1.6% Of Facebook Users Spent Over $1 Billion On Virtual Goods

The social gaming phenomenon is (still) hip, hot, and hype. It's not a stretch to say that there are millions of social gamers across the globe. An industry report projected social gaming to reach $11.3 billion by 2016. But what is the current state of social gaming?

Let's look at the figures from Facebook, which is the world's most populated social gaming platform. In the first half of 2012, Facebook has 15 million users who have purchased virtual goods, according to the social networking giant's recent SEC Form 10-Q document. That's roughly 1.6% out of 955 million Facebook users worldwide.

How much did the 15 million users spend on virtual goods? From January and June this year, Facebook's payments and other fees revenue was $378 million. Let's assume $378 million is wholly payments revenue, as the other fees revenue has been immaterial and also, fees related to Payments are generated almost exclusively from games.

Facebook charges social game developers 30% for purchases made by users using its Payments infrastructure; the remaining 70% go the developers. The mentioned payments revenue of $378 million is the balance after deducting the amounts remitted to developers.

So, the total amount spending on virtual goods in the first half of 2012 was $1.26 billion. As mentioned, Facebook has a total of 15 million spenders of virtual goods. So, the overall average spend per paying gamer is $84 (for the six months period), or $14 per month.

Facebook's average revenue per paying gamer is $25.20 (payment revenue of $378 million divide by 15 million paying users).

From July 01, 2011 onward, social games developers on Facebook Platform are required to process all payments through Facebook Credits. Users buy Facebook Credits, a virtual currency, and in turn, use the Credits to purchase in-app virtual items.

However, Facebook's payments revenue has been relatively flat since third quarter of 2011 (after the imposition of mandatory use of Facebook Credits). This stagnant growth have spurred Facebook to overhaul its Payments service.

Facebook is phasing out Credits. It is introducing local currency pricing, where app developers can price virtual items in local currency (instead of Credits). The developers can also price a single item differently in different markets.

Facebook will roll-out local currency support in Quarter 3 2012 and apps with virtual items will be required to use local currency by the end of the year.

The newly launched Facebook App Center will spur payments usage. In addition to in-app purchase, app developers (not only social games developers) now have the flexibility to charge users one-off flat fee and/or subscription. And, undoubtedly, payment is one of the building blocks for a successful Facebook mobile strategy.

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