Facebook Gearing Up to Be a Major Payments Player
First there was Apple Pay and Android Pay. Then there was Samsung Pay. And coming soon…Facebook Pay? It could happen sooner than you think. Facebook recently took a major step towards monetizing its mobile platforms by launching a native store locator, in which users can search for stores near their location. This indicates that the King of All Social Media is looking to move beyond online advertising and into the growing mobile payment space. Facebook has already begun to test payments within the confines of its Messenger app and by allowing users to book Uber rides, so this new store locator feature will help to further strengthen relationships with offline merchants by giving them a targeted location-based ad platform backed by the largest social media network in the world.
Facebook is literally everywhere, and its reach is unprecedented. According to a recent article in The Guardian, more than 1.6 billion people use Facebook at least once a month, which is half of all internet users worldwide. When you count users on other Facebook-owned sites like WhatsApp, with 1 billion monthly users, and Instagram, with 400 million, that number grows exponentially.
Despite being a free service, Facebook makes money from its users via its advertising. Consider the size of Facebook’s audience, then figure in the amount of time that vast audience spends on Facebook – the average American 18- to 34-year-old spends 30 hours a month on social networking services, of which 26 alone are on Facebook, according to a ComScore analysis. Every time a user clicks a link, likes a post, makes a comment or connects with new group or friend, Facebook is building a rich profile of that individual. Brands pay Facebook to target their ads to users based on age, location, relationship status and interests. Have you ever wondered how Facebook’s ads seem so perfectly targeted to you and your interests? This is how. This is also how Facebook makes money – by selling your information to advertisers. Facebook is a goldmine of consumer demographics.
Even though brands love to mine Facebook’s user information to perfectly target potential customers, those customers cannot make purchases directly through Facebook. Ninety percent of retail sales still occur in stores. Facebook has a new store locator feature that could provide it with additional key consumer data such as user interest, shopping pattern and traffic routine. This may address a key barrier that many businesses have with mobile ad buying, and could turn Facebook into a powerful platform for local businesses, with a long-term goal of expanding into international markets.
However, Facebook’s biggest payout over the long run may be in payment revenue. Facebook is already testing a new ecommerce platform called Local Market, which is powered by Facebook Groups and allows users to buy and sell items in numerous categories, much like eBay but without the auction component. Local Market will eventually have its own dedicated tab on Facebook’s mobile application and a bookmark on the desktop version, allowing users to see all items that have been posted in their local area. For now, the items listed in Local Market are culled from Facebook’s “sale” groups in a particular geographic region, which explains why some categories had thousands of items for sale, despite Local Market being a new feature. Even though its current availability is only in a few markets, if rolled out to more local merchants – which is likely to happen – it is not unlikely that Facebook would develop its own proprietary payment platform, entering the mobile payment market as a competitive player, with nearly three billion potential users at the ready.
Moving into the payments space seems inevitable for Facebook, given its global scope, and such a move could make Facebook even more competitive than Apple Pay or Samsung Pay, because neither of them has a comparable user database and ad platform, as does Facebook. According to an article on the Seeking Alpha website, “with a robust payment system, Facebook could eventually make the transition toward internet finance similar to what BABA, Tencent and Baidu are doing in China.”