Update: Facebook has confirmed that it will be starting an alpha test to let users spend Facebook credits in Facebook applications in the next few weeks. More details here.
As the Facebook payments and virtual currency monetization space continues to grow, entrepreneurs are becoming increasingly interested in what role Facebook will play in transactions on the Facebook Platform. Will Facebook launch a payments system for developers? If so, how will it work, and what kind of payment options will it offer? Will Facebook allow developers to plug into its virtual currency system to enable microtransactions through a universal Facebook credits currency?
Such questions have big implications for developers of apps and games that are monetizing through user micropayments inside Facebook. While Facebook announced an initial beta test of a Platform payments system in December of 2007, no public programs have ever been launched. However, yesterday Eric Eldon at VentureBeat reported that sources say Facebook may launch some kind of small alpha test, the details of which still haven’t been decided, in the next few weeks.
Facebook chose to optimize for Platform growth over Platform revenues in 2008, but 2009 appears to be the year of alpha testing Platform revenue streams. Earlier this year, Facebook announced a small alpha test of its own in-house ad network.
Many in the industry have criticized Facebook for not being more aggressive in building payment products for Platform applications. Sources we’ve spoken with estimate that the overall size of the Facebook Platform economy in 2009 is likely to be between $300-$500 million overall. However, the task of operating a robust payments platform is no small operational task or expense for a variety of reasons, and Facebook also wants to be careful not to discourage third parties from continuing to invest in building third party Platform payment solutions.
Nevertheless, Facebook has been actively experimenting with various ways of integrating its own virtual currency into the site. For example, it’s done several tests around birthday gifts and holiday gifts on user profiles, and recently also started experimenting publicly with a new credit gifting system that allows users to give virtual credits to each other as a reward for sharing good content, as well as packaging the credits with branded Facebook gifts.
Of course, we’ll be keeping tabs on the Facebook payments space as it evolves.