Social game firm Crowdstar embraces Facebook Credits in five-year agreement

Crowdstar is giving a big endorsement to Facebook Credits. The social gaming company has made a five-year commitment to using Facebook’s virtual currency.

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The introduction of Facebook Credits this summer is a big step for the social network, much like the introduction of the euro currency was for Europe. The hope is that the universal currency will grease the skids of electronic commerce on Facebook, prompting users to spend more money across a bunch of apps.

Crowdstar plans to get rid of its own in-game currencies and exclusively adopt Facebook Credits in all of its games said Niren Hiro, chief executive of Crowdstar in Burlingame, Calif., in an interview. Crowdstar is a big player on Facebook, with more than 50 million users in games that include the hit titles Happy Aquarium, Happy Island, Zoo Paradise, Happy Pets and Hello City.

In adopting Facebook Credits, Crowdstar is following in the footsteps of Zynga, the biggest social game company on Facebook. Zynga also struck a five-year deal with Facebook to adopt Facebook Credits in a strategic deal where terms were not disclosed. Terms were also not disclosed for the Crowdstar deal, but Hiro said that Crowdstar’s share of virtual currency transactions will be 70 percent. While Crowdstar was a willing partner all along, Zynga had to be convinced that Facebook Credits would be in its best interest. Zynga was concerned that the 30-percent fee was too much, considering other virtual currency providers took a much smaller percentage.

That means that Crowdstar did not get any special discount on the Facebook Credits fee, which is 30 percent of each transaction, by signing up early. Hiro said that his company has already seen the benefits of dispensing with its own virtual currency (which costs money to develop and maintain) and replacing it with Facebook Credits. With Facebook Credits, average revenue per paying user has increased by 50 percent compared to other virtual currencies.

Facebook has argued that the benefits of a universal currency are multitude. Users are now more likely to spend more money across different social games, since there is less friction. You don’t, for instance, have to sign up for and purchase a new currency with every new game. You have a single electronic wallet that you can use in every game. Users are also more likely to keep their wallets filled and make more purchases because they trust the entity that has issued the currency, Hiro said.

Crowdstar could have played it safe by keeping a secondary currency across its own games. But Hiro said that the benefits of moving solely to Facebook Credits outweighed those of keeping a currency of its own. Crowdstar began testing Facebook Credits in its games in December and customer comfort and trust has steadily increased. Hiro said that the use of Facebook credits has also made it easier to launch Crowdstar’s games in foreign territories such as France, Italy, Germany, Spain and Turkey — all released last week. Now Crowdstar doesn’t need to create new virtual currencies for every market it expands into.

Facebook said earlier that more than 100 social app makers are testing Facebook Credits. Gareth Davis, platform manager for games, said in an interview that there are now 150 apps using Facebook Credits. A formal launch date has not yet been set, he said.

Davis said that Crowdstar is an early participant in the beta test and is seeing efficiencies in shifting entirely to Facebook Credits. Other companies, he said, are also looking at keeping their own virtual currencies for use inside games as a secondary currency. Both models work fine, he said. Davis said he could not comment on the specifics of the deal between Facebook and Crowdstar, beyond to say that both companies are committed to using Facebook Credits.

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The use of Facebook Credits is important to Facebook as a way to monetize its vast audience of nearly 500 million monthly active users. Davis said early results show that Facebook Credits is increasing both the revenue per paying user and the number of people who are buying things in apps. He acknowledged that changes that Facebook made to its platform this spring have slowed growth of games, but he said that newly launched Facebook games are seeing rapid growth. He said the lull is a temporary one and that renewed growth is likely as next-generation Facebook games are launched. (Zynga’s fast-growing FrontierVille fits in this category, as does Crowdstar’s Hello City.

Clearly, one of the benefits Crowdstar is reaping from the deal is marketing help. Crowdstar and Facebook worked together this month to promote Hello City, a new city-building simulation. Since its launch, more than 5 million people have played the game.