Venturebeat is reporting that Facebook is planning to introduce a system of giving people credits for status updates:

My first reaction to this was “That’s evil“.

My second reaction was “That’s brilliant“.

After further consideration, I amended it to “That’s brilliantly evil“.

Currently, my position is that it could be any one of the three depending on how they choose to go about it.

What Facebook has done in essence is linked social status to economic status and I think a lot of how this will play out depends on how facebook crafts the narrative around this.

Let’s look at the three alternatives in turn:


By turning social interaction into a economic exchange, facebook turns the default social relationship from one of Balanced Reciprocity into one of Negative Reciprocity.

When we deal with close friends, we engage in a gift culture. I do good things for you because I like you and I expect you’ll return the favor at some later date. With strangers, we are forced to default to an economic exchange because there does not exist a sufficient level of trust to permit a gift culture. What role someone plays in our social sphere is determined by what sort of reciprocity interaction we engage in.

If facebook links their virtual currency up directly to social status with no other viable alternatives, then it forces people to negotiate an economic exchange in relationships which were previous based on gifting. This becomes a hugely uncomfortable experience as one person now occupies two different reciprocity relationships and it becomes unclear what the social obligations are.

If credits become the default social currency of facebook, then I predict disaster. If someone on the site ever thinks “Hey, how come he gave John 300 credits but he only gave me 200 credits? He must like John 50% more”, then facebook is in for some tough times ahead.


At the same time, if facebook designs this feature right, it could be the holy grail of monetization that they’ve been searching for. I’ve never been too convinced that advertising was going to be the business model for facebook given that they have such a rich social tapestry to explore. If they manage to design this feature so that economic exchange is an augmentation of social interaction, then they can leverage credits as a more authentic form of social engagement.

Many of our real world authentic social interactions are marked by economic exchange. Buying a beer for a friend or bringing back souvenirs from a trip abroad for example. In these cases, money spent makes these activities seem more authentic, not less. How can facebook exploit this? I’m not quite sure. But if they manage to strike the right balance, they could end up with a system that both promotes even deeper social engagement while at the same time, make them money hand over fist.

Brilliantly Evil

The most chilling of these three alternatives is that facebook manages to co-opt social status by turning it into an economic exchange. DeBeers convinced America that you buy a diamond to demonstrate your love for a girl and that you love her because the diamond is expensive. The DeBeers mentality is that the only authentic way to demonstrate social status is through economic exchange.

If facebook manages to accomplish this, then the result will be that every facebook employee will become an instant millionaire but facebook profile pages end up looking like something from MTV Cribz.

The road ahead:

Facebook credits has the potential to greatly enhance the range of social expression on the site but it also has the potential to become a complete disaster. Which one of these paths facebook ends up taking depends crucially on the narratives that it’s users adopt and these narratives depend crucially on how facebook credits ends up being designed.

At this point, I’ve only had a few hours to digest this so I don’t think I’m ready to give design suggestions but here are some things I suggest would be worthwhile to explore:

  • What do credits incentivize? Can they become subject to the overjustification effect? Any incentive scheme is going to distort behaviour, and always in ways you never anticipate. Deciding what credits do will have a major function in how they are used.
  • What does credits make comparable that previously wasn’t? How many home cooked meals is getting picked up in the rain after getting a flat tire? It’s precisely because such questions are hard to answer that make gift exchanges so convenient. If Facebook puts a value on something that was previously hard to price, it removes some of the social ambiguity that makes friendships run smoothly.
  • How close to money should it be? Behavioural Economics has shown consistently that Humans regard money-items as very different from non-money items. Under the right conditions, people will prefer $10 gift cards over $15 in cash and are willing to steal $1 chocolate bars but not $1 bills. By calling them credits, facebook pushes it towards the money end of the spectrum which may or may not be what they desire.
  • How close is the link between cash and credits? How many different ways are there of gaining credits and which of these methods is credible? In the original article, the only two ways that credits can be earned are through buying them or building up reputation. Is someone who gives out lots of credits a person who’s rich or a person who has high social status? Is there any way to tell? If there is, does buying credits increase or decrease your social status?

I have to admit, I’m intrigued by the credit system and the social implications that it has. With the right design principles, it could potentially be a game changer much in the same way that the Facebook Application Platform is. And yet, in my discussion with friends so far, I’ve heard nothing but pessimism and I think this is a reflection of all the various ways a scheme like this could go wrong. I guess there’s nothing to do but wait and see what happens.

  • Amit Seshan

    Hi, I discovered your blog through you comment on Ribbon Farm. Really enjoying your posts, esp the Mech Turk analysis and the Dunning Kruger doubleckick. On this Facebook credits thing, Dan Arielly covers (in Predictably Irrational) what happens when we move a transaction from a social norm into a market norm (e.g. trying to offer to pay your mom-in-law for a Thanksgiving Turkey, and irking her by forcing her to evaluate your evaluation of her social gift to you), and how this permanently destroys some of the altruism innate in friendly interactions (which you call “the ambiguity that keeps friendships running smoothly).

    This is a very interesting move by Fbook, and could be parlayed into all kinds of micropayments, virtual goods, gifts and other “materialistic” status markers” that crystallize the net worth of someone's social network.

    Nice blog – provocative, and well written. Keep them coming