Facebook Payments System Facing Uncertain Demand

Could Facebook credits become the currency of the Internet?

Facebook Inc.'s popular social networking site already has a small toehold in payments through its virtual gift shop, and is reportedly trying to expand the system.

The company claims more than 200 million active users worldwide who trade gossip and keep in touch with friends through its Web site, and analysts said this vast audience might welcome a way to interact commercially as well.

However, they warn that Facebook's efforts to promote an alternative currency may be unnecessary and that demand for a Facebook payments system will likely be minimal unless there is a corresponding market for products or services available through the site.

Offering more payments services through Facebook could be popular with users, "but the recipient would have to see value in Facebook credits," said Bruce Cundiff, a director of payments research and consulting for Javelin Strategy and Research of Pleasanton, Calif. "That's the big issue: are they valuable when they're no longer dollars?"

People can use credit cards now to purchase 10 credits for a dollar through the site's virtual gift shop, and can spend the credits on inexpensive digital novelties such as playful icons sent to one another's Facebook pages, including images of birthday cakes, balloons and sock monkeys — the electronic equivalent of a greeting card.

In recent months the Palo Alto, Calif., company has also opened up its payments system to eight software developers that offer games, calendar tools and other simple applications; (fluff)Friends, for example, lets people buy gifts for digital pets.

Facebook did not respond to numerous attempts to contact the company, and it has said little to date about its payments strategy.