Soft Money: How Facebook Can Boost Its Virtual Currency

Source: Wired

Facebook makes the vast majority of its revenue from advertising sold on its site. But the company’s recent S-1 filing for its initial public offering showed that a substantial portion comes from Credits, the virtual currency used in Facebook games and other applications. If Facebook is going to develop and diversify its revenue streams — which it must — Credits is the natural place to begin.

In 2011, Facebook earned $557 million from payments made through Credits and other fees, 15 percent of the company’s total revenue. Facebook takes a 30 percent cut of all payments processed through credits, and that $557 million represents only that 30 percent, since Facebook doesn’t consider itself the principal in the transaction, just an intermediary.

So, give or take whatever special arrangments or alternate fees may be in play — the S-1 says that “in 2011, other fees revenue was immaterial” — Facebook users spent roughly $1.85 billion on virtual goods within the site last year.

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