As a follow-up to my recent post regarding creating revenue around social games, I wanted to share an article that Shawn Foust, video game industry team lead at the law firm Sheppard Mullin Richter & Hampton LLP and friend of Plexipixel, wrote for Venture Beat, "How to Stop Worrying and Love Facebook Credits." In the article, Foust discusses direct revenue from games via social media outlets and applications. Specifically he is looking at Facebook’s new venture of “Facebook Credits.”

Facebook Credits are sort of like digital Disney Dollars®: good only on Facebook and only on what Facebook says you can spend them on. According to Facebook’s website, “Facebook Credits are a virtual currency you can use to buy gifts, and virtual goods in many games and applications on the Facebook platform.”

Facebook is initially offering credits free to users, alerting them that they’ve just earned credits for playing a particular game, while also allowing users to earn credits through Facebook-sponsored promotions. Game development company Playdom, the largest game producer on MySpace and the third largest on Facebook, has already signed a five year contract with Facebook to exclusively use its credits in its games.

While Facebook is making it easy for customers to earn and use credits, game producers and other businesses have some pretty strict restrictions on what they can and can’t do with Facebook Credits. As Foust explains:

You will not (and you will not enable or allow any third party to) sell Credits to, or trade or otherwise exchange Credits with, any third party.

You may not accept Credits as payment for tangible goods, except in the Facebook Gift Shop.

You may not accept Credits as payment for a currency or other stored value item that can be used outside of the application.

Facebook controls the generation and distribution of Facebook Credits, not you.

You cannot lock in value.  Facebook Credits are a fungible good that can be used in any application that accepts credits.  If a person purchases $100 in Facebook Credits with the intention of purchasing things in your application, if they only spend $80, the remaining $20 is free to go elsewhere.

Credits can abandon you.  Facebook retains the right to “revoke your eligibility to accept Credits at any time in [its] sole discretion.”  That means your economy can get up and walk away in an instant.

Rather than trying to figure out all the cans and can'ts of Facebook’s Credit system, Foust suggests businesses instead set up a third currency system specific to your game or games. Setting up a third currency that you control acts as a buffer between your company’s interests and Facebook Credits’ interests.

Foust’s bottom line is “direct implementation of Facebook Credits without a buffer currency effectively shifts control of a critical aspect of your game (which is often the main source of monetization) to a third party with potentially different incentives. Not good.”

It is interesting that Facebook is implementing Credits while at the same time  the majority of online game players, 480 million of the 500 million users, are non-paying. And adding your own currency means players must be willing to do one more step before they play your game. Are most players willing to take that extra hop?

In the end, though, with social networks and gaming becoming a major chunk of people’s total online time – a recent Nielsen poll found time spent social networking increased by 43% in the past year, and online gaming by 10% – taking and keeping control of how you market and monetize your online games will become all the more important.

Read the original article on Venture Beat, "How to Stop Worrying and Love Facebook Credits."