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Head of Facebook european operations, Colm Long, says that virtual currencies in Facebook could become bigger than their ads itself. They have 400 million users and these users spend a lot of time playing games and opening their wallets to get ahead of the game like expanding their farms on Farmville, buying more tanks on Fishville, buying guns on Mafia Wars, etc. Farmville calls this as FV or Farmville Cash, Fishville as Sand Coins, and Mafia Wars as Godfather Points all of which can be bought using real US dollars.

Zynga and Playfish are two heavyweight companies earning millions of dollars through virtual currencies on their games.

In an excerpt:

If anyone was paying attention when Facebook embarked on its recent redesign, on the top right-hand corner where the user’s account information is, there’s a very telling section called ‘Credit Balance’. Facebook is embarking on its own virtual currency.

“Think about the idea of virtual currency – billions of dollars are being exchanged on virtual goods. People are buying virtual tractors on Farmville and guns on Mafia Wars like you would not believe.

I agree, I have opened up my wallet a number of times for Zynga games, which I believe is cheaper than spending all my time to level up on the game.

Continue reading here—Facebook could generate more cash from virtual currency than ads, exec says

I am a big fan of Zynga games particularly Farmville, Mafia Wars, Cafe World and Fishville. In the latest reports released and reported over at SeattlePI, Zynga Inc. is worth between $2.8 billion and $3.3 billion.

According to Global Silicon Valley Partner’s NeXt Up Research, Zynga is expected to grow 35 percent annually through 2014.

Zynga is blazing hot right now as they have dramatically increased their user base from 50 million players in June 2009 to 230 million in December 2009.

NeXt Up Research previously valued Facebook between $5 and $6.5 billion US dollars while Twitter at $674 million dollars. Zynga’s application is running on top of Facebook and their $3 billion valuation seems too high for a startup that sits on top of a social networking site but the massive number of users they have and their exponential growth weighs heavily on their valuation.

Zynga is generating around $250 million dollars in revenue despite only having 2 to 3 percent of their user base opening their wallets for virtual goods and items. But still, the potential number of users that can shell out money is real and it all depends on how creative and strong the virtual good offers of Zynga becomes.

It doesn’t look like Zynga is slowing down and anything they release turn up into a hit. PetVille for example was only released last December and two months after they already have 18 million monthly users making the application the 12th most popular app in Facebook.