Facebook teams up with PayPal for ads, takes a cut of virtual goods

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facebook paypalFacebook has now teamed with the eBay-owned PayPal to pay for self-service ads and virtual goods.

Although Facebook was once considering its own pay system, rumored to be Facebook Wallet, those plans appear to be shelved. Facebook said that it was partnering with PayPal because 70% of its 400 million members live outside the United States.


Users will use PayPal to buy Facebook Credits, Facebook's currency, that pays for virtual goods like fish tanks, tractors and guns for its online games, where Facebook will claim a 30% cut.

Previously, Facebook only benefited from online ads, but now the company will take part of the developers' profits, such as Zynga Inc.'s Farmville which charges $3.33 for a tractor. (Users can even partake of the PayPal application where you can bug your Facebook friends for that $20 they owe you.)

But the most immediate profit will be in the self-service ads, which will now be almost one-click purchases. With such easy transactions, Facebook is also hoping for a jump in ads -- especially international ones.

While many believe this is creating a mobile commerce presence for PayPal as well as inroads into micropayments (small but ultimately lucrative transactions) it's not quite as clear what Facebook is up to.

Many think the future is Facebook Connect, which is a Facebook application that authenticates identity -- kind of like an Internet driver's license -- which is used as logins for several outside applications including online games. Facebook Connect, which is like showing your ID to programmers, would be easy to integrate with commerce.


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