PayPal Jumps on Facebook's Virtual Goods Wagon

Facebook will offer PayPal in key parts of its advertising and developer systems as part of a new strategic relationship. Advertisers will be able to use PayPal to pay for Facebook Ads, and PayPal will become a payment option for Facebook Credits.

The agreement is designed to make it easier for advertisers, particularly small international companies that may not use credit cards, to use Facebook Ads to reach the more than 400 million people actively using Facebook, 70% of whom live outside the United States.

Dan Levy, Director of Payment Operations at Facebook, said, "We want to give the people who use Facebook, as well as advertisers and developers, a fast and trusted way to pay across our service. As our business has grown, offering local methods of payment has become increasingly important for advertisers who want to buy Facebook Ads. Teaming with PayPal, a global leader in online payments, makes this possible."

Facebook Credits, which is currently being tested in a small number of games and applications, allows users to buy virtual goods on Facebook, including items from the site's Gift Shop.

Ironically, PayPal's parent eBay banned the sale of virtual goods from its marketplace in 2007, and banned digital goods on its site in 2008 in all but the Classified Ads format, citing the integrity of the Feedback system. "Digital goods are often reproduced at little to no cost to the seller. On eBay, this creates the potential for Feedback Manipulation (both real and perceived)," it said at the time.