Facebook could earn more cash from virtual currency, exec says

5 Mar 2010

Virtual currency on Facebook has the potential to be a bigger revenue maker than the ads business on the social-networking giant’s site, the head of its European operations Colm Long told a digital conference in Dublin this week.

Speaking at the Digital Landscapes conference at UCD this week, Long said that globally more than 400m people around the world use Facebook. In Ireland, the service is used by 1.4m people, most of whom have been active on the site in the last 30 days. He said that more than 700,000 Irish people are on the social networking site every day.

Long said that many brands are already using its pages as a means to maintain an audience and embrace the digital opportunity. He cited the New York Times’ Facebook page as an example of a traditional brand that stands out in the social networking world, bringing print and online into Facebook and creating an identity that puts breaking news into peoples’ news feeds.

“The trick is not just creating a presence, you need to invest in that presence. You need to look at what you’re sharing, create mechanisms for feedback on your product.

“Branding is tricky online, the vast majority of advertising dollars are being poured into brand. The problem for brands is taking that and overlaying measurability. One of the things that Facebook does particularly well is allowing people to measure engagement.”

Adding to the measurability argument, Long said that Facebook has just done a deal with Neilsen to gain an understanding of how online strategies influence offline purchases. “We want to tie those two together, online and offline, and see how commenting on something affects the marketing of a product.”

He highlighted the recent campaign Facebook ran with Diageo to celebrate Arthur’s Day, the 250th anniversary of Guinness. “Guinness embraced this and built a page to inform the global community about its brand. It started selling virtual pints on Facebook and sold out its inventory within two hours.

Long also cited a company in Cork called Hairy Baby that sells T-shirts and hoodies online. “The company has 7,000 fans on Facebook yet has a free page, has done just a little bit of advertising engagement and commentary. It’s product is viral and engaging and its success is phenomenal to see. What people need to be asking themselves is what’s the emotional attachment people may have to a brand.”

One of the biggest flyaway successes on Facebook has been social gaming with games like Farmville and Mafia Wars suggesting a vibrant new revenue stream for the site.

Virtual currencies

If anyone was paying attention when Facebook embarked on its recent redesign, on the top right-hand corner where the user’s account information is, there’s a very telling section called ‘Credit Balance’. Facebook is embarking on its own virtual currency.

“There are three constituents on Facebook,” Long said. “Users, advertisers and developers.

“The developers interact with our 400m-strong user base in lots of different ways. The gaming category is absolutely huge on Facebook and is a sure-fire way of building an audience very quickly.

“Look at Zynga and PlayFish – talk about acceleration of growth – their level of acquisition of users and customers is essentially  practically impossible on any other platform.

“Think about the idea of virtual currency – billions of dollars are being exchanged on virtual goods. People are buying virtual tractors on Farmville and guns on Mafia Wars like you would not believe.

“Think about the potential behind this – today, in order to do that we are building a payment ecosystem. We want to build a currency that drives liquidity across the whole Facebook platform.

“If you make money from growing corn on Farmville you can take that currency and buy a virtual or physical gift on any part of the platform and Facebook will take a cut.

“This has the potential to be bigger than our ads business over time,” Long said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years