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Facebook The Almighty Buck

Is Facebook Becoming a Central Bank? 232

Posted by Soulskill
from the while-everyone-was-worrying-about-bitcoin dept.
wasimkadak sends this quote from an article at Forbes: "Facebook's 27-year-old founder, Mark Zuckerberg, isn't usually mentioned in the same breath as Ben Bernanke, the 58-year-old head of the Federal Reserve. But Facebook's early adventures in the money-creating business are going well enough that the central-bank comparison gets tempting. ... Initially, the Credits-based economy was confined to the virtual world’s trifles. Credits could be spent to buy imaginary gold bars for aficionados of Mafia Wars, or bouquets of virtual flowers for birthday postings on friends’ Facebook accounts. This new form of digital money was cute but essentially useless for mainstream activities. Lately Credits have become more intriguing. Warner Brothers this summer offered movie-goers a chance to watch Harry Potter and The Dark Knight for 30 Credits apiece. Miramax and Paramount countered with film-viewing offers, too. In a provocative post this week on Inside Facebook, guest blogger Peter Vogel argues that Credits in the next few years will become more of a true currency. Facebook's 800 million worldwide users represent a lot of buying power. He figures Credits could evolve into commercial mainstays for digital movies and music."
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Is Facebook Becoming a Central Bank?

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  • Cash out early (Score:5, Informative)

    by LostCluster (625375) * on Friday January 20, 2012 @08:30PM (#38769994)

    The history of the web is filled with play-online games for points that could be used for other things... but all crash in an inflationary spiral. Points are free, but the prizes offered are not and eventually the value falls below the "par value" the site originally had. Has anybody recently cashed out with GSN Oodles or Moola.com's Moola points?

    • by Colin Smith (2679) on Friday January 20, 2012 @08:50PM (#38770262)

      When they discover they can get stuff for free. Same way the US government has done.
       

      • Which is the importance of getting your contracts specified in a currency that they can't print. For US contracts, get the money paid in Euros. For European contracts, get the money in Yen (or whatever Asian currency you prefer), and for Asian contracts, get the money paid in US dollars.

        The government will call their brethren overseas to trade their currency for the one specified in your contract. Get a general idea of when they make that transaction, and you can make some more money -> I call it fractio

        • by postbigbang (761081) on Friday January 20, 2012 @10:08PM (#38770982)

          Ummm, no. The finance majors don't say that. Nor do the economists. There is chutpzah, there is subterfuge, and there are varying indicators, but it's not pretend.

          When a letter of credit clears, there's a complex set of events that's spawned. Lots of people get paid. Sometimes they get paid in differing currencies, but they get paid. When the Russians had their post Soviet-breakup crunch, maybe they paid in potatoes, but they paid. Trading is something humans do well, and there is some predictability beyond "pretend".

        • by wisty (1335733)

          Actually, economics majors say that money is a "thin veil over barter", so you don't have to worry about it. Queue the Global Financial Crisis, and they say it can only be modelled as a shock. They don't like considering debt, because it would help them predict crisis, and then they'd get blamed if they modelled it wrong. It's better to say that financial crisis are an unpredictable shock to otherwise perfect markets.

        • I was expecting a link to some scammy website like the ones that advertise on CNN/BBC World.

    • Re:Cash out early (Score:4, Informative)

      by Bill, Shooter of Bul (629286) on Friday January 20, 2012 @09:51PM (#38770860) Journal

      I actually cashed out $10 worth of cybergold, back in 1998. That was the minimum amount you could cash in, never got more than 10 cybergold cents after that. Originally they offered points for surveys and adviews, but after I cashed out it was changed to more of a rewards program for shopping at certain sites and incentive to apply for credit cards.

    • Re:Cash out early (Score:5, Informative)

      by GuruBuckaroo (833982) on Friday January 20, 2012 @09:55PM (#38770886) Homepage
      SecondLife's Linden Dollar, exchangeable for real cash, has maintained its value remarkably well, at roughly L$265/US$1, for the last 5 years.
      • Define "real cash"?

        Everyone says "you can't eat gold", but it IS a fungible commodity... a handy point of reference is that, in say 1960, a 50 cent piece would by you a nice lunch.

        In 2012 that same (90% silver) coin will still buy you lunch, since it is valued at over $11...

        I would bet in another 50 years that Ben Franklin coin will STILL be worth lunch money, but $11 worth of "folding money*" (usd, pounds or euros) will not.

        * note that "silver certificates" stopped being honored by the US Govt
        • I suppose it doesn't make sense to keep an offer going indefinitely, the US government did give plenty of warning before they stopped redeeming them, and many people did redeem them towards the end.
          That and any other old US currency is still legal tender at face value
          Of course, the metal coins kept value in the collector/bullion market in a way that paper certificates didn't.

        • Re:Cash out early (Score:5, Insightful)

          by rasmusbr (2186518) on Friday January 20, 2012 @11:56PM (#38771548)

          The real value of silver has undergone drastic changes in the past, sometimes because of enormous new finds, sometimes for other reasons.

          It's probably better to use "a nice lunch" (as in a good but unpretentious restaurant meal of tasty, nutritious, healthful food, containing about 500 kcal) as your price reference. A meal at a restaurant is both a product and a service, and it contains a range of raw materials. Since the restaurant needs to pay real estate costs it also reflects the housing market.

    • by cgenman (325138)

      I think you're confused. You buy Facebook credits with real money, you don't earn them. They're a secondary medium of exchange, like Microsoft points on Xbox. You spend real money on them. You can't give them to friends, or use them to buy soda, etc. They're just a convenient way of not realizing that you're spending dollars.

      • by rtb61 (674572)

        So basically Facebook credits are a free loan that the unaware provide to Facebook. So does Facebook ever pay them back or are they a one way thing?

        • Re:Cash out early (Score:5, Interesting)

          by M. Baranczak (726671) on Saturday January 21, 2012 @12:29AM (#38771722)

          Facebook credits are like the old Soviet-block currencies. If you were an American visiting the USSR, you could exchange your dollars for rubles when you arrived. But there was no way to exchange them back. And rubles were worthless outside the USSR.

          • Lamp oil! Rope! Bombs! You want it? It's yours my friend as long as you have enough Rubles! MMMMMMM
    • by Zebai (979227)

      Points aren't necessarily free, points take time to earn and time is money. Spend a day earning points could be of equivalent value as spending a day at a job earning real money with just a difference in currency (& currency value) . You are right though this is nothing new with facebook you can make this comparison to almost any other online venture, warcraft being one of the most popular where there are people exchanging virtual for physical currency. I imagine one day we will not even distingui

    • I've always thought of it more like Microsoft Points. Less a reward and more of a micro-currency for buying things. I imagine any points awarded to players by games is paid for *directly* by Mafia Wars. Similarly Halo could theoretically give you MS points but it would come out of their sales.

  • Bits are almost free (Score:2, Interesting)

    by LostCluster (625375) *

    Interesting point that the main cost of music or movie is the "first copy"... duplication costs very little in the digital world. Seems like the movie industry are offering sequels to drive up interest in future movies.

    • by hedwards (940851) on Friday January 20, 2012 @08:45PM (#38770194)

      No, they do sequels because they don't generally have to sell them. The industry knows who's going to go to see a sequel and how large that audience is and as a result is able to much more accurately gauge the prospects. They won't know whom it is precisely that will go or precisely how many, but they'll have it down pretty good in general.

      That being said the studios are always looking for new ideas the big problem they tend to have is that only a fraction of a percent of the ideas they receive are actually worth filming and of those only a fraction of them are going to be memorable.

      • by EdIII (1114411)

        That logic does not explain Police Academy Six: We Can't Stop Making These Fucking Movies.

        Your model does not fit the data. Try again.

      • I think LostCluster was suggesting a reason why the movie companies were offering those particular movies on facebook, rather than a more general motive for the creation of sequels of movies.

  • Not a true currency. (Score:5, Informative)

    by TheNarrator (200498) on Friday January 20, 2012 @08:37PM (#38770090)

    The mark of a true currency is that it can be used to pay U.S tax liabilities. For Americans at least, anything else is just, at best, a commodity subject to capital gains taxes. For example, if you buy gold coins, or facebook credits, and then sell them after their value has doubled you'll have to pay capital gains tax on the amount they appreciated against the dollar. if you barter the gold coins, or facebook credits, for services or goods you will have to pay taxes on that barter transaction in dollars. If the dollar appreciates in value against other currencies though, there is no capital gains tax to pay, even though your dollar might buy more.

    • by hedwards (940851)

      Not quite, I can't pay my US tax bill in RMB, AUD, Euros or CAD, but I can pay them with USD. It doesn't mean that those other currencies aren't any good, it means that to do something interesting with them I probably have to either convert them or move.

      Things like MS' points are basically a way to get you to pay for something with fewer protections so that they have your money and you can't get it back.

    • by Geminii (954348) on Friday January 20, 2012 @09:32PM (#38770722)
      If you can buy goods or services with a currency, and exchange those goods or services for US dollars (via eBay, Craigslist etc), then the currency is a de facto method of paying US tax liabilities.
    • ...a commodity subject to capital gains taxes. For example, if you buy gold coins, or facebook credits, and then sell them after their value has doubled you'll have to pay capital gains tax...

      ...a commodity subject to capital gains taxes. For example, if you buy gold coins, or facebook credits, and then sell them after their value has doubled you're supposed to pay capital gains tax...

      Heh, just like that "use" tax you have been paying, in lieu of "sales tax" on those online purchases you make, you hav
  • Can I trade my Bitcoins for Credits? I also have some vintage CueCat rewards points?
    • Yes.

      Ok, so here is plain and simple how I work.

      I will sell small to medium transactions to people I feel are trustworthy enough in my mind based on a variety of factors.

      I buy

      MtGox USD
      MtGox BTC
      Btc
      PPUSD
      Paxum
      Giftcards

      I also buy alt coins and other things at a less than market but decent rate.

      I pay in

      MtGox USD
      MtGox Btc
      BTC
      PPUSD
      Solidcoin
      Paxum
      Giftcards
      Facebook Credits
      Eve isk
      CashByMail (not responsible for items in transit)
      Western Union (You pay fees, Mon-sat 9a-7pm pst, not available at times)
      Others

      I do not use

      Lib

  • Predicted all of this, and explained very clearly why as soon as there's some traction, and the ability to move/take cash out, the existing banks/authorities will be down on their heads like a weight of very heavy things.
    Why Bitcoin was so scary for a time.

    These things offer wonderful room for money laundering.

    • by ackthpt (218170) on Friday January 20, 2012 @08:56PM (#38770340) Homepage Journal

      Predicted all of this, and explained very clearly why as soon as there's some traction, and the ability to move/take cash out, the existing banks/authorities will be down on their heads like a weight of very heavy things.
      Why Bitcoin was so scary for a time.

      These things offer wonderful room for money laundering.

      I dunno. I see PayPal and eBay as a cartel which should be broken up, but nodbody has done anything about it, yet. All right out there in the open.

      ! It appears you are attempting to receive payment by means other than PayPal which is not allowed, please correct your listing so we get an even bigger cut of your sale

    • Bitcoin is bigger than ever right now. It is just that it has moved beyond creating bubbles by getting stories on slashdot. Recently there was a "The Good Wife" episode with the goal of doing that.

      http://tvrecaps.ew.com/recap/the-good-wife-season-three-episode-13/ [ew.com]

  • by Animats (122034) on Friday January 20, 2012 @08:50PM (#38770254) Homepage

    From the article:

    Peter Vogel is co-founder of Plink, a Facebook Credits-based loyalty program that rewards Facebook members for dining and making purchases at their favorite restaurants and stores.

    "Facebook credits" are just another gift card scheme. You can't cash them out. You can't invest them. You can't convert them to another currency. You can't transfer them to another individual. And Facebook takes a 30% cut off the top.

    The only virtual currency that comes close to behaving like a currency is Linden Dollars, the monetary unit of Second Life. Those, you can transfer and convert.

    Bitcoin had potential, but it turned into a pyramid scheme.

    • by Anonymous Coward on Friday January 20, 2012 @09:01PM (#38770392)

      BitCoin is not a pyramid scheme, technically it is a pump and dump.

    • by Teppy (105859) on Friday January 20, 2012 @09:24PM (#38770634) Homepage
      Bitcoin hasn't gone away. It may not be an investment to hoard at the moment, but as a currency it's functioning beautifully. I run Dragon's Tale [dragons.tl], a casino MMORPG hybrid, which uses Bitcoins exclusively. Our new-players-per-week initially peaked right at the peak of the Bitcoin bubble (around 120 new players per week for a couple weeks), dropped to about 20/week, and has been growing for the last few months. Currently we get around 60 new players per week. Revenue from Dragon's Tale's hasn't passed our other game, A Tale in the Desert [atitd.com] yet, but on several recent weeks it's come close.

      Players love Bitcoin because deposits *and withdrawals* are instant, unlike all other online casinos. I know that some of my players also play poker at Seals With Clubs [sealswithclubs.com], a Bitcoin-only poker site. They may have a win at Dragon's Tale, shoot the money over to Seals, shoot their winnings back to DT, or into their Silk Road account to buy some goodies, or into their desktop wallet. If Bitcoin were never to go beyond gambling, it will be a success: it allows all Bitcoin-based casinos to function as one huge meta-casino.
      • If it works for you, that's fine, I won't tell you not to use it. However that your tiny game (one I've never heard of, and I'm rather in to games) uses it means jack and shit. I can buy -nothing- I want with bitcoins, not a single thing. Anything I can think of that I'd desire which is sold by someone who takes bitcoins as payment.

        Also are your players really using it as a currency? I doubt it, they are using it as chips just like at any other casino. As in they buy them as needed, play with them, and then

        • Last month I sold my older iPhone and a laptop for BitCoin and today I bought Home Depot gift cards and converted some to USD in my bank account. On the Home Depot cards no fees were paid so 100% of the money stayed out of paypal and ebay hands. On the converted Bitcoins to USD I paid 25 cents to Dwolla and .5% to MTGOX.
        • I don't like giving my info to some online poker site (who would?). If they accept bitcoin I don't have to.

    • "Facebook credits" are just another gift card scheme. You can't cash them out. [...] You can't transfer them to another individual.

      So they're the ideal thing if I want to give a gift to myself?

  • If Facebook told me to buy something then I'd be more skeptical than ever about it. Could be a good thing or bad thing, but I don't see Facebook as my consumer advocate or advisor.

    More like an idiotic social networking site which constantly nags me about things and notices and I try adblocking the pop-ups, which invariably makes it all worse, but I don't really care.

  • by a2wflc (705508) on Friday January 20, 2012 @08:55PM (#38770324)

    Facebook will have to send a 1099 to everyone who earned credits this year and we'll have to pay taxes. My bank sent me one saying I earned $17 in interest. If I earned enough credits to buy 2 movies they'd probably be worth more than that and I'm sure the IRS would want their cut.

  • Is someone paying tax on these transactions?

    Lately Credits have become more intriguing. Warner Brothers this summer offered movie-goers a chance to watch Harry Potter and The Dark Knight for 30 Credits apiece. Miramax and Paramount countered with film-viewing offers, too

    This sounds like a barter transaction:

    http://www.irs.gov/businesses/small/article/0,,id=215975,00.html [irs.gov]

    Exchanges occurring through a barter exchange are reported to IRS on Form 1099-B and show the value of cash, property, services, credits or scrip added to your account by the barter exchange.

  • IPO imminent (Score:5, Insightful)

    by slasho81 (455509) on Friday January 20, 2012 @09:52PM (#38770866)

    I clicked through to TFA. I know, what was I thinking...

    This is a guest post by Peter Vogel, co-founder of Plink, which lets consumers earn Facebook Credits for dining out and shopping online.

    So, a co-founder of a business based on Facebook Credits thinks they're super-important and could be equivalent to actual money. Right. Next ridiculous story, please.

    I expect more stories inflating Facebook's perceived worth to be pushed to the mainstream media in the coming months as Facebook's IPO is imminent.

  • Trust facebook? (Score:4, Insightful)

    by reboot246 (623534) on Friday January 20, 2012 @10:17PM (#38771026) Homepage
    I trust facebook even less than I trust the U.S. government, and I don't trust government at all.

    God forbid facebook ever becomes a central bank!
  • ...where idiots are stored for years.
  • No way. I admit I saw the dark side of FB early on and opted out (thank gawd) and I don't know anything that doesn't bubble up to the level of NPR but.. people exchange real money for fucking FB "credits".

    Before I get into a a snark-guffaw endless loop, this is so? Zuckerberg is printing funny money at will and separating douchebags from real money in exchange?

    Surely no one is that stupid.

  • Ya, right (Score:4, Insightful)

    by dilvish_the_damned (167205) on Friday January 20, 2012 @11:15PM (#38771352) Journal

    When people start accepting Facebook dollars as part of their salary then it will be a real currency. Until then it will be a promotional gimmick, just a bit more complicated than Marlboro boxes.

  • I would NOT trust with my money, it would be Facebook.

  • law covering currency / gift cards / scrip / truck may apply to this.

    And facebook trying to act like paypal may end up badly + there may be some irs audits / back taxes as well.

  • If only they'd call them Quatloos, I'd grab some for sure.
  • Mark can print up as many credits as he wants for himelf and friends = inflation

    The government isn't going to allow that crap, they want people using dollars (which are taxed). They don't like competition.

  • Businesses I think will start doing things like using credits because they can hide the cost difference between nations or hide price increases. Something can cost 10 credits forever but what it costs to get those 10 credits will change and what we pay in the UK may be different to what Americans pay.

    That is why I don't like credits, MS points, etc. I wish people would avoid them.
  • Unless people are also being paid for work in "credits" the comparison is worthless. The credit is still pegged to the dollar and you still 'buy' them.

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