Facebook Credits: A Faster Way to Spend Your Whole Paycheck in Farmville

Have you ever thought to yourself that it’s just too easy to spend all your hard-earned greenbacks on magical ghost pepper seeds in Farmville?  If you have, then Facebook Credits are not for you.  I’m talking about the now-ready-for-prime time virtual currency tokens (more on that later) being promoted by the social networking company as a way to streamline virtual item transactions in social games and other affiliated applications.  The New York Times today reported on the adoption of the new payment system by Zynga Games, which marks their transition into full-fledged commerce.  The Credits are designed to create an easy, uniform payment system for more 150 games.

There are many different ways to buy Credits: online via credit card or PayPal, at traditional retailers and convenience stores via cash or CoinStar change counters, or even by mobile phone.  It’s a pretty impressive operation they’ve got going now, especially when you consider how lucrative it is going to be for Facebook.   According to the Times article, Facebook will take a 30% cut of all Credit purchase transactions to pay for the system and to line its coffers.  I guess they figured that if no one really seemed to mind when Apple took 30% from purchases from the App Store, people wouldn’t mind here either.  Judging by the >1 Million fans of Credits on the Credits page in Facebook, they were right.

By now you’ve probably noticed that this isn’t lining up to be a rave review of the system.  I’m not completely against it or about to launch into a tirade about people spending money for silly games.  I think it’s great that people have designed games that people enjoy playing and that most can play for free rather than coughing up $40-60 plus the cost of a console or gaming computer.  I have three major concerns with Facebook Credits: 1) security; 2) privacy; and 3) nomenclature.

First, security.  Facebook claims that Credits are much more secure than existing forms of payment.  In some ways they are–you don’t have to give sensitive information to game providers with little to no reputation.  But you don’t have to do that if you use PayPal or randomly generated credit card numbers that most companies offer.  Facebook promises that the info is kept on a server behind a firewall.   So they’re telling us they’ve got a nice big fat centralized server with all kinds of juicy transaction data on it.  Ok, and we’re just supposed to take it on faith that it’s really, really secure?  Compared with a diversity of payment systems, it means that hackers would have to do a lot less work to get at your data.

Second, privacy.  We’ve been down this road a dozen times before.  Facebook puts up a privacy policy that assures users that they have control over their information and how Facebook uses it.  It looks good, people post pictures and leave messages on friends’ walls and then, suddenly, a new policy comes out that strips away a couple of those privacy assurances.  Facebook usually retreats–but not without keeping at least some elements of the new policy–and the cycle begins again.  So why should we trust what they say about Credits:

On the information page, they specify, “Facebook never shares your financial information with anyone.”  Read that closely and you will realize that the statement is in the present tense.  It sounds great, but it doesn’t say they WILL NOT share information in the future.  It just says they don’t share it… right now. They could just have easily said “We will never share your financial information” but they didn’t.  These words were not chosen by accident so don’t act surprised in six months when the new privacy policy comes out.

Finally, nomenclature.  The Times article and some others have called Credits a “virtual currency.”  I beg to differ.  There isn’t a whole lot of consistency out there right now with what constitutes a virtual currency, but I think the key difference between a currency and a token is the ability to cash it back out for real money.  Unlike poker chips at a casino or Linden$, Facebook Credits are one-way transactions.  You give Facebook your money and you get some services in return, but you can’t sell your Credits back to Facebook for money.  Maybe a secondary/gray/black market will emerge for people looking to sell unwanted Credits to others but that still doesn’t make it a currency.  They aren’t creating an economy, just an elaborate arcade where people can go to spend money.  The Credits, like their brass coin ancestors, are meant to get people to spend more than they ordinarily would because their value doesn’t quite match up to real currency denominations (many arcades will give you 8 or 9 tokens for a dollar, meaning each one is worth $0.125 or $0.1111, making it harder to do the math in your head).  You also spend more because you often have leftovers that you can’t spend anywhere else and you either pay a little more to complete the transaction or you let the extra sit around and gather dust.  It’s not rocket science or remotely novel, but it’s not a true currency.  The value doesn’t float based on demand.  Facebook Credits make the Chinese Yuan look positively liberal.

So, there’s my rant about Facebook Credits.  Tell me what you think.  Am I right?

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About Justin Kwong

An attorney in the Twin Cities and adjunct professor at William Mitchell College of Law where I teach a seminar on the law of virtual worlds.
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