Facebook Opens Virtual Store To Developers

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Facebook has begun letting third-party developers sell virtual and physical goods through the Facebook Gift Shop, signaling a major expansion of the social network's virtual e-commerce business.

According to the Inside Facebook blog, Facebook last night began allowing a limited number of users to buy virtual -- and for the first time, physical -- gifts like flowers and stuffed animals, from a set of four app developers: American Greetings Interactive, GreetBeatz, Someecards and Real Gifts.

The move also broadens Facebook's online payment system, which the social network began testing in a few third-party apps in May and lets users pay for virtual or other goods with its virtual currency--Facebook credits. When someone clicks a "Pay with Facebook" button, a box appears showing the total price in Facebook credits and offering credit purchase options such as MasterCard and Visa.

Facebook's own virtual gifts will still generally sell for $1 (10 credits equal $1) -- but some physical gifts, such as a dozen roses, will go for up to $50, or 500 credits. Developers will generate an estimated $300 million to $500 million in revenue this year from transactions within apps on Facebook that currently offer payment options via credit card, PayPal and other providers such as Offerpal Media and SuperRewards.

If Facebook can grab a portion of this growing market, it could evolve into a key revenue stream for the company. "Between the Gift Shop and payment service for developers, Facebook is in the unique position to build a robust commerce business and simultaneously create powerful new monetization opportunities for developers," wrote Inside Facebook's Justin Smith.

"And because all items in the Facebook Gift Shop are purchased with Facebook Credits, a growing gifts business expands the footprint of Facebook's virtual currency."

Facebook CEO Mark Zuckerberg in June told Smith that payments could play a big part in the company's future. "I think it has the potential to be really important. Its potential correlates with how valuable it is to developers and users," he said. He also suggested that its payment system could expand online via Facebook Connect, its system for letting users log onto third-party sites with their Facebook ID.

Opening up its virtual store also offers new e-commerce opportunities for well-known brands and celebrities. Facebook last week began selling a new set of virtual gifts emblazoned with images of Britney Spears for $2 apiece in partnership with the pop star. It's not hard to envision other celebrities and corporate brands following suit. For its part, Facebook said it is testing the inclusion of third-party apps in the gift shop with the initial small group of developers, and will provide more details on the programs as it goes forward.

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