Last week I began speculating about what Facebook could announce at this year’s f8. One of the only ideas I could come up with at the time was the launch of a payment platform for developers. Last night Eric Eldon suggested that Facebook would begin testing a payments system with developers in the next few weeks. There has been a substantial amount of buzz about a payment platform for almost a year and a half now but so far only subtle changes have materialized.
Facebook has supposedly postponed development of their payment platform but we believe they need to launch sooner rather than later. Facebook has been building an advertising supported “economy” for developers. The problem with an advertising supported economy is that developers are incentivized to build applications that “virally” reach millions of users. Developers end up being forced to work harder at gaming the Facebook platform which has become increasingly difficult.
While most people focus on Facebook’s advertising business when discussing monetization, Facebook has been selling millions of gifts annually to users via the Facebook payment system. Previously, gifts cost $1 per gift but over the weekend Facebook announced that the system would change to a credit based system. Now gifts will cost 100 credits.
In the short-term this isn’t really that significant of a change but in the long-term this could have some big implications. First, it means that Facebook can now accept payments on an international basis. While there may have been credit card information previously, there would have been a conversion fee for Facebook. Now the company can manage accounts in different currencies.
The second implication of this announcement is that the company may very well be one step closer to launching the highly anticipated payment platform. Last week I revealed that Xiaonei, the Chinese Facebook copycat, had launched a payment platform for their applications. Their system works in a similar fashion to Facebook’s announced platform.
Instead of purchasing virtual goods directly, users are given credits that they can use to purchase anything on the site. Such a system will ensure that Facebook directly controls the conversion between currencies and Facebook credits. While the Facebook payment platform may not have progressed significantly, Xiaonei’s announcement last week may definitely be a catalyst for Facebook to push forward.
In Facebook’s quest for global domination rests on the company’s ability to continue to attract developers. When RockYou announced a $17 million round this morning, part of their announcement was that they would continue to expand on the Xiaonei platform. As one of Facebook’s top 5 application companies, it emphasizes the growth challenges that Facebook has abroad.
It will be interesting to see if the whole dynamic created by Xiaonei launching a payment platform will force Facebook to expedite the launch of their own payment system. For now we will have to wait and see but this weekend’s announcement by Facebook could easily be the first steps toward and early launch.