Tag Archives: Plink

The End of Facebook Credits (and Next Steps)

What happened to the theory that Facebook Credits would become a universal virtual currency, competing against the likes of PayPal and others? Facebook very quietly closed the program down a few weeks ago, reverting to a more standard model that enabled spending and credits to be made with local currencies around the world (similar to an iTunes account).

Credits was originally conceived in 2009 as a virtual currency, and specifically supported gamers needing to buy and exchange game elements (fake palm trees, etc.). They were used by 15 million social gamers in 2011, but had begun to be used for other applications, including travel and especially, Facebook Offers. The shut down of Facebook Offers after just a few months, however, seemed to limit Facebook’s ambitions to develop its own currency.

Could Credits have been successful as originally conceived? Facebook didn’t do very much to educate users how to earn and spend Credits; most users never had an idea what Credits were for or even how to check their Credits balance (hidden several clicks into a users’ profile).

In addition, Facebook charged developers a 30 percent commission to accept Credits, discouraging many hard goods companies with lower margins from joining the ecosystem and selling their products. Many companies that had high incremental costs (i.e. hard goods companies and restaurants) would be reluctant to pay such a high fee.

One company that had counted on using Credits but will adjust to the new system is Plink, which set up a Loyalty/Rewards program using Facebook Credits as its sole reward currency. Plink enables members to earn rewards by patronizing nine top dining and takeout establishments at 35,000 locations, including Taco Bell, Outback, 7-11, Burger King, Arby’s and Dunkin’ Donuts.

Even before Facebook phased out Credits, the company saw that FB Credits wasn’t universally applicable beyond the 70 million strong gamer universe. Hence, the creation of a partnership with TangoCard, allowing rewards to be spent at retailers such as Amazon and iTunes.

Plink CEO Peter Vogel says the dual track with Facebook and TangoCard still works well for the company. While Facebook remains important to the company, “Members were asking for more options and we are trying to spread out our ability to acquire members,” he told us.

Vogel still believes, though, that commerce is about to heat up on Facebook. “Facebook made this move in order to make it easier for members to buy and sell, eliminating the confusion presented by a made-up commerce,” he notes.

In a note on its developer page, Facebook said it was eliminating Credit “to simplify the purchase experience for users, give you more flexibility, and make it easier for you to reach a global audience of Facebook users.” The note added that the successor product will support pricing in local currency ( ex. US Dollar, British pound and Japanese Yen.)

Vogel also asserts that Facebook is showing other signs that it is serious about commerce. Facebook has finally opened an App Store and may soon be selling Paid Apps, he suggests.

Facebook has also hinted that it will consider lowering that 30 percent commission for certain industries. And at the same time Facebook cancelled Credits, it added subscription billing to its payments platform. This will enable consumers to be billed monthly for subscriptions (most likely from digital entertainment providers like Netflix, Spotify, The Washington Post and others).

Sounding off on Facebook’s IPO: The BIA/Kelsey Webinar

via CNN
via CNN

If anybody wonders whether the considerable “legs” of Facebook justifies a valuation now set for $83 Billion, have a listen to a terrific BIA/Kelsey Webinar on Facebook’s IPO, featuring Trada CEO Niel Robertson Wildfire CEO Victoria Ransom, and Plink Co-Founder Peter Vogel (and BIA/Kelsey analysts Jed Williams, Matt Booth and Jeanne Dattilo).

People have to understand that “Facebook is more than advertising,” said Trada’s Robertson. “It is a platform that takes people through the digital marketing funnel. It lets you acquire prospects and move them through the different stages,” he said.

It will be more of a challenge over time as Facebook moves its client relationships down scale from the giant brand companies to mid market brands and SMBs. Creative is really hard at those levels. But the basic idea of collecting fans is a winner all around. “It’s like collecting email addresses you can use over and over again,” he said. “Fans amplify your own message.”

Wildfire’s Ransom said that most of the trends for Facebook in social media are very positive. “There was a lot of anxiety from businesses about the Timeline,” she noted. But Wildfire studies show that Timeline has proved to be a smashing success, with a 22 percent jump in photo sharing, and a 90 percent jump in video sharing.

The challenge for Facebook is get beyond the sheer quantity of Facebook friends. “How do you engage them? Who are the right fans? The valuable fans?” asks Ransom. Facebook is getting better and better coming up with answers. And “there are more tools coming out.”

Plink’s Vogel, meanwhile, noted that Facebook watchers are looking for signs that the company will break out big in transactions and payments – an area enabled by its games-based Credits feature. It hasn’t happened yet – perhaps the Facebook’s 30 percent “tax” on transactions performed via credits.

Vogel, however, expressed confidence that the transactions and payments space will soon break out. The company is known for constant adjustment until “it gets things right,” he said.

If Facebook does get transactions and payments right, that “will be more than enough to justify its valuation,” added BIA/Kelsey’s Matt Booth. Facebook is “the biggest website that’s ever existed,” said Booth. Indeed, classifying it as a ‘website’ is misleading since the company encompasses so many things. And will encompass even more as it begins to buy a lot of companies to round out its offerings. “The entire U.S. display market won’t sustain Facebook,” he said.

BIA/Kelsey’s Jed Williams said one of those forms will inevitably be an ad network – an ‘AdSense’ for social,” he called it. Williams also predicted that Facebook will march quickly into the deals and offers space. It will introduce a new offers tool for managed service accounts such as Macy’s and extend down market, he predicted. Mobile is another mega-opportunity, although a risk as well since it hasn’t yet been monetized.

BIA/Kelsey’s Jeanne Dattilo, a BIA/Kelsey valuation expert, said signs were very good for Facebook’s valuation to hold up. She noted that Facebook’s EBITDA of 56 percent last year has got to be considered “really impressive.” Google was in the mid-30s; Yahoo was in the mid 20s.

Listen to a replay of the Webinar here: