Mobile

PayPal to launch micropayment option for Facebook and other sites

Online payment company PayPal announced today that it is introducing support for micro transactions on Facebook and several other online media websites.

The new payment system allows users to quickly pay for low-cost items like a story on a website or a virtual good without ever actually leaving the site. PayPal will charge 5 percent of the cost of the good plus an additional five cents as a transaction fee for any purchase under $12.

The idea is to capitalize on impulse buys of low-priced products. By giving consumers a quick way to execute a low-cost purchase, PayPal is hoping to generate additional revenue.

Micropayments have also become the de facto payment method for many games, but until now users had to buy virtual currencies, such as Facebook Credits, in bulk. PayPal’s new offering is described as “dropping a quarter in to play a video game,” and could lead to an overhaul of how some virtual goods — say, a cow in Zynga’s Farmville — are purchased on a case-by-case basis.

The announcement comes as eBay continues to focus more on PayPal rather than on its online auctions as the primary revenue stream for the company. Just last quarter, eBay’s auction revenues stopped growing more than 10 percent year-over-year for the first time since late 2009, while PayPal continued to grow at a steady rate.

But this isn’t the first time PayPal has made some kind of promise to jump on board with micropayments. In fact, the company has said it would explore this opportunity for the past six years.

In 2009, PayPal brought in $2 billion of $72 billion in online payments. PayPal has brought in around $1.3 billion in 2010 so far and is on track to generate $3 billion this year. We’ll get some more details on how the new micropayments system will work at PayPal’s Innovate 2010 conference in San Francisco tomorrow — especially on how Facebook’s Credit system will be affected.

[Photo: uhuru1701]


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