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The CEO of one of the larger gaming companies on Facebook says that Facebook’s recently-released payment platform is increasing sales of virtual goods in games by 20% to 25%.
This sales lift is enough to make up for the higher commissions paid to Facebook for the service (Facebook takes 30% of a sale, versus less than 10% for most of the competing payment services).
According to the game company CEO, there are two factors likely driving the platform’s success:
- Facebook is a known, trusted brand so gamers feel more comfortable using it to make purchases versus independent companies.
- Facebook has accumulated a massive amount of credit card info through its gift store, so many users can buy goods in games without having to enter any personal info.
The early results are obviously excellent for Facebook, which should drive more high-margin revenue from its payment business. They are also encouraging for gaming companies using social networks to drive virtual goods revenue. The higher fees will pinch profit margins, but if the increased activity continues, game publishers could make more money due to the greater volume.
In addition, continuing to grow its database of consumer information like credit cards will help Facebook in its efforts to expand its payment system beyond Facebook and across third-party sites. At this point, of course, PayPal has a huge lead, and Facebook is likely a few years from meaningfully pushing its broader payment initiative anyway.
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