Zynga's social games — especially its hit Facebook game FarmVille — are a big deal in digital payments. Its games are the key to the success of Facebook Credits, and they may provide a similar boost to American Express' Serve.
Facebook gets about a 15% of its revenue from payments, according to its regulatory filings, which say that "apps built by developers of social games, particularly Zynga, are currently responsible for substantially all of our revenue derived from payments."
Now Amex is getting in on the game.
Its deal with Zynga, announced May 22, ties the Serve digital wallet closely to FarmVille. Though the companies have worked together since 2010 (
"It is really embedded into the gameplay," says David Messenger, Amex's executive vice president of online and mobile, in an interview. "It's the first time Zynga's ever engaged with a third party in this way."
Players begin the quest by planting a Serve Money Tree in their virtual farms. The next steps: open a Serve account, fund it, activate it, and then use the attached prepaid card to make purchases and earn rewards.
Users can redeem the reward points for Farm Cash, which they can spend in the game.
"Farmville players really do value the virtual currency and it's a great incentive for them," Messenger says.
Zynga reported in its first-quarter earnings that it has 182 monthly unique users, of which 3.5 million are considered monthly unique payers, which it defines as the number of players who made a payment at least once during the month.
Many digital payment systems have worked to reduce the steps necessary to buy something online, so Amex's requirement of obtaining and activating a physical prepaid card seems to go against that trend.
However, Messenger says there is value to keeping that extra step.
There are "two distinct principles that are critical to success," he says. One is "reducing friction in what you do online," and the other "is you've got to provide something that's useful … what we've created with the Serve platform is a platform that works in the world as it is today, so you do get a physical card."
Amex introduced Serve as a way to attract customers outside the market for its credit and charge cards, which it has traditionally marketed as elite products.
Working with Zynga "gives Amex access to a very interesting community of pretty much new customers," says Zil Bareisis, a senior analyst with Celent, in an interview. "The likelihood is high that the customers that are on Zynga and play these games are slightly different from the Amex cardholder base."
Though Amex has been aggressive in forging partnerships with social media sites, it still has a lot of catching up to do, says James Van Dyke, the president and founder of Javelin Strategy and Research, in an interview.
"They haven't built the partnerships or made the acquisitions," he says. "Serve is an interesting start … but it's still kind of new."
Rivals such as Visa have leapt ahead by purchasing companies that were built around social media and gaming.
"It's tough, they're up against a company like [Visa], with PlaySpan, where Visa actually acquires a company and brings it in-house," Van Dyke says. Visa bought the online payments company PlaySpan last year.
Zynga can provide a similar benefit to Amex as it has to Facebook Credits, but to Amex's advantage the card network has a more diverse product that doesn't rely as much on FarmVille players.
"Those who will be attracted to [Serve] in its early days are probably also those who would be involved in social media, involved in smartphones and tablet devices," says Nicole Sturgill, the research director for delivery channels at CEB TowerGroup, in an interview.
Because Amex's deal with Zynga is focused on using reward points instantly online, the agreement furthers the trend of rewards points behaving like currency.
Already on other sites, like Amazon.com, reward points are treated as stored values that can be spent without a cumbersome redemption process.
In this way, reward points are not "really all that different from currency," Sturgill says.
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