PayPal recently has announced its new API for Facebook developers, enabling them to more officially create payment options to work directly within Facebook applications. Many Facebook apps with virtual currency payment options already supported PayPal, but without dedicated support tools from PayPal the potential for glitches or incompatibility were higher.
The decision by PayPal to add support for Facebook through its API is also a nod to the Facebook platform itself, indicating that the power for Facebook to become an influential marketplace for virtual goods is all but a matter of expectation. So where is this all going? With both Facebook and PayPal being major companies, any partnership between the two could be very lucrative. At first glance however, the two appear as bitter rivals as Facebook Credits aspires to be the default virtual currency on Facebook allowing users to buy real or virtual gifts and interact with the following applications: Facebook Gift Shop, Birthday Calendar, (fluff)Friends, GroupCard, (Lil) Green Patch, MouseHunt, PackRat, Pirates: Rule the Caribbean!, Robin Hood, and SocialCalendar.
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Currently Facebook Credits can be purchased at the rate of 10 credits per $1 via credit card only. Perhaps most damaging to Facebook Credits is that top Facebook game developers like Zynga and Playfish do not use Facebook Credits in any of their games. Rather they predominately choose credit cards and PayPal as the preferred methods of payment.
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Whether or not Facebook finds a way to encourage app developers to increase adoption rates for Facebook Credits, PayPal’s new API offerings will nonetheless give PayPal more market share over preferred payment methods on the Facebook platform. Having more direct involvement in the way in which PayPal can be utilized by Facebook applications means that PayPal places itself in a better position for the growth and development of its own platform.
PayPal is doing relatively well with strong earnings recently reported. Yet its entrance into social media initiatives has been slow and left up to third parties. Despite the long-standing plans for PayPal and MySpace to partner, PayPal has a lot of room for deep social media integration beyond this.
There still remains several obstacles facing PayPal and other platforms when it comes to virtual currency. Standards around virtual currency have yet to be uniformly established, leaving plenty of room for platforms such as Facebook or PayPal to stake their claim in this unavoidable aspect of widespread implementation.
For PayPal, maintaining its standard as a virtual payment tool is important for the ongoing success of the company. The market, however, is becoming rather crowded with third party companies that include several payment options to be used with their services. That could begin to push PayPal away from its own ability to develop a widespread and socially integrated platform, which could hinder the company moving forward.
But as developers have already demonstrated an interest in incorporating PayPal into their social network applications, it’s smart for PayPal to have more involvement. Not to mention the holiday season, right around the corner. Now is a good time for PayPal to get some testing done in order to see what the best direction for its future platform strategy could be.
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