Facebook has just launched the first live integration of its payment service for applications, a first step toward what could become a major new source of revenue for the company.
The payment system, called “Pay with Facebook” to consumers, is now live in fbFund-winning application GroupCard. Inside the app, users are able to purchase premium items for anywhere from $3 to $25, which can then paid for with any major credit card or Facebook credits. Facebook credits are the first payment option listed in the user interface.
When users click the “Pay with Facebook” button, a new popup appears showing the total price in Facebook credits and offering Facebook credit purchase options. Facebook bills the credits to a credit card you have on file, or you can enter a new credit card in the popup window. Full screenshots are below.
Now that Facebook is starting to roll out its virtual currency payment service to platform applications, demand for Facebook credits should increase dramatically – which would mean substantial revenue increases for Facebook. With the Facebook Platform economy estimated to be potentially as high as $500 million in total transaction values this year, Facebook could potentially add several million dollars to the bottom line simply by capturing a small piece of the overall market.
How much revenue might Facebook’s payment service generate? Back in December 2008, we estimated the following:
Let’s take a look at the current state of the transaction economy on the Facebook Platform. I’m not going to speculate on numbers here, but for the sake of argument, let’s consider the three widely varying cases that 2008 Platform transactions totaled a) $50 million, b) $150 million, and c) $250 million. Without going into too much detail, let’s quickly approximate that Facebook could net 5% of sales through an integrated payments solution.
At the end of the day, those fees might have added around a) $2.5 million, b) $7.5 million, or c) $12.5 million to Facebook’s top line, not accounting for the lift in transactions that would likely have arisen from a more frictionless payment option. Based on popular estimates of between $250-$300 million in Facebook’s 2008 revenues, a platform payment system could have reasonably boosted total revenues by 3-5+% this year.
For the sake of argument, let’s say the Platform does $500 million in total transactions this year (that’s on the high end of estimates in the $300-$500 million range we’ve heard from leaders at companies in the space). If Facebook processes 5%, 15%, or 25% of overall transactions this year, that could mean $2.5 million, $7.5 million, or $12.5 million in incremental 2009 revenues respectively (assuming Facebook charges a 10% transaction fee – we don’t know what the actual fee is or will be yet). In other words, still only a small percentage of Facebook’s overall bottom line.