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Lawyers Take Aim at Facebook Credits

Law firm Newman| Duwors, headed by attorneys Derek Newman and Brian Strange, are looking into whether Facebook's virtual-currency system, Facebook Credits, may be in violation of U.S. antitrust laws. They argue that tying two products together—that is, forcing users of its online gaming platform to use only Facebook Credits—could be illegal.

The two attorneys launched a web site at StopFacebookCredits.com to make their case that, before Facebook Credits, the virtual currency industry enjoyed a healthy competitive environment that is now almost dead.

Almost Dead?

The attorneys, however, do not explain how it is that new ventures based on virtual currencies frequently launch, including two last week. One was GetJar, which expanded its GetJar Gold Program with a virtual currency that rewards consumer loyalty. The currency is backed by advertising spending rather than consumer dollars. Consumers earn GetJar Gold virtual currency by downloading any Android apps, and can spend it on premium apps and in-app purchases.

GetJar Gold virtual currency can be used with any Android apps from any app store, including GetJar, Android Market and Amazon.

Quepasa, owner of North-American platform myYearbook and Latin-American platform Quepasa, also just launched a virtual currency initiative–Credits for myYearbook mobile, to help users meet more people faster by increasing their visibility through premium services. By using the mobile credits, users can activate three Spotlight features directly from their mobile devices. Each Spotlight feature costs 50 Credits, or approximately $1.00.

Driving In-app Purchases

Perhaps the most telling evidence against the attorneys’ argument is the fact that most in-app purchases typically involve virtual currencies, according to HIS Screen Digest report, "Free for All: In-App Purchases to Dominate Smartphone App Business."

It estimates 63 percent of in-app purchases on the U.S. iPhone App Store at the end of the third quarter were for virtual currency. Specific in-game functions or features were among the most popular U.S. in-app purchases—and yes, probably via Facebook Credits.

However, other popular categories include time-limited navigation services, dating and premium social network access, as well as specific functions or features for photo and video apps.

A Technology in Flux

Not that GetJar’s or Quepasa’s new initiatives are guaranteed to succeed. This industry is still a work in progress, with even well financed endeavors occasionally failing. Microsoft's proprietary virtual currency system, Microsoft Points, will be phased out by the end 2012, Inside Mobile Apps reports, citing a source.  Instead, transactions will be based on the region set on the purchasing account. In addition real money will be used to purchase all Windows Phone content.

This news follows a report in ReadWriteWeb that Coffee & Power, a company founded by Second Life creator Philip Rosedale that lets remote workers hire each other for small jobs, is dropping its virtual currency. U.S. dollars will be used instead. Rosedale had hoped the "sticky" nature of virtual currencies would stimulate more activity on the site.

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