Facebook Payments Takes Another Big Step Backward

  • JJ Hornblass
  • January 29, 2016
  • 2

© Can Stock Photo Inc. / ElenathewiseWhen Mark Zuckerberg says “we don’t view ourselves as a payments business,” he’s not kidding.

Facebook, the social media monolith, took a big step backward in payments last quarter, as its payments revenue dropped 21% to $204 million compared to the same quarter in 2014.

Facebook’s payments revenue has been on decline since the end of 2012. This compares to, well, crazy-massive growth in advertising revenue at the social network. As a point of comparison, year-over-year advertising revenue grew 57% to more than $5.8 billion. In total, 97% of Facebook’s revenue now comes from advertising.

Facebook is still pitching its payments future as being wrapped up in Messenger, which last quarter began offering debit card-only payments functionality within the messaging app, a standalone from Facebook’s mobile platform. Here’s how Zuckerberg described Facebook’s payments strategy yesterday
during the company’s earnings call:

On payments, the basic strategy that we have is to make it especially in products like Messenger that where the business interaction maybe a bit more transactional, to take all the friction out of making the transactions that you need. So, we don’t view ourselves as a payments business, that’s not the type of company that we are. We’ll partner with everyone who does payment. We look at the stuff that Apple is doing with Apple Pay for example as a really neat innovation in the space that takes a lot of friction out of transactions as well. And our view is that the less friction, the better the user experience, the more people can easily interact with businesses that they care about. And ultimately for our business that will drive up the amount that businesses are willing to pay to advertise to send people into those interactions because they perform well. So it’s good for everyone but that’s how we think about that.

Well, sort of. The core payments revenue decline was blamed on a “reduction in payments revenue related to games played on personal computers.” Clearly, the payments functionality in Messenger did not make up for “games played on personal computers.” Messenger payments are free to consumers.

facebook payments rev 012916

Look, Facebook still reigns supreme in active users. Facebook has 1.04 billion daily active users, and its Whatsapp unit has more than 1 billion, too. Numbers like that stagger — and, in fact, they make the company’s decline in payments all the more perplexing.

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JJ started the first iteration of Bank Innovation back in 2007, and has been working on it ever since. He also serves as President & Chief Executive Officer of Royal Media, Bank Innovation’s parent. He founded Royal in 1995 and oversees all aspects of the New York-based diversified media company. Prior to forming Royal, JJ was on the editorial staff of American Banker, the daily newspaper, and worked as an editor of a business magazine in Hong Kong. As a reporter and editor, he has won journalism awards from the National Press Foundation, Newsletter & Electronic Publishers Foundation, and the Reader’s Digest Foundation. He has a BS in Economics from Yeshiva University and a Master’s from the Columbia University Graduate School of Journalism. He was also a Fellow at the University of Wisconsin-Madison Graduate School of Banking. He lives in New York City with his wife, two daughters, and son. He counts among his accomplishments one New York City Marathon, two New York City Triathlons and the 2010 Father’s Day 5K, the first race he ever ran with his daughters. He can be reached at hornblass@gmail.com or 212-564-8972.

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