Facebook Is Setting Up Stage For Online Payment Business – A Threat to PayPal ?

Must Read

The Grim Reality Of Indian Startups: Only 12% Left With Cash Runway of Less Than One Month!

Previously, in the month of April when the lockdown was still in effect, Dazeinfo reported how the...

India-China Tussle May Result In Massive Job Losses

The Sino-Indian border dispute has been a hot topic in Indian news and media ever since it...

Upskilling Is Mandatory As 72% Companies Have More Than 25% Roles At Risk!

The COVID-19 pandemic has led to businesses around the world facing unprecedented amounts of disruption and change....

Facebook seems to be very “wide-open” when it comes to strengthen its revenue stream. Besides online advertisement – the major source of revenue – Facebook is broadening the other wing of revenue source which comes from the sales of “Facebook Credits” in form of virtual currency.

Social Media giant has recently formed a subsidiary – Facebook Payments Inc – for accepting online payments directly without the help of any mid layer processing engine like PayPal or 2CheckOut. Even to make it much more effective and flawless, Facebook has started registering it in a host of states.

Though, Facebook may not have any intent, currently, to move into the consumer facing online payment processing business analogous to PayPal – but this will setup stage for the company to roll in such type of business ‘anytime’ smoothly.

Advertisements

The subsidiary was formed in Florida in December 2010. Facebook CFO David Ebersman, general counsel Ted Ullyot, and vice president of business development Dan Rose from the entity’s board. Facebook is hiring a controller for the business, which it describes as a “rapid growth, very dynamic subsidiary.”

Does all this mean that Facebook is exploring the new business venture of Online Payment processing? Or it’s just a move to stretch the profit margin by “smart initiatives”. Let’s analyze few facts which, possibly, can justify Facebook’s latest initiative till an extent:

As per eMarketer, Facebook is expected to cross $4 Billion as revenue in 2011. Approximately, one forth of this comes from the sales of credits which help users to buy virtual good in games like Zynga’s Farm Ville and Crowdstar’s Happy Island. On very conservative note, if Facebook pays 1% of this revenue share to online payment processing engine providers, like PayPal or 2CheckOut, company will end up paying whooping $10 Million as transaction fees which itself is a big chunk of revenue.

However, if Facebook manages to omit these payments processing engines it will witness significant jump in profit. Though, company will have to have direct arrangements with Visa and MasterCard besides their own engine management, it will pay off enormously well in long terms scenario.

The other important aspect behind Facebook’s Payment processing system is “future expansion model” of Facebook Ad network. There are speculations from long time that Facebook may slant towards Google Adsense model and will start branching out their ads on third party websites known as “Publishers”. Facebook already has planted a presence across hundreds of thousands of websites with its “Like” and “Share” buttons, comment functions, and other social plugins. It would be easy for Facebook to sign those publishers up for an advertising network powered by Facebook’s detailed demographic information. But then it would have to start cutting checks on a massive scale — something that would be eased by a dedicated payments-processing operation.

Advertisements

The third important fact behind setting up Facebook Payment processing system is the promising future of mobile payment. Infact, at MobileBest 2010 conference, Facebook mobile chief Erick Tseng expressed that company is willing to offer same features on mobile as its Web platform. That presumably includes Credits and other payments functionality.

Considering all above scenarios, possibilities and few speculations, one thing clearly stands out – Facebook is predominantly pushing e-commerce on its platform. Company is currently serving to more than 620 Million users worldwide – expected to reach close to 900 million users by year end – e-commerce activities are bound to grow, so the transactions. And there is something much more powerful which provide an extra edge to Facebook over possible future rivals like eBay, and Amazon.com– power to control transactional frauds.

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Qualcomm Ventures Invests In Jio: A Masterstroke To Dominate 5G Market In India!

If you thought Reliance’s hot streak of selling stakes in Jio Platforms was over after 12 deals...

The Success Of TikTok Alternative Apps May Be Short-Lived [STUDY]

After the Indian Government, in a bid to take a stance against China, banned TikTok and 58 other Chinese apps, the popular...

India’s Flourishing Gaming Sector: What’s Driving The Growth!

The Indian gaming market is one of the fastest-growing gaming markets in the world. In 2019, the number of gamers in the...

Employee App: Companies Must Have To Thrive In The New Normal

With all the advancements in technology, managers and business owners seem to be taking note. Far too many believe that traditional methods...

India-China Tussle May Result In Massive Job Losses

The Sino-Indian border dispute has been a hot topic in Indian news and media ever since it escalated to unprecedented levels back...

Apple iPhone Has A Serious Technical Issue That Is Annoying Users!

Apple aficionados beware! It is recently learned that iPhone devices have an extremely annoying problem and Apple has confirmed it.

In-Depth: Dprime

Will The Online Food Delivery Market in India End Up Becoming A Two-Horse Race?

It's pretty much evident that the food delivery space in India is all set to get riled up soon enough as one...

Fantastic 4: Four Day Work Week A Flashpoint Of Innovation?

It has been an idea that has been mooted by many, perhaps also somewhat sceptically. From being a dark horse to becoming...

TikTok Is Facing The Wrath Of People Who Love It The Most

Ever since the popular social media app TikTok entered India, it has been growing very aggressively in terms of users. Within a...

More Articles Like This