How Facebook Could Make Credits for Websites Work: Optional, Then Mandatory

Last week Facebook announced the first test of “Facebook Credits for Websites”, its new program that could allow any site to sell virtual goods or digital media in exchange Facebook’s virtual currency. For businesses selling things online, a big hurdle to conversions is getting potential customers to enter their payment details, so this could be a big new way for them to make payments easier and monetize more users.

Facebook will need to make a choice regarding exclusivity and Credits for Websites. Requiring Credits to be the exclusive payment method for Facebook-logged in users would allow it to essentially charge websites for access to its identity platform. A rollout without exclusivity requirements could get more websites to adopt Credits.

Therefore, we believe that similar to how Credits were at first an option but then later required to be the sole payment method for Facebook.com games, Facebook may be best off initially allowing websites to use Credits alongside other options and later making them mandatory.

For background, Facebook launched Credits in the summer of 2010 to simultaneously make it easier for game developers to accept payment for virtual good and to give itself a 30% cut on virtual good transactions. Users buy Credits from Facebook with their credit card, PayPal account, mobile phone, gift cards, or offers. Rather than having to enter payment details in each different game or with each developer whose games they play, Facebook Credits allow them to enter payment details once with a single, theoretically more trusted vendor (Facebook) and then spend across different games and developers.

Initially game developers could provide the option to pay with Credits alongside their other payment methods. They would then redeem with the Credits spent by their users with Facebook for 70% of their value. In July 2011, Facebook began requiring all game developers to exclusively process payments through Credits, while utility app developers could (and still can) choose whether or not to use them. Then, Facebook began allowing mobile app developers to process payments with Credits earlier this month.

Offering Facebook Credits as a payment option is a trade-off for developers. Benefits include the ability to:

Instantly process payments from those with a balance of CreditsMonetize international users without having to accept their local currencyMonetize those without credit cards such as teens that can acquire Facebook Credits by completing offers, buying Facebook Credits gift cards with cash at local convenience and grocery stores, or by depositing loose change at Coinstar/Rixty kiosksAvoid transaction and fraud costsLet users pay through a big-name company they may trust moreIncrease user spend because they’re paying indirectly through a virtual currency rather than directly with dollars they may be more careful with

Developers must also endure several drawbacks if they offering Credits as a payment option. Most importantly, they must pay Facebook a 30% tax. Additionally, developers lose flexibility in how they optimize virtual currency costs to maximize sales. Some people don’t trust Facebook and may be more likely to submit credit card information to a game developer than to the social network. Developers are also less likely to earn money off of breakage, where users buy their proprietary virtual currency but never end up spending it. Though there haven’t been many prolonged outages in the past, if the Facebook Credits system went down, those relying on it to process payments could miss out on sales until service was restored.

Finally, Facebook can impose its own exclusivity policies on how Credits can be used alongside other payment options. Facebook allowed the game developers to flourish using any payment method they wanted on the Facebook.com Platform before eventually requiring Credits to be their exclusive way of processing payments. In this way, the gaming industry invested in developing for the Facebook Platform rather than competitors such that it had little choice but to accept Facebook’s 30% tax when it became mandatory.

In many cases, developers would prefer Facebook not implement exclusivity policies, though they begrudgingly accepts them and the 30% as the cost of being able to do business on the Facebook Platform.

In the first round of testing for the new Facebook Credits for Websites program, the social network is working with online gaming portal GameHouse. In two specific games, if users are logged in to GameHouse via their Facebook Credentials they’ll be prompted to pay for virtual goods with Credits and won’t see the credit card and PayPal options. In this way, Credits are the “exclusive payment method for users logging in through Facebook”.

If the tests go well, Facebook could roll out Credits for Websites to more beta partners and eventually to all websites. Here are some of the exclusivity structures it could use, how they would impact developers, and the likelihood that Facebook would choose each potential structure:

Exclusive for all users - Websites can only use Facebook Credits as a payment method if it’s the only option they give to users, even those without Facebook accounts. This would prevent developers from monetizing significant portions of their users who don’t have a Facebook account or don’t log in with it. Therefore it wouldn’t be worth it for developers to switch to Credits exclusively. It’s very unlikely that Facebook would choose this structure. It only works on Facebook.com because every user there must be logged in through Facebook.

No Exclusivity - Websites can offer Credits as a payment option as well as other options such as credit cards and PayPal. Though it would clutter their payment flows, developers could offer Credits as an additional option to lower the payment barrier for those who maintain a balance of the virtual currency. It would help with monetization of international and teen users without forcing developers to pay a 30% cut on all of their transactions.

At first, Facebook may choose to roll out Credits for Websites without exclusivity. This would lower the risk and cost for developers such that Facebook could to get the maximum number of developers to add Credits as a payment option. Getting a wide base at first would also help Facebook push more users to start carrying a balance of Credits because they’ll see them as more widely applicable.

Though it would complicate enforcement, Facebook could require Credits to be listed equally or at least alongside credit card and PayPal options so developers wouldn’t bury Credits behind additional clicks to dissuade users from paying through a taxed method.

Exclusive for Logged in Facebook Users – Websites that want to utilize Facebook as an identity provider to power their registration and login systems would have to exclusively use Credits as their payment method for Facebook-logged in users. This creates a value exchange where developers can’t piggyback on Facebook identity without paying for it. If developers want to monetize their users but not use Facebook Credits, Faceboo could deny them access to its identity platform.

Functionally, it works because only logged in Facebook users would see the option to pay with Credits, and those with an existing balance of Credits would be able to pay instantly. People using a third-party website without signing in through Facebook would only see more traditional payment options, or could also be given the option to log in through Facebook to pay through Credits.

If the test is any indication, Facebook may eventually want this to be the way Credits for Websites works. Third-party sites would be taxed for access its its identity platform the same way Facebook taxes developers on Facebook.com. At first it might allow Credits for Websites to be used without exclusivity, but eventually it might give sites warning that it would become the mandatory payment method for Facebook-logged in users.

Facebook has already carried out this strategy of luring developers with an untaxed Platform, then giving them the option and incentives to use its taxed universal currency, and then finally making Credits the exclusive payment method with games on Facebook.com, and canvas utility apps might be next. A similar long-term strategy for Facebook Credits for Websites could be the best path to monetizing transactions for games, media, subscriptions services, and more across the web.

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New This Week on the Inside Network Job Board: Context Optional, Lolapps, Ngmoco :), PopCap Games and More

The Inside Network Job Board is dedicated to providing you with the best job opportunities across social and mobile application platforms.

Here are this week’s highlights from the Inside Network Job Board, including positions at Context Optional, lolapps, ngmoco , PopCap Games, GREE International, Inc., MegaZebra, Tagged, Pontiflex, Electronic Arts and Kabam.

Listings on the Inside Network Job Board are distributed to readers of Inside Social Games, Inside Facebook and Inside Mobile Apps through regular posts and widgets on the sites. Your open positions are being seen by the leading developers, product managers, marketers, designers, and executives in the Facebook Platform and social gaming industry today.

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New This Week on the Inside Network Job Board: Context Optional, Acquinity Interactive, Tetris Online, T-Mobile and More

The Inside Network Job Board is dedicated to providing you with the best job opportunities across social and mobile application platforms.

Here are this week’s highlights from the Inside Network Job Board, including positions at Context Optional, Acquinity Interactive, Wild Needle, T-Mobile, Ace Studios/Tetris Online, Sneaky Games, and Tagged, .

Listings on the Inside Network Job Board are distributed to readers of Inside Social Games, Inside Facebook and Inside Mobile Apps through regular posts and widgets on the sites. Your open positions are being seen by the leading developers, product managers, marketers, designers, and executives in the Facebook Platform and social gaming industry today.

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New This Week on the Inside Network Job Board: Context Optional, AdParlor, PopCap Games and More

The Inside Network Job Board is dedicated to providing you with the best job opportunities in the Facebook Platform and social gaming ecosystem.

Here are this week’s highlights from the Inside Network Job Board, including positions at Context Optional, AdParlor, 6waves, Tagged, TinyCo, PopCap Games, Roblox, Openfeint, PopCap Games and Kixeye.

Listings on the Inside Network Job Board are distributed to readers of Inside Social Games, Inside Facebook and Inside Mobile Apps through regular posts and widgets on the sites. Your open positions are being seen by the leading developers, product managers, marketers, designers, and executives in the Facebook Platform and social gaming industry today.

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Facebook Ads API Tool Efficient Frontier Acquires Page Management Tool Context Optional

Efficient Frontier, an established search and display advertising platform that offers a self-serve Facebook Ads API tool, has just acquired one of the oldest Page management companies, Context Optional. The reportedly $50 million deal will allow Efficient Frontier to help its existing advertising clients customize the Facebook Pages that their ads sometimes point towards, as well as secure advertising contracts with Context Optional’s clients.

Facebook ad spend is growing, Page management being commodified as free products are released, and the connection between advertising and Page management is deepening due to Facebook’s Sponsored Stories ad unit. These factors could inspire a trend where cash-flush Ads API companies purchase or partner with Page management companies.

Efficient Frontier is primarily a search and display ad company, but seeing the shift in spend towards social, it developed an Ads API tool so clients wouldn’t have to look elsewhere for a way to run their own large scale ad campaigns on Facebook. The tool’s multi-channel interface helps advertisers balance spend between search, display, and social to maximize returns.

However, by being rooted in slower evolving ad channels, Efficient Frontier is slightly less agile in responding to Facebook’s changes. For instance, Justin Merickel, the company’s VP of Marketing told us it added API access to Facebook’s social ad unit Sponsored Stories on April 16th, a month after private beta access to the Sponsored Stories API opened on March 8th. Other Ads API companies that don’t handle search or display reportedly only took a few weeks to include Sponsored Stories in their services, with TBG Digital reporting that it started running Sponsored Stories through the API as soon as March 16th, though we are awaiting confirmation on these dates from Facebook.

Some consider Efficient Frontier to be relatively weak Facebook advertising solution since the tool has social tacked on rather than as core of its targeting and optimization technologies. The need for more social expertise may have contributed to the company’s decision to make its first acquisition a dedicated social engagement tool.

Efficient Frontier CEO David Karnstedt acknowledged that it needed to close the social gap, saying “Our heritage is that we were early in optimizing search engine advertising for clients, so we wanted to expand our efforts exponentially with Context Optional, since social is different than search.”

Context Optional has been helping brands market themselves through Facebook since its launch in 2006. Its suite of apps, analytics tools, and viral marketing services for Facebook,Twitter, and LinkedIn have helped many Fortune 500 companies grow their fan bases, including Allstate, Ford, Microsoft, AT&T, eBay, and CNN.

Page management services were crucial to brands in the early days of Facebook because they didn’t understand how to get started, create apps, or derive value from the social network. However, with time, marketers have learned the ropes of the Platform and many small companies now offer cheap or free ways to create promotional apps. As core Page management services become commodified, the industry needs to find new sources of revenue — namely advertising.

There’s great potential for synergy between companies from the two industries. For instance, Context Optional’s team could create a new branded app for a client, which would then be promoted with ads purchased through Efficient Frontier. Page management companies also hold demographic and engagement data on users that can help improve ad targeting.

The acquisition is a smart move for Efficient Frontier. Context Optional’s Co-Founder and CEO Kevin Barenblat says the acquisition makes sense because”[it and Efficient Frontier's] respective clients are asking us for a comprehensive solution to both acquire and build relationships with their customers.”

This is probably the case with other Ads API and Page management companies too, so expect more acquisitions and partnerships in the space to emerge over the coming year. As we predicted in February, acquisitions of Page management companies are becoming more common as companies lacking them don’t want to fall further behind by taking months to develop their own.

Some Page management companies like Buddy Media, Syncapse and Vitrue have grown quite large and raised over $30 million, but still may be viable acquisition targets for the largest search and display ad services providers, or Ads API companies including TBG Digital, Blinq Media, AdParlor, and Spruce Media. There are also a host of medium-size companies such as Involver, and smaller companies such as Fan Appz, Brand Glue, Likeable Media, and iPlatform that could be acquired more cheaply to bring social tools and expertise to companies looking to break into social or expand their offering.

More information on the Page management and Ads API companies operating in the Facebook ecosystem can be found in the the Facebook Marketing Bible’s Facebook Marketing Service Provider Directory. It includes the areas of expertise, verticals covered, client lists, portfolio samples, news updates and contact information of organizations of all sizes who are marketing and advertising on Facebook.

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Facebook Tests Optional Broad Interest Category and Family Status Targeting

Facebook has made several new self-serve ad targeting options available to a test group of users, including family status such as “Parents”, “Engaged (< 6 months)”, or “Newlywed (< 1 year)”, as well as “Has birthday in < 1 week”. Those in the test group have the option to target ads to broad categories of interests, such as musical genres, types of sports, activities such as photography, and professional categories such as real estate, in addition to traditional precise interest targeting.

If the tested targeting options were fully rolled out, they could give novice advertisers easier ways to target large relevant audiences, and make Facebook a more accurate advertising channel for brands and small businesses with customers in specific life phases.

Facebook tested broad interest targeting last month, but as a replacement for precise interest targeting. While useful for those less familiar with targeting ads based on the Likes of their audience, it provided less accuracy and transparency, so we recommended Facebook test or implement broad interest targeting as on option rather than a substitute.

Now, those in the test group can click a “Switch to Broad Category Targeting” link to reveal the options in Facebook’s self-serve ad tool. Advertisers can include the audiences of as many of the broad categories as they want, and can pair them with demographic targeting such as age or relationship status. However, they can’t combine broad and precise interest targeting. In a tool tip, Facebook recommends advertisers to:

“Use Broad Category targeting to reach groups of people who share similar interests and traits, such as activities related to “Food & Dining”. These groups draw from the authentic information people have included in their profiles, allowing you to easily reach your ideal audience.”

The complete list of Broad Category targeting options can be found at the bottom of this post.

Advertisers can target sub-categories such as Music->Pop or Retail->Beauty Products rather than manually entering the Pages of several pop musicians such as Lady Gaga, Britney Spears, and Katy Perry, or several beauty brands such as Aveda, Sephora, and Maybelline. This will help their ads reach users with more obscure Likes that advertisers might not know about but that still indicate they are the relevant audience.

It will also help them combine audiences of local branches of brands from a single region, such as Maybelline Singapore, Maybelline Philippines, and Maybelline Indonesia. It could also open opportunities for niche brands or services that might not have competitors with large Pages to target against. For instance, a company offering wine tours could combine the existing demographic targeting option “Married”  with Broad Category targeting parameters such as Interests->Beer / Wine / Spirits or Activities->Travel.

While the interest categories enhance the existing precise interest targeting options, attribute targeting offers ways to access demographics that were previously difficult to pinpoint. The new Family Status options for targeting parents with children of different ages could help advertisers of products and services such as baby food and clothing, toys for pre-teens, or even college admissions offices.

The existing “Engaged” relationship status has long been a target for wedding photographers and florists, but the “Newlywed (<1 year)” option available here could be popular with insurance and financial services providers. Bars, nightclubs, travel agencies, and big box retailers could target users with a birthday that week, while the existing option to target users on their birthday was too narrow.

Using Broad Category targeting doesn’t appear to disproportionately increase Facebook’s suggested bid price per click. For instance, an ad targeted to the estimated 408,420 US users who Like classical musician Beethoven has a bid suggestion of $2.69, while targeting to the Broad Category of Music->Classical reaches an estimated 1.7 million users for $2.46. Targeting US users who are married reaches an estimated 38.8 million people for $2.20, while targeting the Broad Category “Newlywed (< 1 year)” reaches 5.6 million people for $1.74.

Facebook has found a way to increase targeting options, and make the process simpler for new advertisers without cluttering the self-serve ad tool’s design. If rolled out, Broad Category targeting could further differentiate Facebook advertising from search advertising by leveraging its wealth of demographic and interest user data. After all, keyword targeting doesn’t work for everyone.

For more advertising strategies, including how to use Facebook’s new Sponsored Stories ad unit, check out our Facebook Marketing Bible.

CookingDancingDIY / CraftsFood & DiningGaming (Console)Gaming (Social / Online)GardeningLiterature / ReadingOutdoor Fitness ActivitiesPhotographTraveling

Birthday

Business / Technology

Personal FinanceReal EstateScience ProgrammingScience / TechnologySmall Business Owners

Family Status

Baby BoomersEngaged (< 6 months)Newlywed (< 1 year)Parents (All)Parents (child: 0-3 yrs)Parents (child: 4-12 yrs)Parents (child: 13-15 yrs)Parents (child: 16-19 yrs)

Interests

AutosBeer / Wine/ SpiritsCharity / CausesEducation / TeachingEntertainment (TV)EnvironmentHealth & WellbeingHome & GardenNewsPets (All)Pets (Cats)Pets (Dogs)Pop CultureTravel

Movie / Film

Action / AdventureAnimatedClassicComedyDramaFamilyHorrorIndependentMovie / Film (All)MusicalRomanceScience Fiction / FantasySportsSuspense / Thriller

Music

AlternativeChildren’s MusicChristian & GospelClassic RockClassicalComedyCountryDance / ElectronicHip Hop / RapJazz / BluesMetalMusic (All)PopR&B / SoulReggaeRock

Retail / Shopping

Beauty ProductsConsumer ElectronicsFashionLuxury Goods

Sports

BaseballBasketballExtreme SportsFantasy SportsFootball (American)GolfHockeyMotor Sports / NASCARSoccerSports (All)Tennis

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New Facebook Platform Industry Hires: Context Optional, Wildfire and Syncapse

Syncapse made some big hires this week in our roundup of Facebook platform hires. The company brought on a Director of Strategy, Chief Service Officer and Vice President of Program Delivery. Context Optional and Wildfire also made some hires.

If your company is hiring new people or making a notable promotion, please let us know. Email mail (at) insidefacebook (dot) com, and we’ll get it into next week’s post. Also, please note that information about most new hires, below, comes directly from company updates from LinkedIn.

Looking for new opportunities? Check out the Inside Network Job Board, which shows the latest openings at leading companies in the industry.

Here’s this week’s list of hires:

Context Optional

Jordan Enright-Schulz, Strategist – Now at Context Optional, previously a Freelance Producer and Web Content Manager at 21 Drops.Matt Kim, Account Coordinator – Now at Context Optional, formerly an Investment Banking Analyst at Pacific Crest Securities.

Syncapse

David Blumer, Director, Strategy – previously worked as a Manager of Integrated Marketing, Microsoft Canada.Claude Galipeau, Chief Service Officer – Now at Syncapse, formerly General Manager, Rogers Digital Media.Derek Marshall, Vice President, Program Delivery – Now with Syncapse, previously a Senior Director of Digital Engineering at Rogers Communications Inc.

Wildfire

Neil Joseph, Social and Digital Media Specialist – Now at Wildfire Interactive, Inc., previously in Market Development at Tesla Motors.Madelon Wills, Account Manager – Now with Wildfire Interactive, Inc. and formerly a Manager at Cavé Vin.

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New Facebook Platform Industry Hires: AdParlor, Buddy Media, Context Optional, Involver, Kontagent, Vitrue and More

There were hires all around this week, from business development to interns, on our new weekly post covering hires among non-gaming companies on the Facebook platform. In particular Buddy Media hired a Director of Business Development and General Manager of Lifestyle brands. Nanigans hired a Vice President of Client Partnerships, TBD Digital hired a Managing Director of France and two VPs of Business Development and Vitrue hired a General Counsel, as well as a Director of Business Development.

If your company is hiring new people or making a notable promotion, please let us know. Email mail (at) insidefacebook (dot) com, and we’ll get it into next week’s post. Also, please note that information about most new hires, below, comes directly from company updates from LinkedIn.

Looking for new opportunities? Check out the Inside Network Job Board, which shows the latest openings at leading companies in the industry.

Here’s this week’s list of hires:

AdParlor

Sarah Watson, Account Manager – formerly an Intern Marketing Coordinator at T Magazine.Dustin Keller, Designer – previously a Web/Graphic Designer at SteadyRain.Prashanth Mohan, Account Manager – formerly the Development Manager at Management and Economics Students’ Association.Vitaly Pecherskiy, Account Manager – previously a Financial and Research Analyst at Oriyon Corporation.

BranchOut

Christopher Henty, Marketing Associate – formerly at Project Manager, Recruitment Chair at Cornell Business Review.Andrea Kalsow, Marketing Associate – previously a Teaching Assistant at Saddleback Valley Unified School District.Emma Markley, Marketing Associate – formerly an Intern at Makena Capital.Michael DeVerna, Product Manager (Virals/Analytics) - formerly Director of Products at Pagefad.John Petroff, Marketing Associate

Buddy Media

Stephanie Sprangers, Vice President of Strategic Brand Accounts - formerly Vice President of Business Development at InterMundo media.David Dowd, General Manager of Lifestyle Brands - formerly the CEO/Founder of ViewPlay Media, LLC.Drew Stern, Director of Business Development – formerly a Senior Manager of New Product Development at American Express.Rebecca Bonell, Manager of Client Loyalty Team - previously an office Manager & Executive Assistant at Lead Financial Group.Jamar Parris, Senior Engineer – previously a Vice President, Application Architect at BNY Mellon.John Friese, Front End Engineer -formerly a Graphic Designer/Production Support professional at Sign-a-Rama.

Context Optional

Grahame Lesh, Comunity Genius – formerly the Marketing Manager at Tripping International.Belen Torres-Gil, Account Manager - previously a Program Coordinator at Stanford University.

Involver

Richard Rich, Sales Executive – formerly the Director of Marketing at Webtab, Inc.Jed Wheeler, SML Trainer & Developer – previously the Founder & Editor in Chief at Vallejo Free Press.Adam Steinharter, Recruiter - formerly a Contract Recruiter at Adchemy.

Kontagent

Ryan Tankoos, Enterprise Sales Executive EMEA – formerly a Business Development Manager at Global Collect.Taehoon Kang, Software Engineering – formerly did the same work at Soompi Media, LLC.Justin Hypes, Business Development – previously Director of Business Development at MSDonline.Art Santos, Business Development – formerly at Senior Director of Business Development at heyzap.com.Dave Paola, Software Engineer - formerly a Software Developer at the Department of Civil/Environmental Engineering.

Nanigans

John Dobrowolski, Vice President of Client Partnerships – formerly the VP and Brand Alchemist at SCVNGR.Ron Searls, Ad Operations Manager – previously a Software Developer at Incipient.

Spruce Media

Jason Leveille, Software Engineering – formerly Lead Developer at Blue Atlas Interactive.Scott Bain, Director of Advertising Delivery -previously the Mobile Marketing Manager at Neverblue.

TBG Digital

Ben Miles, Senior Account Manager – previously a Key Account Manager at Shopping.com.Ed Cox, Client Services Manager – formerly a Digital Media Analyst at Fairbrother Lenz Eley.Bruno Vannod, Managing Director France – previously a Solution Sales Specialists Director at Microsoft Advertising France.Mike Lee, Vice President of Business Development – formerly an Agency Development Manager at Yahoo.Chris Phenner, Vice President of Business Development – formerly EVP of Business Development at Thumbplay, Inc.

Vitrue

Michael Rideout, Director, Business Development – previously President and Founder at Rideout Media Group, LLC.Harris Troutman, General Counsel – previously a partner at FSB FisherBroyles, LLP.Amy Barbieri, Mid-Market Sales – previously a feature producer for Jezebel Magazine/Modern Luxury Media.Eric Schwertzel, Business Development – New York City, previously Vice President of Business Development at Netbiscuits.Kevin Race, Senior Project Manager – formerly a Project Manager at Trivantis.Erika Admundson, Strategic Services Manager - once a Marketing Strategist at MKTG Inc.

Work4 Labs

Libby Te, Office Administrator at Work4Labs – previously a program leader at YMCA.Vincent Vo, Business Development & Strategy Intern

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