Inside Facebook

Flash has become an increasingly popular platform for social game developers over the last two years. These days, almost all of the most popular sims and virtual worlds on Facebook are Flash-based. However, for social game developers monetizing through virtual goods, there has been no good way to process microtransactions securely in Flash, until now.

Today, Social Gold, which raised $5 million this August to build out its virtual currency payments platform for social apps and online games, is launching the first API for secure in-Flash payments. With the API, developers of Flash apps can integrate a payment flow that keeps users in the game instead of sending users off to a payments page.

CEO Vikas Gupta tells us that the company has been focused on building the new service for months, largely focusing its efforts on a new security model designed to overcome Flash’s inherent security limitations. Because Flash SWF files can be decompiled, anyone can see secret keys that are placed in the Flash code, Gupta says. As a result, Social Gold is only putting session keys in Flash, and keeping a secret key on the server. Second, Gupta says that the company has created mechanisms that ensure that even if the Flash application has malicious libraries compiled in, they will not be able to intercept the user payment data that the Social Gold client library collects to sends to its servers.

“Data exchange between our library and our server always happens on a secure https channel,” Gupta says.

For now, users will only be able to pay with credit cards in in-Flash payments, but Gupta says mobile payments will come next. Once users enter their payment information once, it’s saved for 1-click purchases in the future. The service is now live in the popular Facebook game BarnBuddy by TheBroth.

“We really care about engagement, so we have always bemoaned the fact that users have to leave our game to buy virtual currency. The Social Gold API is the first API we’ve seen that allows users to make the purchase in Flash,” TheBroth CEO Markus Weichselbaum tells us. “This means the currency can be immediately available. With other payment gateways, users have to go to other pages, and in some cases other sites, and then come back and load the Flash. We’re hoping this will translate into higher conversions and revenue.”

Social Gold is part of a burgeoning industry in the US focused on virtual currency monetization and payment solutions optimized for social applications and games. It was founded by Gupta and Reza Hussein, who led the payments and web services groups at Amazon. We estimate the total size of the US virtual goods market to be just over $1 billion this year, according to our Inside Virtual Goods report.

Here’s a video demo of how it works: