Facebook Deals Highlight Convergence of Currencies
Two online payments companies have developed applications to facilitate purchases on Facebook Inc.'s popular social networking Web site.
PayPal Inc. said last week that people can use its service to purchase Facebook Credits — which are used to buy virtual items in online games — and advertisements.
ClickandBuy International Ltd. of the U.K., meanwhile, has developed a Facebook application that allows users to conduct person-to-person funds transfers and purchase virtual goods, content and services offered on the site.
The announcements demonstrate the convergence of virtual and real-world currency on social networking Web sites, especially for low-value transactions, said Beth Robertson, the director of payment research at Javelin Strategy and Research.
Facebook Credits is using a PayPal program called PayPal X that enables software developers to build new products based on the payment company's platform. For example, TwitPay, which is powered by PayPal X, lets users send and receive micropayments through Twitter Inc.'s microblogging service.
"One of the key points of our payments platform is the ability for it to be integrated into what other people are developing," said Anuj Nayar, PayPal's director of global communications.
The Facebook-PayPal partnership ended any speculation that Facebook Credits would evolve into a direct competitor of the established payments company. PayPal never viewed itself as a competitive threat to Facebook, according to Nayar.
Facebook wanted another way for users to pay for credits, but did not want to develop a payments system from scratch, he said. "That is where we come in," he adds.
Facebook users also can purchase credits with a credit or debit card or charge the purchase to their mobile phone bill.
PayPal, a unit of eBay Inc., is no stranger to Facebook micropayments.
The online game developer Zynga Game Network Inc. has two Facebook games (Farmville and Mafia) that accept PayPal as payment for virtual goods used in those games. Facebook Credits are not limited to just one game.
The agreement also lets companies that advertise on Facebook use PayPal to pay for the ads. Accepting PayPal "was something advertisers told Facebook they wanted," Nayar said.
Spokespeople for Facebook did not respond to requests for interviews.
ClickandBuy is expected to roll out its Facebook payment application this month. And like PayPal, the London technology company also has some experience with micropayments, said Charles Frankl, a ClickandBuy spokesman.
ClickandBuy users can pay for songs on Apple Inc.'s iTunes store and pay for online games from the game developer Electronic Arts Inc.
ClickandBuy decided to create a Facebook application because "Facebook in itself has become an important platform on the Internet and it will become a lot more important to electronic commerce," Frankl said.
Users can fund a ClickandBuy account with a credit or debit card or a direct debit from a bank account. "You need to make something like this intuitive and explain what the product really does for you," Frankl said.
Frankl would not provide many details about the fee structure for the ClickandBuy service, but said it would be low and most likely limit transactions to a maximum of $75.
ClickandBuy also plans to partner with online game companies to accept the application as payment. "We are aligning ourselves with companies that are interested in social e-commerce," Frankl said.
Payments through Facebook were bound to happen, Javelin's Robertson said. But Facebook and the companies involved will need to make a distinction between virtual and real-world currency and virtual and "hard goods" she said.
"There could be a situation where virtual currency can be exchanged for an actual retail item and that distinctions needs to be highlighted," Robertson said.