Log in   •   Sign up   •   Subscribe  feed icon

Social Media Virtual Currency: Does Facebook Or Zynga Hold The Purse Strings?

After Target became the first retailer to sell Facebook Credits gift cards in its stores last month, this week Walmart and Best Buy jumped into the fray selling $5, $10 and $25 denominations of FB Credits just in time for the holiday season. At the same time, Zynga filed a patent for "Virtual Playing Chips in a Multiuser Online Game Network." Are these tactics separate issues or the first signs of a strategic battle of wills between the two Internet powerhouses?

Facebook CreditsFacebook CreditsBack in May, my posting titled "War of Wills - Zynga Refuses To Pay Facebook Credits' 30 Percent Tax" higlighted the first gauntlet laid down by Zynga. At that time the online gaming company's founder Mark Pincus actuallyMark PincusMark Pincus threatened to pull all their games off of Facebook and launch their own social network called Zynga Live - in retaliation of Facebook's 30 percent cut of gaming proceeds. Name-calling was actually cited in a number of reports, and Michael Arrington at TechCrunch noted that Zynga felt that Facebook's tactics were comparable to a "protection racket."

However, Zynga apparently deciding not to 'bite the hand that feeds' pulled back from their hard-line position and actually appeared to 'cave in' to Facebook's control of the situation. Subsequently, both parties have signed a five-year agreement committing Zynga to the use of Facebook Credits as the virtual currency of choice.

Now that the patent has been filed, it looks like Zynga might be experiencing buyer's remorse in wanting to gain back some leverage in the virtual currency space. If granted, it could give Zynga a 'leg-up' in ongoing negotiations with Facebook, particularly since Zynga is believed to be one of the largest advertisers on social network.

The patent would allow Zynga a legal channel for virtual currency transactions. Up till now, online games could offer virtual currencies for performing actions within a game where purchases of in-game objects could be traded - but these transactions have not traditionally been something one could purchase legally. According to VentureBeat report, as a result, booming bootleg economies have sprung up around these games leading to illicit operations in countries such as China.

The report goes on further to state that Zynga's patent application stresses that one of its virtual-currency requirements is that the currency exchange be 'one way" - where players can send cash into the system, but they can't take cash out, arguably avoiding the risk of the regulations pertaining to gambling.

However, while Facebook and Zynga jockey for position as to who will have ultimate control of the 'Federal Virtual Reserve' coffers, both parties are embroiled in yet another volatile issue. Last week, a class action law suit was filed in San Francisco accusing Zynga of illegally sharing Facebook user data of its customers with advertisers and data brokers. And Facebook is culplable as well. For privacy breaches in this matter, see my previous post, titled, "Social Media Privacy Leaks Creates More Detractors than Promoters For Facebook."


How this most recent turn of events will turn out is yet to be decided by the courts, but based on the outcome it might widen the contentious gap between these two parties that feel they are both entitled to print their own money!