Facebook Testing Virtual Currency

Facebook is finally testing a virtual currency system called “credits,” an expansion of its virtual gifts market. If the feature is broadly rolled out across Facebook, you will be able to purchase “credits” (100 for $1, the way it’s set up now) and send them to your friends. They can then send them to other people as virtual “kudos” or use them to buy virtual gifts on Facebook.

This is the closest Facebook has come to building an on-site PayPal, except there is no way (yet?) to turn credits back into cash.

A fine start, but Facebook will probably have to extend the feature beyond “kudos” and gifts to make it more useful — such as using it as a payment system for classified ads, new Facebook features, in-app purchases, or for Facebook Connect sites.

It’s also possible this feature is too late. This would have been much more useful a year and a half ago when Facebook was trying to establish itself as a platform for third-party developers. Now that that’s dead, and Facebook is trying to turn itself into a sort-of Twitter-plus-photos, there’s fewer uses for currency.

Facebook’s virtual gifts business — estimated last year at $35 million annual run rate — isn’t nearly enough to support the company by itself. But the company is smart to milk it for as much revenue as possible: It’s a good side business, and having a secure, in-Facebook currency should help.

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.