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Facebook Introduces New Revenue Stream

Ever since social media networks like Friendster and Myspace began attracting millions of unique visitors each day, developers have been searching for ways to successfully monetize what is essentially a free service.

Free social media platforms have historically generated income almost exclusively through ad revenue, an incredibly flawed system that dries up as quickly as the site loses relevance (ala Myspace). Learning from the downfall of their competitors, Facebook is trying to strike while their popularity is still climbing and might find success with the introduction of their new internal payment system launching this week.

Will Facebook Credits Equal Revenue Gold?

The addition of the new payment system will help Facebook potentially turn their popularity into tangible profits by diversifying their income and providing a service that will generate cash flow by allowing users to buy "Facebook credits" to purchase virtual goods and services on their website.

The credits can be used for purchasing Facebook applications as well as those developed by third-parties. By creating a singular currency that can be used throughout the site, Facebook will collect revenue on each purchase, receiving a portion on every Facebook credit transaction even when the user is purchasing a third-party application.

The E-Commerce Experts Weigh In

Experts are optimistic about the addition of a payment system that will allow users to continue using the site for free but gives them the opportunity to purchase applications and services to enhance their social networking experience, a model that has already generated millions of dollars for third-party developers.

Ray Valdes, an analyst with Gartner Research, estimates that Facebook's new internal payment system could potentially result in up to one third of Facebook's total income.

With a user-friendly credit purchasing system more users might be enticed to purchase applications, which could grow Facebook into a significant shopping portal according to Bruce Cundiff, the director of payments research and consulting at Javelin Strategy and research.

For more information on Facebook's payment system, check out the entire article at Financial Times.

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