facebook application development

Today at TechCrunch’s CrunchUp conference, PlacePop officially launched its loyalty card iPhone app and social service. Instead of businesses offering deals to customers checking in to a centralized location-based service, users check-in directly to a business’ custom PlacePop loyalty card, digitally punching the card, earning rewards, and sharing their actions.

It’s a new example of companies trying to tap into social connections — on Facebook or elsewhere — to connect businesses with customers, and customers with deals.

The conference also featured Twitter discussing their GroupOn-like Earlybird deals, and FourSquare talking about the future of transaction-intiated check-ins. The trend  of the conference shows that social companies see monetization potential in helping businesses not only increase awareness and connect with fans, but in directly facilitating sales.

PlacePop allows business owners to quickly convert an existing loyalty program or create a new one, and have total control over the rewards they offer. Users toggle a switch on each card to share their actions, and can also share photos of their favorite businesses, which PlacePop saw Facebook and Twitter users doing frequently.

The PlacePop website uses Facebook for login, and makes it easy to share your affinity for places you’re loyal to. A PlacePop tab for Facebook Pages could create a powerful link between a business’ communication with customers and efforts to encourage them to visit. Investors see potential too, with PlacePop securing $1.4 million in funding from Ooga Labs cofounders James Currier and Stan Chudnovsky, Affinity Labs Founder Chris Michel, and Bebo Founder Michael Birch.

Twitter launched Twitter.com/Earlybird in early July after analyzing existing promotions run on Twitter and learning what worked best. It seeks to run promotions that stimulate conversation, like their 20% off deal with JetBlue which got users tweeting where they were flying to, broadcasting the deal to their own networks. Earlybird could become a significant moneymaker for Twitter, especially if they give the account representation on the home page.

FourSquare explained that moving check-ins to the point of transaction, instead of when a user visits a business, is core to their future. Its integration with frozen yogurt vendor Tasti D-Lite, which allows users to enable auto-checkin when they use their physical loyalty card to make a purchase has been a success, and they’re considering how to scale it to other businesses. FourSquare’s head of biz dev Tristan Walker admits that they don’t have the staff to help the thousands of companies who request to run promotions each day. This leaves room for loyalty programs like PlacePop where owners run promotions independently.

If you had told developers during the time of the earliest generation of social games on the Facebook Platform – games like Vampires and Zombies, circa mid 2007 – that The Walt Disney Company would be acquiring an app developer for somewhere between $550 – $750 million three years later, most would have been very skeptical, if not incredulous.

But Disney’s acquisition of large social game developer and publisher Playdom yesterday marks another symbolic moment in the evolution of social gaming on Facebook (and MySpace, where Playdom invested early and has had success). Following EA’s acquisition of Playfish last November, Disney is the first media giant to pull the social gaming acquisition trigger in a big way.

It wasn’t that long ago that social games and apps were thought of as just another vast repository of low quality advertising inventory – if not worse. But Disney’s acquisition of Playdom, even more so than EA’s acquisition of Playfish (given Disney’s breadth of brands and media interests, and how careful they are with protecting their IP portfolio from potentially scarring issues), will now validate the virtual goods model to many media executives and investors who were hesitant to believe that something as trivial as inviting your friend to mop your restaurant might be a promising way to build a business on the internet.

As social gaming has become increasingly mass-market throughout the west and – this year – increasingly popular in the east as well, media companies like Disney are betting on the idea that new brands and IP can only take you so far; existing IP will become increasingly important in separating from the pack of developers vying for consumer attention, especially as customer acquisition costs increase.

We continue to hear of many social game developers and media companies interested in talking more with one another. If anything, we’ve been seeing that developers are getting more eager to have conversations than was the case six to nine months ago, but the number of potential acquirers sniffing around has also been increasing throughout the year as well.

Overall, we continue to expect to see more M&A activity in the space over the coming months. There are a lot of companies who are now confident enough that virtual goods inside games on social networks will be sustainable and are trying to figure out what exactly their move will be.

To dig deeper into the social gaming market, check out our recent Inside Virtual Goods reports:

• Inside Virtual Goods: The Future of Social Gaming 2010,
• Inside Virtual Goods: Spending and Usage Patterns of the Social Gaming Audience, and
• Inside Virtual Goods: The US Virtual Goods Market 2009-2010.

Each week, it seems, we hear about another company choosing to pass by Facebook’s many independent monetization companies and use Credits, the social network’s in-house virtual currency, exclusively. Wooga, a German developer with 9.7 million monthly active users, tells us that it’s the latest.

Last week, we covered RockYou’s decision to use Credits, before the company officially announced a new contract with Facebook this Wednesday. Before RockYou, we reported the switch by LOLapps, which is known for both games and quizzes. Along with CrowdStar, Credits’ biggest cheerleader, that now makes four big companies using Credits exclusively.

There’s an interesting twist to Wooga’s story, though: the company didn’t have to switch to using Credits. For a year, since the July 2009 release of its game Brain Buddies, Wooga lacked any monetization options at all: no ads, no virtual goods, no subscriptions.

Monetization is the focus for most companies, so Wooga’s failure to include it in its first three games – now including Bubble Island and Monster World — sounds naïve. CEO and co-founder Jens Begemann doesn’t have any regrets, though.

“Our goal is more long-term,” Begemann says. “We want to create one of the top three game companies in the world — but we started roughly 20 months later than Playfish or Zynga. Last autumn, we had the decision to either monetize as quickly as possible, or raise venture capital and invest it in growing the userbase. We took that option. It’s a little bit like what Facebook did for a couple of years. We didn’t make money, but we grew.”

Since Wooga is based in Germany, it also publishes its games on StudiVZ, that country’s largest social network with 15 million users versus Facebook’s 10 million. Along with the release of Credits on its Facebook games, Wooga added monetization to its games on StudiVZ, so we naturally wondered how Credits compared.

Surprisingly, Begemann says that Credits perform almost as well as StudiVZ’s payments, which have the advantage of targeting local options like mobile payments.

“We find Facebook Credits are better than they’re being talked about if you deeply integrate them into the gameplay,” says Begemann. “If you look at Monster World, Facebook Credits is the currency, we don’t call it something else. That, as we see it, tends to reduce conversion. But if you make Credits your currency, it works pretty well.”

We’ve written extensively about Credits here at Inside Facebook. For the best of our coverage, check out our in-depth examination of the issues around the virtual currency and our interviews with industry leaders on the pros and cons of Credits, over on Inside Social games.

Last week, RockYou began telling users (and us) about its plans to make Credits the exclusive payment option in its Facebook applications. Today, the company has gone further, announcing a five-year deal to exclusively use Facebook’s in-house virtual currency on the platform.

RockYou is one of the largest developers on the platform, with around 34.6 million monthly active users and 2.70 million daily active users, according to AppData. By getting this commitment, Facebook is ensuring that the company’s user base will start using the currency, thereby furthering its reach across the platform.

Facebook intends for Credits to get more users buying more virtual goods on third party applications than they have through third party payment options. It is experimenting with a variety of promotions to help spur the currency along, including giveaways, and special advertising for third-party developers who adopt it — also signing up other developers to exclusive five-year deals, including CrowdStar and Lolapps.

Meanwhile, some developers have balked at Credits, because Facebook takes a 30% cut — whereas it has taken 0% up until now — and because the implementation of Credits can create additional costs for developers.

For more, see our coverage from last week about RockYou’s Credits integration.

Over the past few months, Facebook has been testing more ways of “seeding” users with Credits, its universal virtual currency, to spend on virtual goods inside social games on Facebook. Just last month, it started testing a Credits giveaway promoting CrowdStar’s Hello City. Now, Facebook is testing more generic Credits giveaways inside social games running on the Facebook Platform.

Over the last couple of days, users have reported seeing the following notice above many Facebook games. Facebook is testing a variety of Credits seeding amounts – we’ve seen from 10 to as many as 25 for some users. (We’ve even seen some users complaining that their friends got more Credits than they did in this giveaway.)

Facebook’s goal with the Credits giveaway is to accelerate the adoption of Credits as a common virtual currency across apps and games. As Facebook CEO Mark Zuckerberg told us a few weeks ago, “It makes sense that there should be one currency. If I go play a CrowdStar game right now and get Credits there, I can’t go use those Credits in a Zynga game, so that kind of sucks. One of the biggest inefficiencies in buying virtual goods is all the friction of having to take your credit card out, so having one store of [virtual currency] that you can use everywhere is both good for users and good for all the apps.”

We expect Facebook to continue doing promotions like these over the rest of the year to build up the number of Credits in circulation. For more background on the Credits rollout process, see our recent in-depth story here.

To dig deeper into the social gaming market, check out our in-depth market research report: Inside Virtual Goods: The Future of Social Gaming 2010.