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Facebook Can Do Much More than Payments but Will They?

October.24.2014 0 Comments


Earlier this month, Stanford student Andrew Aude discovered that Facebook was planning to implement payments capabilities to its Messenger app. While he found out that there were no plans to charge its users in the code, many people have taken to breaking down the possible revenue streams Facebook may opt with.

The two most popular concepts are the per-transaction payment and the increased ad value as a lead generator for online commerce.

When Aude had discovered the code, he found that Facebook had not written anything into it regarding charging its users. He said it would probably be free to use when it first becomes available.

Not charging its users at first but then, over time, adding a fee seems like the way Facebook has run its business in the past.

They were slow to start implementing advertisements to their website, and they offered users the option of downloading Messenger for a brief period before making it mandatory to use the feature in the app.

Visa and MasterCard will probably charge Facebook to run the transactions, which is why it would make sense to create a per-payment fee like other apps such as PayPal. With Facebook’s nearly 800 million users, the fees could add up very quick to create massive revenue.

The other option is implementing more, and charging more for advertisements. In the most recent quarter, Facebook generated $2.67 billion from advertising. The ads have become prime real estate on Facebook’s app and desktop home page and they could start selling for much higher prices. Once the payment processing is implemented, in theory, Facebook users can purchase goods directly from the ad without ever leaving Facebook. By simplifying the purchasing process, Facebook could create much more demand for ad space.

However, from a global perspective, Facebook’s E-commerce play could be deemed U.S.-centric due to the focus on facilitating payments through credit cards.

Ralph Dangelmaier, CEO of BlueSnap, said “One thing I think Facebook did a great job on was making everyone equal. I’d be surprised if more than half the [Facebook users] could utilize that service because they’re either too young for credit cards, or they can’t get one.”

The international money remittance market could be a potential target for Facebook, and the company’s entry is a potential game-changer. “There’s 7 billion people in the world and there’s only 2 billion people with bank accounts. If Facebook could go after that market, I think that could get really interesting,” Dangelmaier said.

While Facebook’s $2.67 billion advertisement revenue seems impressive, they remain far behind Google in per-user revenue. In 2013, Facebook earned $6.44 per user, while Google earned $45 per user. Google’s lead should be safe for the time being but Facebook’s demand for advertising could, at least, help close the gap.