Ditching Credits a smart move for Facebook, says analyst

Following the news that Facebook is abandoning its Credits monetary system in favor of real-world currencies and recurring monthly fees, analysts have labeled it a "smart move." Colin Sebastian at analyst firm Baird Equity says that the move will potentially lead to higher conversion and monetization rates for Facebook, and reflect the company's adaptability to change. The Facebook Credits system did not meet its goal of becoming the de facto virtual currency for in-app transactions, reasons Sebastian, and therefore Facebook's move to streamline the payment process is welcome. He adds, "With the change, Facebook will clearly not be extending Credits onto other websites, and may pose less of a competitive risk to PayPal. However, Facebook will continue to store user payment information (credit cards, PayPal account) and earn a 30 percent fee on transactions, similar to Apple iTunes." He also noted that the new monthly subscription system adds flexibility for developers. Those games which do not gel as well with micro-transactions can now make use of subscriptions for offering users premium content. With all this in mind, Baird Equity is maintaining its Outperform rating for the company, stating that while there are near-term risks and pressure on Facebook, the firm's long-term view is that Facebook will have multiple opportunities to expand thanks to its "unprecedented gravitational pull in social media."