Facebook (FB) appears intent on using its messenger app to advance its ambitions in mobile payments, and that’s all to the good when it comes to Facebook stock.
FB poached a second executive from PayPal (PYPL), TechCrunch reports, to head up communications for Messenger. The executive in question, Christina Smedley, had been PayPal’s VP of global brand and communications.
A little more than a year ago, FB hired PayPal president David Marcus to run its Messenger unit. PayPal was still part of eBay (EBAY) at the time. As TechCrunch noted, FB hinted that Marcus would be looking for ways to monetize Messenger outside of using ads.
No, there’s nothing here to change the thesis on Facebook stock, but these are the kind of strategic moves Facebook needs to make if it hopes to get a piece of the digital payments pie.
There’s a reason why FB, Alphabet’s (GOOG, GOOGL) Google, PayPal, Twitter (TWTR), Apple (AAPL) and others are competing for dominance in mobile payments. An analysis by Accenture shows that cash, credit and debit card payments add up to about $13 trillion annually.
More importantly, the digital payments market is growing at a healthy clip — as much as 8% per year, according to industry reports. If just a small percentage of those $13 trillion in transactions move to digital, this market will explode.
Indeed, consumers are expected to make more than $140 billion in mobile payments by the end of the decade, according to Forrester, a market research and consulting firm.
Facebook Struggles in e-Commerce
Naturally, Facebook very much wants in on such a potentially lucrative market. Unfortunately for anyone holding FB stock, the company has mixed success with e-commerce so far.
As TechCrunch notes, Facebook Gifts never developed into a well-used service and was eventually shut down. FB also went with Foursquare-like “check-in” features, but they haven’t worked when it comes to generating revenue. And those are just a couple of examples.
The bottom line is that FB’s revenue from payments came to $215 million in the most recent quarter, or less than 6% of total top-line results. That’s not quite immaterial, but close. Worse, payments revenue was off by 8% year-over-year.
The numbers make it plain that FB payments efforts need significant attention and investment. The market for such services is simply too large to miss out on.
FB is already paying catch up with Apple Pay and Google’s Android Pay. So anyone holding Facebook stock should welcome this latest hire as a sign that it’s serious about not falling farther behind.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
