Last month, Facebook teamed up with PayPal to offer users a way to purchase on-site products, such as virtual goods. The service is being tested on a small number of games and applications. Furthermore, it allows advertisers to make payments for placing ads and paying developers.
In January, the Financial Times also linked with PayPal to introduce day passes giving visitors 24-hour access to its website, ft.com. It additionally provided users with the option to purchase individual articles.
In terms of social networking sites (SNS), the concept of virtual payment for both news and digital products is nothing new for Asian audiences. Popular platforms ranging from Tencent’s QQ in China to Cyworld in Korea and Friendster in Southeast Asia have found that there is a significant demand for services requiring micropayments. Many of these sites charge users for add-ons in games and virtual goods, which parallels Facebook’s plans.
Facebook’s decision to incorporate PayPal into its site begs the question: did Asian social networks get it right?
“Micropayments really took off in Asia because people didn’t have credit cards,” says regional VP and head of digital integration of Fleishman-Hillard Napoleon Biggs. “It was habit for people to go into convenience stores and buy scratch cards for low amounts of money, which would then be a vehicle for payments. Scratch cards became the de facto way to make purchases, and online micropayments in Asia are built on that infrastructure.”
Biggs points out that the West has more of a culture of paying by plastic. “That doesn’t work for young gamers who don’t have credit cards or for people who don’t want to use their cards because of fraud and other security reasons. So I think there’s real appeal for this because it’s a way to have more control over how much money you spend on the internet.”
Introducing virtual payment to Facebook is evidence that the Asian method of micropayments may be the best business model for a generation of digital players who have yet to see little in the way of profits. In May of last year, Tencent revealed that, out of its $366.4 million in revenue for first quarter 2009, $342.3 million came from the sale of virtual goods and similar services, both online and via mobile purchases. That statistic alone is bound to inspire others.
Micropayments were certainly on Friendster’s mind at the end of last year, when it agreed to be acquired by Malaysian digital payment development company MOL Global. At the time, executives justified the deal by saying that Friendster would adopt more of an e-commerce infrastructure.
“In the ‘real’ world we have to pay for everything, so it’s amazing that the internet has got this far without empowering people with a micropayment system,” says Barney Loehnis, digital lead for OgilvyOne and Ogilvy & Mather Asia-Pacific. “By bringing PayPal to the forefront of our web experience via Facebook, it will accelerate adoption. Slowly the web will become a place of pay-as-you-eat, rather than eat-as-much–as-you-can for free.”
According to Matt Sutton, managing director of Aktiv Digital, micropayments across a range of online platforms are turning into a relevant money stream. He suggests the model can be adopted by any site that offers a product because, if nothing else, micropayments can act as a companion to online ads.
“The story here is that e-commerce is a key component of the internet space. The more people that go to the internet to chat and to purchase, the more it becomes a fully functioning online high street,” Sutton says. “From an online-media perspective, this makes the internet even more a central part of daily life, so even more a critical part of an advertiser’s media schedule. It’s also no surprise that outdoor and online are the two fastest-growing media in the world, as it also means advertisers are able to reach users right at the point of sale, a space traditionally enjoyed almost exclusively by outdoor.”
Got a view?
Email anita.davis@media.asia
This article was originally published in the 25 March 2010 issue of Media.
