Will Facebook’s Payments Revenue Ever Be The Same?

games-newsroomcoverFacebook’s payments revenue has been on a steady decline since users stopped obsessing over desktop video games like Farmville and Cityville. Will we ever see the social media giant revive that revenue stream?

As games went mobile, Facebook launched instant games feature, bringing its Messenger platform into the action in November. Back then, Facebook’s head of Messenger, David Marcus, said that “over time” the company will find ways for game developers to monetize. “That’s our commitment to them in the new year.”

So far, Messenger games don’t feature payments or ads. During the company’s earnings call yesterday, Facebook’s CEO Mark Zuckerberg said the company will be making more gaming investments this year, and only nodded toward the possible monetization efforts, but not in the near future.

Until there’s a certain volume of units in the field, you’re not going to be able to make enough money to fund your game development just based off of people buying your content.  So that’s why we’re investing so much capital in content to feed the ecosystem and solve this chicken and egg problem if you need the content in order to create the ecosystem. But I don’t think that there is really a strategy to pull this in from 10 years to five, I just think it’s going to be a 10-year thing.

Facebook still insists that it’s not a “payments company,” even after receiving a payments license in Europe in December. Payments revenue past quarter was down 12% to $180 million compared to last year. In comparison, ad revenue was at $8.6 billion, up 53% (!) from the previous quarter.

P2P payments through Messenger, enabled last year, are still free for consumers. Zuckerberg implied that a similar payments feature, but more on the business side, may soon be introduced on WhatsApp.

So, we did the experiment that you asked about before around ads and Messenger and different ways that businesses can interact and there’s a lot of flexibility around how we can explore there, which is why I think you’ll see more of that on the Messenger side than on the WhatsApp side in the near term. But giving businesses the opportunity to connect in WhatsApp and reach the people that they want and eventually have increasingly, hopefully, transactional interactions I think will be a really useful thing on that platform as well.

WhatsApp reached 1.2 billion monthly active users, with more than 50 billion messages sent every day. Many business already use WhatsApp to interact with consumers, Zuckerberg said, which may become an interesting payments market to tap into.

For now, here’s the overview of Facebook’s payments revenue, versus its (soaring) ad revenue for the past year.

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To learn more about payments, join us in San Jose on March 6-7 for Bank Innovation 2017, where the best conversations in fintech take place. Click here to register.

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