Google Buys Jambool: Social Networking Battle Begins

Google has purchased virtual currency platform Jambool, a move that will fuel Google's reported foray into the social networking world. Jambool's Chief Executive Vikas Gupta and Chief Technology Officer Reza Hussein confirmed the deal Friday on the company's website. "We are excited to announce that Jambool is becoming a part of the Google family today," the founders write. They add, "The game has only just begun."

Jambool started up in 2006 and a year later shifted its focus toward social networking sites by creating a virtual currency platform called Social Gold. "Along with success, we found fun and lucrative ways to monetize our apps -- specifically virtual currency and goods. That led us to create a platform to help developers create, host, manage and monetize their virtual economies," its founders write.

Facebook's Rival Service

Jambool's main competitor is Facebook Credits, Facebook's own virtual currency platform. Facebook Credits takes a 30 percent cut of earned revenue, whereas Jambool took 6 to 10 percent per transaction. It is mandatory for Facebook developers to use Facebook Credits for monetization. Editor's Note: Facebook clarifies that use of Facebook Credits is not required, but is encouraged.

Jambool CEO Vikas Gupta recently had some harsh words for Facebook Credits in an interview with Inside Social Games. Gupta listed many problems with Credits, including its hefty revenue cut, its implementation failures (only 1 to 2 percent of people spend money on social games, where as Gupta believes it should be closer to 50 or 60 percent), and its similarities to pre-paid credit cards, which have had "limited success." An example of Facebook's failures with Credits is the closure of its Credits-powered online Gift Shop.

Social gaming has begun a multibillion-dollar industry. FarmVille creator Zynga is worth more than $4 billion, and recent estimates say that social gaming will reap more than $1 billion in revenue this year. Jambool conducted its own four-month study and discovered:

  • 7 percent of users that make a virtual goods purchase are still buying them after four months. Still, the vast majority of people never make a purchase in any game that they play
  • The best-performing social games can get 41 percent of users to make a repeat purchase
  • The average North American spent $74 on social games, while the average Asian player only spent $30 on virtual goods
  • Latin American users spend an average of $300 in a four-month period

Meanwhile, Google has kept quiet about the Jambool acquisition and is being especially elusive about the company's plans to build a social networking site. Google's CEO Eric Schmidt recently dodged the Wall Street Journal's question about Google Me, but did say that "the world doesn't need a copy of the same thing," which likely means Google Me won't be an exact replica of Facebook.

Buying Spree

Google has now acquired 18 companies in 2010, many of which are potential components of its rumored social networking site, Google Me. Before buying Jam

bool for a reported $70 million, Google snatched Slide for between $180 million and $230 million. Slide is a media company that develops games, widgets, and applications designed specifically to be used in social media, and are responsible for Facebook apps such as SuperPoke. Google also invested between $100 million and $200 million in Zynga, the company responsible for FarmVille and Mafia Wars, among others.

No matter what Google is or is not saying, it's readily apparent the company is preparing to battle Facebook on its own territory. Let's hope Google Me isn't another social networking failure for the company; Google recently shut down Google Wave, a collaborative Web site, and experienced embarrassing privacy flubs with Google Buzz.

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