11/10/08

MySpace COO Amit Kapur announced on Friday at the Web 2.0 Summit in San Francisco that his company was working on a payments and virtual gift system that MySpace's developers will be able to add to their apps. The idea is to make it possible for third party developers to finally start charging for their apps.

Social network competitor Facebook has been working on a payment program of its own for some time. Facebook senior platform manager Dave Morin said in a keynote speech at the Snap Summit at the end of March of this year that the payments product was 180 days away from launch. That would make its release … well, just about now (no sign of it yet, but maybe in time for the holidays?)

Both MySpace and Facebook are keen to launch paid app programs where they can share revenue with their developers, in part as a way of making up for reduced ad revenue in today’s down market.

There remains the question whether Web users will pay, however.

While the iPhone’s App Store has proved that, at least on mobile phones, consumers are willing to pony up some small change, Web users by and large still operate under a “content for free” mentality. Paid social network apps will have to be head and shoulders above the free apps to succeed.

Still, if either Facebook or MySpace gets the payment system right, they could conceivably create an EBay or Amazon like e-commerce system. Can you say PayPal?

More Facebook news: Last week, Facebook quietly announced it is no longer charging for Facebook-created gifts by the dollar. Gifts that once cost $1.00 will now be 100 credits, according to Facebook’s blog. The reason: to be more accessible to Facebook users not in the U.S. The Facebook Gift Shop offers nearly 400 gifts, ranging from digital flowers to online depictions of Frisbees and birthday balloons. The credits system will also allow users to buy gifts for micro-transactions (e.g. a digital heart for 10 cents).

Clearly, the race for the first social network payment system is on. Who will get there first?