A group of Facebook executives believe the company’s “Pay With Facebook” business could someday outstrip the social network’s advertising revenues.
We’re curious to hear if people in the industry think that’s plausible.
I spoke to an analyst who covers eBay to discuss this issue. Then I pinged Business Insider editor-in-chief Henry Blodget for a quick IM discussion on the topic.
I’ve pasted the latter exchange below. Please weigh in in the comments.
Nicholas Carlson: An analyst I just talked to thinks the only way “Pay With Facebook” works is if they partner with PayPal or Amazon (AMZN).
Henry Blodget: If they can get a decent cut, it certainly makes sense to do that.
NC: But then, she thinks Zynga’s whole $100 million business is BS — she can’t believe anybody spends money on virtual goods.
HB: Well, she’s not keeping up with times then.
NC: The big hurdle to clear is getting people to use Pay With Facebook the first time. But if Pay With Facebook is the easiest way for all these kids to buy their virtual goods then boom — they sign up once and now they’re Pay With Facebook users their whole life. Paying with one click is very satisfying.
HB: Yes. No question about that. It’s hard to get the necessary scale, though. Yahoo tried this…flopped.
NC: That’s what she was saying. AOL and Google Checkout, too, right?
NC: PayPal had eBay.
HB: A huge help. And PayPal had first-mover advantage.
NC: So I guess…can the virtual goods economy be Facebook’s eBay? Or is it too small?
HB: It could. But again, if Facebook can get a cut, why not use PayPal? Alternatively, Facebook could just create credits within Facebook that you could redeem once in a while for cash. That would be fine and maybe easy. Buy $100 of fbook money, pass it around to your friends, buy virtual crap, etc. and just leave it in there. But that’s a far more limited opportunity.
NC: It is. And Zuckerberg says things like the Facebook of the future isn’t on Facebook.com.
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