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Most everyone knows about “Facebook Gifts” – little items that you pay a sum of money for (usually a buck) and it puts your “gift” on your friend’s wall. Basically, you pay a buck to send someone a cute little picture that drops off their news feed in 3 days or so. I would say, for a birthday or something, that would be a good investment. A cute little gift.  But this week is Valentine’s Day. And the price of the gifts has gone up a bit… With one gift topping in at 50,000 “gift credits” or, as of the latest translation value, five hundred dollars.

Thats right. 500 dollars. For a PICTURE of a flower. And, might I add, according to a random poll of my 7 (also single) female friends online facebook right now, it’s rather an ugly flower. Or, picture of one, if you want to get precise. And that begs the question – where the hell will “virtual currency” become too much? At what point do users say enough is enough? 500 bucks for a picture of a flower. And with the total over marketing of the Valentines day holiday on Facebook, I am sure someone has bought it. Somewhere. (more on this in a bit…) I recently read a topic on the Facebook Developers Forum that was a break down of some of the CPA apps. And being that I am in the process of integrating CPA into my own ads, I did some digging. Mob Wars, one of the highest ranking apps, is supposedly raking in $22,000 per day. Much of this, I assume, is generated from the in game CPA “incentives” and “rewards” that users complete in order to earn more of their virtual currency and keep ranking up.

I took a quick look at my own spending on $uperRewards and OfferPal and did the math, and I have earned the dozen or so apps that I use well over 200 dollars in offers I have completed to earn ingame currency. Then you have apps that claim to be the “Facebook-Wide Unofficial Currency” that span several apps – imagine how much money is changing hands with that.

Credit: Cal Skinner

The idea of “virtual currency” is exactly the same concept as tokens in an arcade, or “ride tickets” at a carnival - You spend 5 bucks and buy yourself 20 tickets. This is how every carnival I have ever been to operates. Then, you muse around for a bit until you find the ride you want to go on. It says “7 tickets” so you rip off your 7 paper tickets, hand it to the attendant, and jump on the ride.  Being a small child, you know you just used up 7 of your 20 tickets. Being a penny pinching adult, you know you just paid $1.75 to have your kid ride the bumper cars for a minute. Now, lets ask ourself. If every time we wanted to go on that ride, we had to take out $1.75, would we be just as willing to shell it out for each ride? The answer is no… After all, that’s why they use a tickets system. And this is why every facebook app uses “virtual currency” for everything they do. Up until recently, even Facebook’s gifts app used real money. Recently, and somewhat un-anounced prior to, they changed to the credits system. At the time, I bought into the “localazation of the global currency not focused on the USD” bla bla bla bullcrap. But by the time my next friend’s birthday rolled around, I realised just how much like a “virtual currency” facebook was attempting to create.

Be it a “gift”, ride at  a carnival, arcade, or an in game currency for an app – “virtual currency” is the way to pay. With users less careful about just how much they are shelling out, and the value of shelling it out, they convert more.

Using pre-set refills/cashouts - Carnival rides have always cost, in my experience, an odd number of tickets. In the Wii Marketplace, things cost 1,100 and 800 points frequently. You either have to go buy more, or throw out your leftovers. My Wii account has had 400 points sitting in it unused, because I do not want to reload another 10 bucks to buy anything. And again, here is the money. The free money. No goods or services were ever provided – this is literally free money for the company you are paying. This is exactly how sites like Adbux or Bux.to operate. If it costs 1 cent per click to adversise, and the user makes 1 cent (and their referer makes 1 cent too) isnt that a negative net profit? -200%? Well, yes. But the catch is, the amount of users that will ever reach payout is very low, around 5% on most PTC sites. And that well makes up for the loss. The same can be said about most anything. Operate at a loss and know your users will never reach the point where you have to pay them, and eventually you will either be in hot water when they want money, or you will turn a tidy profit.

Back to something I mentioned earlier about those pesky gifts – Facebook has been aggressively pushing them, with a large button at the top of every user’s profile asking to buy a gift for them. Now, I know that from experience facebook is the hyper-targeting king. What did not make sense to me was why run those links on people who are listed as Married, or in a relationship? Quite frankly, it bothered me seeing those links plastered on all of my friends walls, including ones of the same sex*, and ones who are in a relationship at the moment. If I had a special someone and I wanted to buy them a gift, I would. I do not need the “in my face” marketing that Facebook has used on these gifts. And that brings me back to the topic of this blog – who would spend 500 dollars on a picture of a flower?

*disclaimer: this statement is not meant to offend same-sex couples. this statement is meant to relate to other features that facebook correctly identifies with and matches to my “interested in” stat. why not do it with gifts too as they do with other features.