Facebook Credits to Launch Friday: What It Means for Tech
Facebook will now be both a social and a retail platform, using a monetization scheme similar to Apple, Amazon, and Google. But Facebook Credits are so much more.
On Friday, Facebook will take "Facebook Credits" out of beta and officially launch this new monetization platform. This establishes Facebook as both a social and a retail platform, using a monetization scheme similar to Apple, Amazon, and Google. Facebook Credits are so much more, though. Giving users credits allows Facebook to become more entrenched with its users, creating a barrier to entry/exit that allows Facebook to avoid the fate of Friendster and MySpace, but it can also be combined with the user's data to help individuals monetize their social currency. While some count page views or Twitter followers, it has been difficult to actually track and assign a value to one's impact on their social graph. Facebook, with almost 700 million users, is in a unique position to allow companies to both engage customers and reward them for increasing brand awareness or providing constructive feedback for improvements. The coupons, links, and product reviews of the local Mom's Club have way more influence on how and where my dollars are spent than Kim Kardashian, and soon that small, local, and influential group will be able to monetize that street cred.
Facebook is not the only player in this game though. Apple has simplified the on-line purchase process and created, in my view, the best on-line shopping/checkout experience on the web. Its selection of products is limited, but millions of users trust the site with their billing information, and that is a tremendous advantage. Apple's iOS is also a retail, browsing, and data-gathering platform with broader functionality than Facebook. When combined with iAds, iOS allows Apple to leverage that data into more effective targeted (and location specific?) ads, which also will not detract from the user experience that is at the heart of everything Apple does.
Google dominates on-line ads, but sees the threat posed by Facebook and Apple. Google gives Android and Google Docs away to log usage information and maximize the effectiveness of the ads it sells. While Apple sells iOS only on Apple hardware, Google is hardware agnostic, which ensures market penetration. Google Wallet and Google+ are attempts to fill in the pieces of the consumer puzzle (social and transaction) in which Google is not presently involved. Google Wallet is interesting because it links the virtual user to purchases in the physical world. The iPhone will surely have this functionality soon too, and it will be interesting to see how the offering differs from Google's. I have to think that the next evolution of Apple and Google will be to incorporate the television into their user data-gathering and transaction apparatus. This should allow consumers to cut their cable box (and bill) out of the equation and purchase content a la cart, supplemented by the sale of more effectively targeted ads.
Amazon is the gorilla of the on-line retail world because it has scale and consumer trust. With the media and on-line retail world rapidly changing, Amazon intelligently carved out the low-priced segment of the digital reader market. In addition, while the Google app store has been a disaster, Amazon is trying to leverage its customer credibility and focus on the customer experience, to bring some order to the Android app store. Amazon is at a disadvantage in a world where its competitors have platforms that engage users beyond on-line retail sales, include troves of user data that can link to coupons, and enable mobile payments. The success of the Kindle shows Amazon knows its customer and will be a formidable competitor, but Amazon has some work to do to both retain its position and justify a P/E multiple of 65.
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