Media Money with Julia Boorstin

Facebook Improves Payments to Drive More Spending

Kainaz Amaria | Bloomberg | Getty Images

Facebook is announcing changes to its payments system to make it easier for developers to drive payments on their apps, generating more revenue for Facebook.

The social network announced two big changes: the option of subscription payments for apps, and Facebook is streamlining the payments process by eliminating its “credits currency.”

Subscription Apps

Starting in July developers will be able to sell apps with a subscription. Facebook says three apps are testing subscriptions—Zynga’s Pioneer Trail, Farmville, and KIXEYE’s Backyard Monsters. This follows the launch a few weeks ago of Facebook’s first paid apps. But now this opens the door for premium content subscriptions, like to Netflix , Hulu Plus, or Spotify.

Easier Payments

Facebook overhauling its payments system by getting rid of its ‘credits’, instead allowing developers to price items in local currencies, or games virtual currencies. This eliminates the clunky step of users having to purchase Facebook credits before paying to buy virtual goods in a game like Zynga’s Farmville, or before using those credits to say, stream a movie.

Facebook is also allowing developers to price items in local currency—the Euro, Yen, etc—instead of credits, which previously required that developers deal with the exchange rate to dollars and Facebook credits. This will roll out gradually starting in the third quarter, finishing by the end of the year.

Bottom line

Facebook gets that its cut of payments—about 18 percent of revenue in Q1 – is faster growing than advertising, and still has major room to grow. Perhaps most important, Facebook sees the potential to expand beyond virtual goods (like cows in Zynga’s and streaming movies.

If Facebook is going to start selling more entertainment –or even physical goods, it needs a simpler payments process. These changes are necessary to open the door to a whole new range of e-tail options.

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