The Virtual Currency Revolution
If you count yourself among the thousands of e-commerce professionals at the Shop.org Annual Summit in Dallas this week, it might be worth your while to visit booth No. 824 for a demonstration on how retailers can use Facebook Credits and other virtual currencies to promote and sell their own products and services. The company giving the demonstrations is Ifeelgoods, a new virtual goods incentive provider with the first platform that allows merchants to use Credits as marketing incentives in their online stores.
At the very least, you should continue reading this article whether you happen to be at the summit or not – especially if your immediate reaction to the words “Facebook Credits” or “virtual currencies” was “doesn’t apply to me”. They do apply to everyone in the e-commerce industry, and here are a few frequently asked questions and answers to help explain why:
Q: What’s the big deal with Facebook Credits lately, and how does it even affect my business?
A: Facebook Credits is arguably the social network’s biggest initiative at the moment, which means the ripple effect will be felt by most businesses on the Web. Consider yourself potentially in store for a tsunami effect rather than just a ripple if your business happens to be selling retail goods online, as Facebook Credits could become the de facto alternative currency used for such purchases.
Q: Then let’s back up a little bit. What the heck is virtual currency, anyway?
A: Well, for starters, it’s already more than a billion dollar industry that stands to get a lot bigger very quickly, so it’s definitely time to start paying attention. Essentially, virtual currency is an online payment system derived to pay for virtual goods such as game credits or items used in the games themselves.
Q: But my business has nothing to do with games. So, again, what’s the big deal and how does it affect me?
A: Virtual currency evolved through games as a way to purchase things of “insignificant” cost by buying more substantial packages, or credits, but it is soon going to become much larger than just games. In fact, it already is, with Apple, Google and Amazon among the most interested players in the virtual currency industry – and that fact alone means that you should already be watching the space for any new developments.
Facebook, however, now has something that none of those companies do – its own currency. Facebook Credits can currently be used for games and other virtual purchases on the network, but the very likely progression is that Credits will eventually allow shoppers to buy physical goods across the entire Web through Facebook Connect and the Open Graph. Consider the opportunities that presents for retailers – from major brands to the smallest merchants.
Q: Where do users even buy Facebook Credits?
A: Besides online, users can now get them at Target retail stores in a partnership announced earlier this month. More retailers such as Best Buy are expected to follow suit.
Q: How do they pay for them?
A: They can use credit cards or their PayPal accounts, and there are currently 15 currencies accepted including U.S. dollars, the British pound, the euro, the Danish krone and the Venezuelan bolivar, to name a few.
Q: Speaking of PayPal, how does it fit in with all of this?
A: For now, PayPal and Facebook are essentially partners as far as Credits is concerned, but Credits looks to change the entire online payments system, possibly competing with and eventually threatening PayPal. Call it a coincidence, but many of the engineers working on Facebook Credits came from PayPal.
Q: Okay, so what’s the story with this company Ifeelgoods again?
A: It has created the first platform in which online retailers can leverage Facebook Credits to market their own goods. An example would be, rather than using coupons as a buying incentive, a retailer offers 25 free Facebook Credits to shoppers that purchase a particular item in their online store. Today, that provides an excellent incentive to the millions of people who play social games on Facebook. In three to six months, however, it may provide an even bigger incentive to hundreds of millions more people. Something to think about.