimes that promise means nothing.

With a "digital" currency, the situation is no different. No "money" changes hands when I buy something from Amazon, just a number goes from one box to another on some computer somewhere. So credit cards and bank accounts are no different to a virtual currency at all, because they only exist as a number... the plastic card is merely a convenient security device / container for that number. If my country dive-bombs economically, it might well be the case that international sellers refuse to acknowledge that my money transfer is worth as much as I say it is. It's all based on a perception of value.

Thus, all currencies are by definition "virtual".

Therefore, if I choose to exchange my "real" money for some "virtual" money, it's no worse than putting it into my bank account. In fact, I do this every day - I buy petrol and I'm given "loyalty points" which I can cash in to claim, say, a cut-glass goblet or a breakfast bowl at a later date. And people buy entirely "virtual" products every day - the games on my Steam list, the account for my mobile phone, the subscriptions to websites, I don't see any "tangible" product at the end of a day, just the result of a bit flipping somewhere on some distant server, but it still has value to me.

Facebook's plans are no different at all, nor are some MMORPG's "gold", or an LWN.net subscription, etc. - they're the same as every other "virtual" currency / purchase out there (which is why Beenz and Paypal were often under investigation under various banking laws - they were, in effect, banks).

If people *want* to pay "real" currency for some game tokens of some kind, then they believe they are going to get value from those tokens. It's no different to going to

Re:Virtual Currency? this is just wrong!

[omglolbah]

Well thought out and well reasoned comment on this issue.
Hell of a more interesting to read than the average gulped up newspaper-fodder these days.

Please keep writing :)

Re:Virtual Currency? this is just wrong!

[misexistentialist]

There is a difference between legal tender and scrip, and people are right to be uneasy about the latter since it is always a way to increase the issuer's profit.

Re:Virtual Currency? this is just wrong!

[Luke has no name]

I actually think that in the near future virtual currencies will be more and more popular, to facilitate easier online transaction that don't involve traditional banks/paypal fees. Virtual currency exchanges will come around, and BOOM! You have a new online way to pay for goods. After all, money is just a number.

not THAT wrong...

[Errol backfiring]

It is a game. In a game, you can have virtual money and virtual economies. You can see how blatantly "wrong" economies develop. And if people want to pay for that, they are free to do so. I mean, they don't have to. Only if the virtual money gets mixed in the real economy, this can get bad.

Its better than current alternative

[nomaddamon]

At the moment Zynga makes most of it's money from scamming users to download fake anti-viruses and subscribing users to services that are costly and nearly impossible to un-subscribe from.
Facebook virtual currency will put a stop to this and ensure that users who want to buy virtual currency will get just that, with no addition of malware.
Taking 30% cut from it is greedy but hey... i'd rather pay the 30% fee (which is invisible to end-user anyway) than get my credit card emptied out by some Russian group who distributes malware via Zynga

Re:Its better than current alternative

[Rhaban]

i'd rather pay the 30% fee (which is invisible to end-user anyway)

Not so invisible, Zynga may just raise all their prices by 30% as they migrate to facebook credits.

Re:Its better than current alternative

[Quirkz]

Technically you have to raise prices by 50% to make up a 30% loss.

Re:Its better than current alternative

[Rhaban]

yes.

where do I go to cash in my beenz

[karmaflux]

or can I just feed them directly to farmville animals

Re:where do I go to cash in my beenz

[Macgrrl]

Maybe you can swap them for a Farmville cow owned by a guy caled Jack...

disappointing

[Trepidity]

I was hoping this would be a long, drawn-out standoff that somehow ended up damaging both companies.

Re:Worse than DRM. Much worse.

[N1AK]

I'm not generally a fan of DRM, game expansions etc specifically because they limit my ability to continue to use a product in the future. But calling it fruad is little better than FUD.
 

It's like DRM: When the server is gone, your "money" is gone. (Yes, technically it's still fraud

I have no issue paying for something with a limited lifespan. In fact, if I could pay a reasonable monthly rate to download and play games of my choice on my console I'd do that rather than buying (generally 2nd hand games). The problem isn't that computer games are moving from physical media with effectively unlimited lifespans to digital media with limited lifespans. The problem is that prices aren't decreasing with it.

At the moment the digital distribution option is normally more expensive, and comes with downsides. Sadly, this doesn't seem to stop people from using it :(

Listen to Sheldon

[Renaissance 2K]

I guess all that subliminal messaging in The Big Bang Theory might finally pay off.

"Buy Zynga!"

Re:Worse than DRM. Much worse.

[kestasjk]

People who pay for any of those thing should be shot at first sight.. Let's start (and end) with the GP.

Facebook Late to the Party

[angryphase]

Well, it seems that Facebook's reluctance to (or slow) monetization of the site has certainly come back to bite it. When releasing details of the API for developers back in the day little did they know that the casual market would suddenly turn into a full blown business platform on top of their own infrastructure.

Unfortunately they are now in the position where Zynga are such a big part of Facebook that forcing them off the site through policy changes would be a loss for Facebook any way they looked at it. Luckily for Zynga they got in early to have the power or authority to cut a deal as well. Now all the new developers will seemingly be under the 70/30 rule of Facebook credits.

what does the IRS think of this?

[Joe The Dragon]

what does the IRS think of this?

Re:what does the IRS think of this?

[omglolbah]

http://virtuallyblind.com/2007/10/23/tax-virtual-profits-in-world/

Old article but hey, was the first thing I found when googling for "irs virtual currency".

Google ftw? :-p

Re:Worse than DRM. Much worse.

[ppc_digger]

The difference is that with all the things you mentioned, you know the expected lifespan when you pay for them. When you buy a game, you don't expect it to stop working 5 years later, when the company that made it goes out of business.

Flooz 2.0?

[theodp]

What's the current exchange rate between Facebook Credits and Flooz, Whoopi?

Re:Worse than DRM. Much worse.

[daid303]

This isn't about DRM, it's about buying 'virtual money' (tokens which you can exchange for objects in an online game) You can expect online support for the game to stop at some point, just as World of Warcraft will stop at some point.

Everything you buy wears out at some point. Cloths go bad/out of style, food gets eaten/rots, online games end, life ends.

Re:Worse than DRM. Much worse.

[daid303]

That was more expensive the a one off. But she will still 'end' at some point.