Facebook: Threat or Menace?

It looks like the Facebook Credits are hitting the windmill.  I could see this one coming for a while; once I heard that Facebook was planning to implement Facebook Credits, where Facebook would offer a universal currency for virtual products offered on Facebook games, I could see the trouble brewing. Facebook Credits (or Facebucks, as some have dubbed them) give a sweet 30% rakeoff to Facebook. Of course, they do make it easier for players to spread their virtual spending around to a variety of games, particularly to less well-known games from smaller companies. So they will probably result in some more sales for the obscure games, perhaps enough extra to compensate for the loss of 30% of the profits.
That situation doesn't describe Farmville, however, since it's the most popular game on Facebook (78 million users!). The Facebook Credits represent a straight loss of 30% of Farmville revenue; it's pretty clear that few new users will be attracted to the leading game (by far) just by offering Facebook Credits. Now, when Facebook announced this, they didn't say in so many words that Facebook Credits would be the ONLY way games on Facebook could take your money. But that was pretty obviously the way things were heading.

And now it appears the shoe is dropping, at least from the rumors hitting the intertubes. TechCrunch says Zynga is lawyering up and getting ready for battle as negotiations head south; the scuttlebutt is that Zynga will leave Facebook entirely in a few weeks. Zynga's talking about how they are diversifying away from Facebook (here and here and here).

This follows on the heels of a drop in users because of Facebook's change in the way they handle notifications; Farmville lost 4.4 million users in one month because of it.

It's a difficult transition for Zynga, but a necessary one. Right now they're at the mercy of Facebook; it's hard to deal with a sudden 30% loss of revenue. And who's to say next month Facebook won't decide that, hey, maybe 40% is a better deal? Now, Facebook should be careful about losing 80 million players, too. With Facebook's recent privacy shenanigans, they are certainly causing more negative publicity. Ultimately, I guess that Zynga and other companies will still have games on Facebook, but they'll be sure to have plenty of alternatives... and try to push users towards alternatives where the game company makes more money. Facebook may think "Hey, Apple can take 30% of all app sales, and nobody complains about that, so we can do it too!" But the difference is that Apple sells hardware that makes it possible... if you don't own Apple hardware you don't buy apps. With Facebook, there's no real need to conduct the game through Facebook when with one click you can be on somebody else's web site. One where the game publisher doesn't have to pay a 30% tax.

Which all means Facebook will become more of a marketing vehicle and less of a platform, and by making the platform more annoying they are making competition a little more possible. They may look invincible now, but Myspace looked that way once...