Facebook will finally begin testing a payments system in a few weeks, a company rep tells us:
We’re starting a very small alpha test with a handful of developers that explores ways for users to use their Facebook credits with third-party applications on Facebook.com. The test hasn’t started so it’s too early to get into the details.
A payments platform that makes it easier for users and third-party developers to buy and sell over Facebook — with Facebook taking a small slice of each transaction — has been in the works for several quarters now.
A source familiar with the company’s long-term strategy tells us a payments system is part of a dream scenario in which Facebook not only begins making money off applications within Facebook.com, but also becomes the preferred, trusted way for its users to pay for things across the Internet. In the short term, Facebook executives believe a robust platform full of apps that either use Facebook’s payments system, its upcoming ad network, or both could provide rapid revenue growth. Facebook investors hope for an IPO in the next 24 months.
We’re also bullish on the plan after learning that Facebook games-maker Zynga will make $100 Million this year selling virtual goods.
So why did it take Facebook so long to begin rolling a payments system out? As we understand it, Facebook executives wrestled with three main issues. They are:
- A virtual currency payments system is fraught with basic security issues. Facebook has to make sure it’s never in a position where it converts fabricated credits into real money. It’s more difficult than it sounds.
- Facebook didn’t have the people and resources in place. Facebook is quickly expanding and until recently, didn’t have enough bodies to put toward finally rolling out the payments system and keeping it running safely.
- Launching its own payments system, Facebook isn’t sure yet how to treat the third-party systems already using its platform. Facebook has two choices. It can eliminate competitors to its in-house payments system — going against years of rhetoric — or it can continue to allow competitors, creating confusion for users as awell as the possibility that its payment system may not win in the end.