Initial thoughts on PayPal's new developer platform

Individual sellers are highly unlikely to need PayPal X

I just finished watching the PayPal Platform Preview, which was PayPal's official announcement of their new open development platform (it was previously leaked on TechCrunch).

Officially called "PayPal X," the platform was presented by Osama Bedier (VP of platform and emerging technology) in broad, almost utopian terms, as something that would unleash waves of innovation transforming the way goods and services are delivered. Maybe.

Curiously, the concept video shown before the presentation featured exclusively physical world applications, including grocery shopping, moviegoing, and buying drinks at a bar.

Perhaps these examples made for better visuals, but none would be possible without embedding computer screens into shopping carts, movie posters, and bar tables. We're a long way off from that sort of thing, when we can't even get NFC contactless payments past the trial stage.

The reality, as suggested by PayPal's co-presenters (TwitPay, LiveWork, and Microsoft Windows Azure), is that PayPal X is a channel play - a way for PayPal to integrate with digital marketplaces, social networking platforms, application stores, and cloud services.

Individual sellers are highly unlikely to need PayPal X - the existing tools for enabling a shopping cart with PayPal are just fine. The value of PayPal X comes from its ability to payment-enable other application and service delivery platforms.

For example, RIM has used PayPal X to PayPal-enable its application store, and uses PayPal to distribute the proceeds of sales to the creators of the applications.

TwitPay, as the name suggests, uses Twitter as a mechanism to facilitate person-to-person payments, with PayPal doing the settlement in the background.

LiveWork is a new kind of outsourcing service that brings together practitioners with specific skill sets and customers who need to employ them on a temporary basis.

LiveWork uses PayPal to collect and redistribute payments to all of the parties involved in a particular project.

It is unclear just how big the opportunity is here. How many app stores are there going to be? One for each smartphone platform, certainly, and one for each social-networking site, and one for each browser, but that only gets you up to a couple dozen or so.

It seems to me that the opportunity for individual developers is very limited; most of the value is for the platform providers that now have an easier way to embed payments.

In short, PayPal X is an important step in the evolution of PayPal into a universal payment utility, but its impact will be mostly indirect, highly dependent on the success of the channel partners.

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More about: Microsoft, NFC, PayPal, RIM, X.com
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