For years, analysts and reporters who watched Facebook said the company would eventually roll out some sort of product to do with payments.
You’d hear that Facebook was working on a “Pay With Facebook” button.
Or you’d read that Facebook Credits, a currency you could once use to buy virtual goods in Facebook games, would eventually become a currency you could use at e-commerce or even offline stores.
And now, Facebook has scaled back its ambitions entirely on payments.
Reporting for The Information, Katie Benner says that according to “interviews with Facebook executives, former employees and payments experts,” Facebook only wants to be in the payments business so far as it can bolster its ad revenues.
Facebook has a product called Autofill, where users can give Facebook their credit card information once, and then when visiting e-commerce apps and websites later, can click a button and have that information quickly populate fields on the page.
Benner says the business goal behind the product is for Facebook to understand “consumer buying patterns that should bolster its advertising business, its main revenue stream and core competence.”
Venture capitalist Hunter Walk is disappointed by Facebook’s payments pivot.
1. Immediate Utility Different Than The Dollar (First Party Utility)
An alternate currency needs to have bootstrapped/kickstarted market liquidity and validation. Facebook, at the time, had the power to tell all Facebook Platform app developers that they needed to use Credits as their virtual currency. Immediately there was a widespread use case and reason for consumers to hold Credits instead of Dollars. The issuer of the currency was also able to create a market.
2. Broader Third Party Recognition
Once the Games market was set, other on-platform businesses started to experiment with Credits. For example, you could rent movies from Warner Brothers. At the time “F-Commerce” (omg what a horrible name) was trendy and all different types of apps were being used to help merchants set up storefronts within Facebook and on their Facebook Pages.
3. Tied to Identity & Reputation
Because Facebook is a real name space, it was exciting to imagine that Facebook Credits could come with a reputation system. There hasn’t been an interesting transaction-oriented reputation system on the web since eBay built their user ratings, and that never broadened despite fact that eBay User Ratings + Paypal COULD HAVE BEEN HUGE AS A PLATFORM. Within Facebook, or anywhere that you could sign in using Facebook ID (which is still the most robust part of their platform play), you would have a one-click payment system tied to a user history. Huge.
4. Inherently Global
Facebook was also the first global social network at scale. That meant you were going to run into inter-country transactions and a frictionless proxy currency would have had use. Within a single country it would be very hard to replace the local unit of exchange, but across borders, less so.
Why didn’t the Hacker Way push Facebook to be aggressive here. Hacking money? That’s so cool. Unfortunately they turned in another direction. Admittedly they had much on their plate and needed to focus, but I wonder why they don’t take on a few of these 100 Year Hacks…
Facebook’s decision to leverage whatever position it has, or could have, in online transactions for the benefit of its already existing ad business fits a general trend at the company these days. Unlike Google, which is investing its massive and growing search advertising profits into seemingly unrelated industries like cars, robots, and health — Facebook is going through a narrowing of its ambitions. It’s figuring out how to sell branded ads against social content viewed on mobile devices.