PayPal, Facebook Team on Micropayments Service

PayPal Oct. 26 said at its developer conference it is launching a micropayments platform that will allow consumers to purchase goods and content online.

Facebook is PayPal's marquee customer for PayPal for digital goods, which when it launches later this year will enable the payment platform's 90 million users to pay for games, music or video content from Websites in two clicks.

PayPal also counts Autosport.com, FT.com, GigaOM, Justin.tv, Ooyala, Plimus, Tagged, Tyler Projects and Ustream as customers already using its PayPal for digital goods platform.

Speed to payment is the key here, as PayPal has learned from years as eBay's payment engine that consumers who find paying online frustrating will abandon purchases.

"The decision to purchase digital goods and content usually happens on impulse, so the act of paying needs to be as quick as that impulse," said Sam Shrauger, PayPal's vice president of global product strategy, in a statement .

Pricing for the platform is 5 cents plus 5 percent of the transaction for purchases under $12. Publishers and merchants get paid automatically rather than wait several days or weeks for transactions to clear.

Facebook COO Sheryl Sandberg appeared on stage at PayPal's developer conference in San Francisco to say that Facebook will use PayPal's new platform to enable consumers to purchase digital goods on Facebook.

PayPal's partnership with Facebook builds on the companies' existing arrangement; Facebook leverages PayPal to let its 500 million-plus users buy its Facebook Credits virtual currency for digital games and goods on the platform.

Virtual goods have emerged as a major economic force on Facebook, where players of games such as Zynga's Farmville or Mafia Wars may purchase virtual tools to help them advance in their gaming experience.

Google was so enamored of Facebook's success with Credits that it acquired virtual currency startup Jambool to flesh out its Google Me social software strategy.

This healthy rivalry means reliable payment platforms such as PayPal are in fine position to build secure software for companies looking to sell virtual goods. PayPal is also expected to provide paying punch to Google's Android Market soon.

PayPal concluded 2009 with $2 billion of total payment volume for digital goods and reached $1.3 billion in the first half of 2010.