23 ms·

Seriously? Ads?

283 points by Ryan_Shmotkin 14y ago

pajju 14y ago
Its not possible to solve for everyone, the whole of web-communities ! Nerds and Geeks never trust facebook, but their moms and sisters do !
bookwormAT 14y ago
There is no way facebook has a billion active users. Official numbers are always very optimistic. For example, a lot of brands and agencies register many,many pages on facebook, and even post content there. And Britney Spears is not really on Facebook, she just has someone have post stuff for her. I'm sure Facebook is huge. But if they say a billion, it is probably closer to 500m.
pistoriusp 14y ago
I agree with most of this article, except, if I was Facebook I would bill via the mobile networks. Not really viable on the desktop, but certainly on phones. There's no reason that I can think of why I can't be identified by my own mobile network and either charged at the end of the month or via my airtime.
TomGullen 14y ago
This thread is interesting in that some people are arguing they wouldn't trust Facebook with their cc. To me this makes no sense as the likelihood of fb doing anything funky with your cc details once obtained seems highly unlikely. If something does go wrong cc have very good insurance on them. The problem does seem to be a general resentment and paranoia of large companies. I dont think fb are going to cook up a half baked solution for anything like this, there's every likelihood they will do it as securely as the next especially with the strict laws and regulations around implementing such systems. Everyone with a cc has probably used it in far less secure environments than fb could ever be, for example pubs, bars, resteraunts, independent shops etc. If fb did a payment system it would annoy me briefly as another payment system I'd inevitably have to register with at some point but that's realistically as far as the problems would go.
- prof_hobart 14y ago
  It's not about FB deliberately doing something funky with it - it's about one of the million and one apps that have requested access to your FB account at some point doing something funky with it. You may trust them to do it as securely as the next person, but at least partly based on their past reputation around privacy, I don't.
  - TomGullen 14y ago
    Do you think facebooks payment implementation would be naive enough to allow anything like this?
    - theycallmemorty 14y ago
      Yes.
    - marblar 14y ago
      No.
    - prof_hobart 14y ago
      I don't see a great deal of evidence that they wouldn't.
TomGullen 14y ago
This thread is interesting in that some people are arguing they wouldn't trust Facebook with their cc. To me this makes no sense as the likelihood of fb doing anything funky with your cc details once obtained seems highly unlikely. If something does go wrong cc have very good insurance on them. The problem does seem to be a general resentment and paranoia of large companies. I dont think fb are going to cook up a half baked solution for anything like this, there's every likelihood they will do it as securely as the next especially with the strict laws and regulations around implementing such systems. Everyone with a cc has probably used it in far less secure environments than fb could ever be, for example pubs, bars, resteraunts, independent shops etc. If fb did a payment system it would annoy me briefly as another payment system I'd inevitably have to register with at some point but that's realistically as far as the problems would go.
girlvinyl 14y ago
Facebook has demonstrated a completely utter disdain for interacting with their users. If something goes wrong with your "friend wall" or whatever, it's an inconvenience. If something goes wrong with your money, you want to talk to a human. Everyone knows you can't reach fb humans. When it's money, that matters. The work involved in turning that perception around is a huge hurdle to this idea.
- shmerl 14y ago
  The whole approach of Facebook at its core is a disdain for the users, because Facebook profits from users' profiles. They can argue that users are willing to trade off their privacy for the "free" service, but it's just a sneaky way to get users information to monetize on. Given that, why do you think they should have more respect in other kind of interactions?
  - girlvinyl 14y ago
    There are lots of reasons they /should/ have more respect. But my whole point was that I don't think they ever /will/. Putting a high touch endeavor like financial dealings on top of a no touch venture like a social network is dumb. Basically, looks like you and I agree.
    - shmerl 14y ago
      Yes, we agree. Really Facebook is not fitting to be a social network, but at the same time it has such a huge number of users at the moment. Hopefully real social networks like Diaspora which are built for social interactions and not for ripping users off on their privacy, will eventually gain more traction.
      - girlvinyl 14y ago
        You inspired me to write a little blog post. http://www.sherrod.im/81/just-give-them-their-money/ http://www.sherrod.im/81/just-give-them-their-money/
Ryan_Shmotkin 14y ago
why stop at credit card processing how about a Facebook Credit Card !
- georgespencer 14y ago
  Cannot tell if serious. If so: a credit card would be picked up by a tiny number of people worldwide in comparison to the numbers who would use a "pay with Facebook" button, and the latter is already an area of expertise for Facebook (or at worst a logical extension of their current expertise).
- salmanapk 14y ago
  They're already giving out those to white-hat hackers btw..
TazeTSchnitzel 14y ago
Dammit, then I'd have to reactivate my Facebook account. And then Facebook would know everything I buy.
- darkstalker 14y ago
  What if I refuse to use facebook, would be unable to pay?
  - jiggy2011 14y ago
    It's in a companies interest to make sure that there is a way to give them money, they are unlikely to want to throw away good customers just because they don't have a FB account. What I would expect to see however is discounts offered if you use FB payments and allow your purchases to be automatically shared with your friends.
    - truncate 14y ago
      allow your purchases to be automatically shared with your friends. This is one of the creepiest feature one can get. I already hate these social readers which automatically share what you read (I've stop reading stuff on FB because of that, even if many of them are of my interest). However I'm hoping they would provide some reasonable privacy options with that.
      - jiggy2011 14y ago
        I don't imagine it would become compulsory. After all people need an avenue to buy their porno and health related products in privacy. You would get something like "10% off for you and 5% off for all of your friends, if you allow us to repost on your wall" The problem of course becomes spam, if FB ever gets to such a poor signal/noise ratio then people will simply stop using it.
DanLivesHere 14y ago
Too late, I think. Facebook has scared off a lot of the "moms" out there by their bad bad bad privacy history. Do you really want to pay for things using their service?
- Kiro 14y ago
  I'm pretty sure my mom has no issues with Facebook's privacy history.
  - bmuon 14y ago
    My mom is a lot more worried about seeing pictures of relatives she doesn't like than about privacy.
- slig 14y ago
  Maybe the subset of moms that frequents reddit and HN.
- roc 14y ago
  While I tend to agree, they could throw in an RSA fob or a smartphone-based two-factor equivalent. They probably should already.
  - deleted 14y ago
    [deleted]
  - Splines 14y ago
    I like two-factor authentication too, but casual users don't care about this sort of thing until it's too late.
    - roc 14y ago
      There's a large and growing number of casual users who've dealt with or watched a friend or family member deal with fraudulent charges. I think a sufficiently streamlined phone app and pitch could net quite a few. Say, demonstrating the feature by showing someone making an Amazon purchase and then getting a phone notification to approve the charge and approving with a simple PIN entry.[1] [1] Said notification ideally showing merchant, amount, scan location, warnings if it's a card not present transaction, etc.
perlgeek 14y ago
> People will think twice about losing their ‘Facebook Credit Score’ over a few $ for an online presence they spent (literally) years building and cultivating. Which keeps them from using that hypothetical service, because they don't want to risk losing the account over a transaction that went wrong. Or maybe not. Who knows?
zdw 14y ago
Seriously? Linking your checking account with Facebook? It would definitely be the next step in user lock-in, but you'd start competing with banks and everyone else who offers a way to pay. Now, I wouldn't complain if they bought some "bypass the credit card companies" service like Dwolla...
- tatsuke95 14y ago
  >"bypass the credit card companies" I have both an American Express and a Visa (because Amex just isn't accepted some places). The customer service has been nothing but amazing, even when dealing fraudulent charges. And the cards are accepted everywhere. What I'm saying is, I don't feel any need whatsoever to bypass my credit card company to pass my information off to a start up.
viraptor 14y ago
I really don't want that to happen. Sure, it may be a good idea for them, but I'm already tired of services that won't let me register without a Facebook account. When it comes to payment, they better have a good alternative available. With credit cards we have a number of "hidden alternatives". We've got multiple processors, multiple card companies, etc. It's a number of layers there. With Facebook and Paypal... you're not able to pay when they say you're not able to pay (or be paid). They're not even controlled banks, so there's little you can do about some issues. Think about all the problems when Google cut someone off and didn't provide any way of contacting them. Do you have a good way to contact Paypal, or Facebook now? (besides forms that result in canned responses) What are the incentives for changing it?
- rhnoble 14y ago
  I definitely don't want it to happen either. But from Facebook's standpoint it's not a bad space to start looking at. The reasons you listed above worry me as a consumer, but unfortunately the average user isn't as scrupulous. If FB made paying for things as easy and simple as "liking" something, I'd be very surprised if it wasn't successful.
msy 14y ago
Why not, it worked out so well for Google with their deep search history, world-beating teams of big data specialists, deep pockets and massive Gmail/Gapps userbase... http://www.bloomberg.com/news/2012-03-21/google-said-to-rethink-wallet-strategy-amid-slow-adoption.html http://www.bloomberg.com/news/2012-03-21/google-said-to-reth...
- mtts 14y ago
  Google Wallet is actually fairly useless. To load it up you need a credit card. If you have a credit card, you could just as well, uhm, use a credit card.
  - jurre 14y ago
    I think your parent was being sarcastic. We need a sarcasm tag in HTML.
    - mtts 14y ago
      I was aware of that. But parent did raise an interesting point. Google Wallet isn't doing too great. Why?
      - naitbit 14y ago
        I cannot talk for everyone, but I use paypal instead of Google Wallet, because it allows me to pay without using credit card. I do think that current model of credit card payment is broken so I refuse to use it. Sure if dishonest merchant purges all my cash from credit card I could get it back by contacting bank, but money lost would be covered by all bank clients. I don't have much trust in paypal, but I can transfer to it appropriate amount of money from bank just before the payment, so possible damage is much lower. That said my level of trust with facebook is so low that I would probably refuse to put on their account even 100 USD.
      - iamgilesbowkett 14y ago
        the sheer number of possible answers is overwhelming, but pretty much everything Google does fails, except for search and email. (I can't be the only one who's afraid to find out what their cars are like.) so I'm going to say the reason Google Wallet failed is because it was neither search nor email. I guess you could say Android is only half a failure, because the constant catch-up game they're playing with Apple isn't going as badly as the constant catch-up game Google Plus (and Wave, and whatever they called the other one) plays with Facebook. but seriously, business failure can happen for so many reasons, it doesn't really mean anything at all, unless of course you see a string of people failing at the same thing.
crag 14y ago
I've been on FB since the beginning. And I've never clicked on an ad. What makes you think I will to actually buy something? I barely trust Paypal, you think I'm gonna trust FB with my CC details. You gotta be kidding. There are a few steps FB must do before I'll trust them with anything other than bs about what games I'm playing now: 1. Convince me they take my security and privacy seriously. 2. Convince me they aren't selling my personal data (statistical or not) without my permission. 3. Allow me to export (backup) ALL my data to my drive easily. 4. All me to cancel my account (not that I would). And by cancel I mean remove all my data. No questions, no sales pitches to stay - just delete everything in my profile (and off their, FB, drives). FB says they do this, But there are plenty dead folk with active profiles. Despite families begging FB to delete them. Until all this happens, FB gets nothing from me except an occasional post about my Skyrim adventures. Oh and commenting on the latest high school gossip (the latter being funny. I mean, there's a reason I left town 25 years ago and hardly kept in touch. But here we all are, FB friends.)
- omonra 14y ago
  You seem to conflate [1 - what I want FB to do with regards to privacy] with [2 - what FB needs to do so I trust they won't steal my money]. The two have nothing to do with each other. Realistically speaking, 1 may never happen, 2 is already there (even if you're only liable for $50 from unauthorized cc transactions).
  - ktizo 14y ago
    3. What facebook needs to do so I trust that other people can't steal my money through facebook.
    - jusben1369 14y ago
      If you're entering a CC then it's not your money that's on the hook.
  - Zak 14y ago
    What if what I spend my money on is private? I don't really want my spending habits to be social.
eli 14y ago
Right, because the main obstacle to international online payments is having a strong brand.
- deleted 14y ago
  [deleted]
ruswick 14y ago
I wouldn't trust or use something like this. 1) I don't trust Facebook to transact payments quickly or safely. 2) I don't want Facebook to take my money. I'm guessing Facebook would capitalize on this by exacting a higher rate than other options. Because they can. I want the max amount of money to go to the creators of a product, not to Facebook. 3) As it says, Facebook already knows everything about people. Should they really have access to our credit cards as well?
jiggy2011 14y ago
Are online payments such a big unsolved problem? It takes me all of 10 seconds to type my CC number and associated security codes. Sites that I use a lot tend to allow subsequent purchases without re-entering them anyway. If everyone's facebook account has CC details attached and a 1 click "pay now" button you are only 1 XSS vulnerability from fraud on an unprecedented scale.
- SonicSoul 14y ago
  Credit cards suck for many reasons other than just convenience of use. Credit card companies are big cartels with hefty fees to retailers, slow and unpredictable turnaround between when a payment is made, and when it gets to retailers bank, and infrastructure that's not well suited for micro payments, or peer to peer payments. http://www.wired.com/magazine/2010/02/ff_futureofmoney/all/1 http://www.wired.com/magazine/2010/02/ff_futureofmoney/all/1
  - jiggy2011 14y ago
    It depends if we are talking about FB simply providing a service for taking payments similar to google checkout (using existing Cards) or whether you suggest that they try to replace card altogether. In order to do that FB would be looking at setting up massive infrastructure and essentially having a "banking division" that would get bogged down in regulations and bureaucracy.
    - SonicSoul 14y ago
      my point is, credit cards suck, and there is plenty of space for alternatives. There is a race in peer to peer and micro-payment space, and currently paypal is the leader, but it is far from perfect. I'm not a big fan of FB, but i think this article is on point, and they are well suited to enter this space. Being able to validate identity (thanks to all the information), and having a brand and cash to back it up. As for the new division, infrastructure, and bureaucracy, it would boil down to how well they can execute.
      - 14y ago
digitalsushi 14y ago
It would be very convenient for someone, somewhere, to establish a widely accepted micropayment system for the Internet. I sure can just whip out the CC, type in the 16 things, the special code, the expiration date, maybe a second screen the CC vendor presents to get my address or phone number for additional verification... But I would never bother for a 3 or 5 cent article. And I firmly believe that's why there is no way to pay 3 or 5 cents for a view of something. But there is a lot of cool stuff we could make or do with this. It should just be easy. Why doesn't it exist? There might be a big business answer that my fellows and myself don't get as we rant over coffee.
- kalleboo 14y ago
  And Facebook already have "Like" buttons all over the web. They could steal Flattr's model in an instant and make it a huge success.
- snowwrestler 14y ago
  Micropayments haven't taken off because people don't want to pay 3 to 5 cents for anything. The perception of value is so low that even a one-button form is too much friction in the user experience. If your article is only worth 3 cents, just show it to me for free and put an ad on the page.
  - digitalsushi 14y ago
    If the transaction processing costs were 0, do you suppose this payment system would still continue to not exist?
    - Splines 14y ago
      There are very few things that are worth 5 cents that you'd get me to pay for that I couldn't just do without.
      - drivebyacct2 14y ago
        That wasn't the question; what percentage of the economy is from purchases that fall into the category of "I could do without"? The question is, the NYTimes article linked on HN with 120 comments... would you pay 5cents to read it?
tomeric 14y ago
The second biggest social network in The Netherlands (Hyves) introduced something like this in 2010. They mainly intended it to be used to pay back (small) debts to friends or relatives, but also made partnerships that enabled you to order food online or order drinks at a bar. As far as I know, it did not really lift off, but this could be because Facebook overtook Hyves as the most popular social network shortly afterwards.
JackFr 14y ago
It's a possible but hardly compelling: Facebook: ~ 1 billion customers Visa: ~2 billion cards out there. Facebook: ? merchants. Visa: > 10 million merchants. Facebook: potentially disruptive to the existing market Visa: 50+ years experience with electronics payments processing, fraud detection, government relations and consumer credit marketing Facebooks main competitive advantage is(was?) relatively cheap capital. http://corporate.visa.com/_media/visa-fact-sheet.pdf http://corporate.visa.com/_media/visa-fact-sheet.pdf Edit: Corrected years, added reference
- waterlesscloud 14y ago
  Who works for Visa that Facebook couldn't hire?
- rmc 14y ago
  Facebook don't have 1 billion customers. They have 1 billion users. If you don't pay for something (Facebook) you are not a customer, you are the product.
Akram 14y ago
With 1/6th of the world population Facebook can very well release it own currency.
timharding 14y ago
I think that "be a payment provider" is a much easier thing to think than it is to do. While it may be easy to build the customer side of the equation you've got to build a vast network of merchants willing to accept payment and that's hard work. Especially if you're trying to convince them to re-price in Facebook Credits? Sure, you could charge 1% but people have added credits to their Facebook account at some point and it probably cost you more than 1% to allow them to do that. How do people buy credits right now? All those cost Facebook more than 1%, right? I buy $100 of credits, it costs F8 a couple of bucks, I then spend $100 of credits and they recoup $1 of it in merchant fees? Doesn't sound like a good business model. Beyond the need to create a financial model that makes sense and then go out to find merchants and convince them there's a massive risk of merchant fraud. Fraudulent merchant X signs up for a F8 Merchant Account. Fraudulent customers A, B, C buy something with stolen credit cards for $100 each. Everyone disappears after merchant X receives settlement. F8 is out of pocket to the tune of the original $300, another $300 in reversals to their bank and then $30-$60 of chargeback fees. If that happens enough then F8 might even have its merchant account revoked... though they're probably big enough to avoid that. It's an excellent money laundering channel too and there's a lot of financial regulation to navigate around that. I know that this stuff can be overcome but it is hard to do and would be a major piece of work. This type of thing nearly sank PayPal back in the day. Perhaps I'm missing the point here though?
- fusiongyro 14y ago
  There are reasons for and against pursuing this particular niche, but I think Boris is really onto something. Selling ads is a safe bet, but FB really could wager a billion dollar fee to enter a new market. There must be markets where entering the field with a billion signed up users and a billion in capital will work, even if this isn't the perfect example.
- kunaalarya 14y ago
  Well there's interesting ways to do that with Facebook though. A la you can't start selling large amounts of goods unless you have x number of likes on your page. Same thing, on the user side. You can only buy $10 worth of credits if you have a new account, accounts can be flagged, etc. I agree it's a pain in the ass to do, and much easier said than done. But it's definitely doable and hugely profitable. They can easily take more than $1 in merchant fees, and credit card companies will beg them for their business and give them great rates. Shoot, they can do a Visa or Mastercard exclusive and get even better rates at the beginning.
ecaradec 14y ago
I fully agree. For a lot of people facebook is their identity, linking their identity to paiement is a logical step. They could first allow people to exchange any amount of money with friends for free, add it to their mobile app so that everyone has it anytime. Other apps are doing that, and that's very useful. And they should buy Stripe, bind everything together, displace amex, visa and mastercard. Or may be that's the plan, but it's best to be silent ?
- bezaorj 14y ago
  I always thought this would be Apple's next plan as well. "Pay with your Itunes account" or something like that.
  - ecaradec 14y ago
    That doesn't seems very Apple like move, they don't like to mess with ugly systems and integrate their products with anyone. They have a good place to do that, but I doubt that they'll go that way. But Steve isn't there, and Apple moves might be unexpected.
elorant 14y ago
Why not buying RIM and make a serious move into the smartphone market. Last time I checked RIM's market capitalization is a bit over $5bn and Facebook has tons of money in their pockets after the IPO.
roguecoder 14y ago
It's worked well for Walmart (well, okay, aside from the whole "bribing people in Mexico" thing.) But people seem willing, and even eager, to bank with companies they know and trust. The real problem is regulation. It is so, so much easier to sell ads than to navigate the international financial markets.
ew 14y ago
These articles make me wonder why everyone with a blog thinks they know better than the massive teams of engineers running these companies... Do you really think Facebook doesn't have reams of data and analysis on this exact idea? I bet they've been analyzing the crap out of it for years and for whatever very good reason they have they haven't done it yet. Now, I predict the company who will make a trillion on payments is Apple. They're set up quite nicely to tell the credit card companies to take a hike.
TimJRobinson 14y ago
100% spot on, Facebook could see massive profits if it pulls off any or all of the following: - Upon logging in Facebook lets me know my favourite band is playing in a few weeks, tickets are $25 and I can purchase with one click. - A new episode of Dexter comes out, Facebook knows I love dexter and thus notifies me and allows me to watch instantly in my browser for just $1. - A games company (steam, humblebundle, blizzard, whoever) is running a sale on games similar to ones I've already liked on Facebook, I can view and purchase the bundle through Facebook. All of this is taken care of in one click by my credit card being linked up to Facebook, just like iTunes. They can basically combine the best bits of iTunes + Amazon + All the data they have on everyone on Facebook and build the ultimate relevant shopping directory completely personalized to me. Sure there are sites that already cater for this but it's about the convenience and instant gratification. 50% of their users log into Facebook daily and won't even bother checking out other sites for these things if they're already right there in front of them available with one click. They don't even have to do it themselves initially, just hook into Amazon / Ticketmaster / iTunes data and this shouldn't take too long to develop. This is where the future is and if Facebook does this there's no reason they can't be the most profitable web company in the world.
- tomp 14y ago
  I reckon most people would quickly turn off this feature after it would produce more than a few bad predictions/recommendations in a row.
  - mahyarm 14y ago
    People wont be able to turn it off unless they install adblock.
sharmanaetor 14y ago
You know you don't actually have to click an ad for FB to make money? Companies pay money just to get that ad in front so many eye balls!
dpham 14y ago
I can't take this article seriously because it's so terribly written.
JumpCrisscross 14y ago
>Fraud. Paypal and others use complex algorithms, special teams and God knows what. But Facebook has an unique and unparalleled data base of a user’s history, friends, activities and what not. The author seems to confuse credit risk and fraud risk. Credit risk pertains to the probability of you being unable or unwilling to honour your commitments. Fraud, within this context, pertains to the unauthorised use of funds. Facebook's data may be a uniquely valuable to evaluating the former, but to fighting the latter it is less important than existing transaction history databases. Financial fraud is an immensely complicated problem. An estimate quoted in The Economist recently put the fraud loss rate at approximately 0.35% of transactions and up to 1.8% for online payments [1]. Cross-border payments are a niche unto themselves - even with margins as high as 10%, the fraud risk still poses a high enough barrier to entry that even the banks handle just 5-10% of remittances [2]. It's 11AM and so far Visa and American Express already have 1-3 data points of swipe activity on me. Over the day they'll get 5-10 swipes apiece (+1 NYC). Facebook has a tremendous amount of value in its dataset, but think for a moment about how much Visa, Mastercard, American Express, or your primary bank know about where you live, what you spend on (and by virtue when and where you spend it), and, by aggregating that data, who you tend to spend with. That is what's valuable for anti-fraud and by proxy payments processing. [1] http://www.economist.com/node/21554743 http://www.economist.com/node/21554743 [2] http://www.economist.com/node/21554740 http://www.economist.com/node/21554740
- philwelch 14y ago
  All told, it's probably more valuable and actionable information than Facebook will ever have about you. Oh look, you claim to "like" some restaurant that gave you a special deal for mashing the "like" button. Isn't that precious--meanwhile, you actually eat more often at this one just across the street.
- startupfounder 14y ago
  "The Economist recently put the fraud loss rate at approximately 0.35% of transactions and up to 1.8% for online payments" For the ~$2 trillion[1] going through online payments, bringing down the online fraud loss by every 0.1% is equal to $2B, if over time Facebook can reduce that online fraud rate by 0.5% or more there is your $10B. Using your real identity to make online payments could reduce that to real world levels. If this is the case then reducing the fraud rate from 1.8% to 0.35% in online payments (a reduction of 1.45%) would calculate to a savings of $29B for this industry. Thus, if Facebook is able to be a major part of that reduction by using real identities then they will get much of this transaction business. If they are able to pull this off there is no stopping them... Feel free to rip me apart, but there is some validity to may arguments :) [1] http://www.edgardunn.com/uploads/100012_english/100385.pdf http://www.edgardunn.com/uploads/100012_english/100385.pdf
rmATinnovafy 14y ago
Aside from the points the author makes, this would also improve Facebook's advertising model a lot. They would have purchasing information from basically every segment/product/niche/market out there. You put an ad on Facebook. People click on it an buy with FB-pay. You then get a ton of marketing data to better aim your ads. Tine of purchase, day, credit card type, marital status (confirmed versus Fb status), income information, billing address, etc. All in one convenient place. How much would businesses pay for that? A lot. Evidence? Call your local mailing list broker and ask for a quote. Of course, this will set off what I call "the privacy wars". Where the government will step in after some single mother of three is scammed and the story is picked up by some mommy-blogger who then sells the story to the huffington post, who then sells the article to CNN, who then puts it on TV. Then FOX makes a deal out of it, republicans notice, and make some lobbyist-impregnated bill that includes the "single-mommy law for online privacy". But, we've had this coming for a while.
shmerl 14y ago
> To fight the money game you need extremely deep pockets. Not really. You just need different kind of priorities. For example Diaspora challenges Facebook on the grounds where FB is the weakest - privacy. Facebook can't compete on privacy no matter how hard they try (and they simply won't even try since the whole FB is built on selling off privacy).
ratbr 14y ago
I think FB does not have to be a PayPal, and there are many good reasons outlined in these comments already why that is a bad idea. However, it can become some kind of market place. It already knows user locality, it already has people flocking to it. It already has big brand stores sharing discounts and coupons to consumers. All it needs to do is finish the last mile and allow those brands to actually have a "Facebook-only Sale", for example. Also, it can become a great "local market place", and can help local businesses to sell to local customers. TLDR: not just ads, and not necessarily a payment gateway, but a niche market place could be it.
adventureful 14y ago
$10 billion? I don't think so. VISA: $3.36 billion profit | DFS: $2.2 billion profit | AXP: $4.9 billion profit | MA: $1.9 billion profit That's Visa, Discover, American Express, and MasterCard. That's a $12.4 billion profit, if you take every aspect of all their businesses away from them across the board and basically acquire a complete monopoly in transactions. Their businesses go far beyond processing of course, so you'd really need to not only take over all transaction processing but then double the business. Facebook processing payments is maybe a billion profit opportunity for them. Not chump change, but very far away from $10 billion.
- staunch 14y ago
  Revenue is multiples of those numbers though. Because Visa manages to have insanely bloated overhead doesn't mean Facebook would.
  - adventureful 14y ago
    I agree that Facebook could try to be less bloated, however that's not very likely. The history of tech companies is gradual bloat, whether you're talking about Microsoft or Google or Apple. Visa has a $80 billion market cap, $9b in sales, and $3.6b in profit with a mere 7,500 employees. One of the best ratios of any major company. In fact, it's better than Facebook's current employee to sales ratio (and it's worth pointing out that they're nearly at a $10b sales run rate, and $4b in annual profit). Visa has around a 40% net margin, that's beyond extraordinary. There's almost zero chance Facebook can be any less bloated than what Visa is already doing. Discover also has a stellar ratio, 11k employees to $8.5 billion in sales. Ditto MasterCard, with 6,700 employees and $6.7b in sales.
    - staunch 14y ago
      The only reason these companies have such high margins is because these businesses are unbelievably profitable. Being the guy who takes money from someone, puts some of it in his pocket, and hands the rest to another guy is a very very sweet place to be. I think Facebook could tack on a payments business with relatively little additional hiring or resources, and maintain far higher than 40% margins. Whether they would try to be that efficient or not is another question. Most tech companies don't bother with being particularly efficient. Google could have stuck to their search engine and advertising and had > 80% margins if they wanted to.
mseebach 14y ago
This makes very good sense to me: CC payments are expensive (up to several percent), merchant accounts are difficult to come by, accepting international cards is annoying. This is partly because of the fraud risk, partly because of VISA and MasterCard's duopoly. Facebook is pretty well situated to deal with both IMO. And it's not just online payments: The current state-of-the-art in mobile-phone POS payments ("It's exactly like a credit-card! Except it's in your phone!") seems like a dead-end to me. Facebook is in a unique position to move into this area.
onlyup 14y ago
I commented on another submission that was similar to this. http://news.ycombinator.com/item?id=4040519 http://news.ycombinator.com/item?id=4040519
InclinedPlane 14y ago
Just plain silly. People who see a big user base and jump to the conclusion of "payments!" as a future business don't have the slightest clue what they're talking about. Facebook isn't competent at tackling that problem, they don't have the expertise, experience, or relationships. It makes about as much sense as looking at facebook with their billion users and saying "You know what all these people have in common? They eat food!" And concluding that facebook should become a grocery store. Payments is a non-trivial business to enter. Paypal has a nearly 15 year headstart, 100 million active accounts and does a tremendous amount of business in a great many countries, yet it is still only a $4 billion a year company.
- stickfigure 14y ago
  Facebook's potential advantage in this space is not that they have a billion users, it's that they arbitrate the identity of those users. And payment is inexorably linked with identity, especially WRT avoiding fraud. Certainly it is a difficult market to enter, but a few billion dollars can buy you a lot of expertise, relationships, and time to build experience. The reason Facebook should go into transactions is the same reason Willie Sutton robbed banks: "because that's where the money is".
  - InclinedPlane 14y ago
    The problem is that it isn't where the money is, not much more money than Facebook is already making anyway. Not unless facebook intends to commit theft. The money today is in selling digital goods which have a near zero transactional cost. Music, movies, games, books, etc. Not that it makes sense for facebook to get into that business either, necessarily.
    - stickfigure 14y ago
      I don't have the statistics in my hands, but I'm willing to bet that the transaction volume of nondigital goods is at least two orders of magnitude larger than the transaction volume of digital goods. A 1% cut of tens of trillions of dollars worldwide is worth quite a lot more than 30% of a few billions. Granted, a worldwide payment scheme is a Very Hard Problem To Solve for many nontechnical reasons... but this is exactly the kind of problem that large, ambitious companies with lots of street cred should try to attack. If it was easy, everyone would be doing it.
devan 14y ago
Had a similar idea for this - We'll probably play around with this at Kout as soon as we've sorted out our payments infrastructure - Here's a mockup I made a little while back using Twitter - http://bit.ly/Kd0ugW http://bit.ly/Kd0ugW = Inital Idea = You're perpetually logged into a social network, why not pair up a payment method and leverage that connection. Always be connected to a payment method/global checkout - authorised by a 4 digit pin. There's an array of pro's as cons for this. = Issues for Facebook (and Twitter) = The hurdles to get setup as a Payment Service Provider, and have the capability to preform cross-border, cross-country transactions, dealing with multiple currencies, as well as boarding merchants outside of the US, is a complete bitch. It would be completely out of Facebook's internal focus to build and maintain this - outsourcing/partnering is a different story. = Facebook's Cut = Facebook takes a 1/3 cut from developers for FB Credits. They can't take a 1/3 cut from credit card processing. They'll realistically take 2.75 - 3.5% and that would just piss off their developers who are being charged a 1/3, unless FB reduce their 1/3 cut - which I doubt they'd do. Facebook would (probably) make more cash using FB Credits than processing credit cards - The margins are rediculously low with card processing (varies on card type) - It's game of volume. Unless you're PayPal who charge you 2/3% for sending money between PayPal accounts. When all they're doing is ACH transfers between "dynamic bank accounts" they've setup, which costs them under 5 cents to preform. = The trust factor = with Facebook (Guy/Girl's in Social Commerce take notice here). Consumer's/Users whatever you want to call them simply would not trust Facebook with their super sensitive data (Credit Card & Billing Information). They don't have the best reputation when it comes to users data. They might experience some success and sign up a few tech savy users - but ultimately - even if they sort out all of the technical & logistical issues they will constantly face this one. This is why social commerce isn't full circle, or shouldnt be. When was the last time you entered your credit card details into a Facebook app? would you? Social Commerce is really the discovery of products, but when it comes to facilitating the transaction, consumers need to be out of the ecosystem where "public" data is flowing, their friends are talking to them, or irrelevant social data is distracting them. Consumers feel incredibily uncomfortable entering sensetive data into a platform which they use with the mindset of "sharing". Unless of course it could be masked under a "Pay by Facebook" option which doesnt require the user to type in and sesntive information - ha. Those are just my thoughts, and of course you have risk, disputes, charge backs, being the ultimate target for russian hackers etc. I could be completly wrong, but I think a third party needs to step in here. Facebook and a Dwolla/GoCardless partnership - now that would be intresting - you can fake a credit card but you cant fake a bank account.
Yrlec 14y ago
I heard through some friends that Swedish start-up Klarna is actually using your Facebook profile to evaluate probability that you are a real person. If you pay online using an e-mail address that has lots of friends on Facebook then the overall risk of the transaction is considered lower.
pg 14y ago
I'm surprised this got so many upvotes. Does the author really believe that Facebook hasn't thought about this? Or that the ways they make money now are the the only ways they ever will?
- dabent 14y ago
  I wonder if votes are an expression of interest in the (payments) product. That aside, I not only assumed Facebook had thought of the idea of payments, they might even be working on it. It seems like an extension of the "Like" button they already have on so many sites. Certainly Facebook is certainly thinking about new ways to make money, but they did disclose that ads are a risk factor in their S-1, with special concern for increased mobile device use, where they don't currently display ads.
FiloSottile 14y ago
Well, it would be GREAT also on mobile! All my friends have Facebook, if I could pay them with my phone and only their name I would do it all the time. (Like what PayPal tries to do, but there is not enough adoption)

283 points by Ryan_Shmotkin 14y ago

pajju 14y ago

Its not possible to solve for everyone, the whole of web-communities ! Nerds and Geeks never trust facebook, but their moms and sisters do !

bookwormAT 14y ago

There is no way facebook has a billion active users. Official numbers are always very optimistic. For example, a lot of brands and agencies register many,many pages on facebook, and even post content there. And Britney Spears is not really on Facebook, she just has someone have post stuff for her. I'm sure Facebook is huge. But if they say a billion, it is probably closer to 500m.

pistoriusp 14y ago

I agree with most of this article, except, if I was Facebook I would bill via the mobile networks. Not really viable on the desktop, but certainly on phones. There's no reason that I can think of why I can't be identified by my own mobile network and either charged at the end of the month or via my airtime.

TomGullen 14y ago

This thread is interesting in that some people are arguing they wouldn't trust Facebook with their cc. To me this makes no sense as the likelihood of fb doing anything funky with your cc details once obtained seems highly unlikely. If something does go wrong cc have very good insurance on them. The problem does seem to be a general resentment and paranoia of large companies. I dont think fb are going to cook up a half baked solution for anything like this, there's every likelihood they will do it as securely as the next especially with the strict laws and regulations around implementing such systems. Everyone with a cc has probably used it in far less secure environments than fb could ever be, for example pubs, bars, resteraunts, independent shops etc. If fb did a payment system it would annoy me briefly as another payment system I'd inevitably have to register with at some point but that's realistically as far as the problems would go.

prof_hobart 14y ago
It's not about FB deliberately doing something funky with it - it's about one of the million and one apps that have requested access to your FB account at some point doing something funky with it. You may trust them to do it as securely as the next person, but at least partly based on their past reputation around privacy, I don't.
- TomGullen 14y ago
  Do you think facebooks payment implementation would be naive enough to allow anything like this?
  - theycallmemorty 14y ago
    Yes.
  - marblar 14y ago
    No.
  - prof_hobart 14y ago
    I don't see a great deal of evidence that they wouldn't.

TomGullen 14y ago

girlvinyl 14y ago

Facebook has demonstrated a completely utter disdain for interacting with their users. If something goes wrong with your "friend wall" or whatever, it's an inconvenience. If something goes wrong with your money, you want to talk to a human. Everyone knows you can't reach fb humans. When it's money, that matters. The work involved in turning that perception around is a huge hurdle to this idea.

shmerl 14y ago
The whole approach of Facebook at its core is a disdain for the users, because Facebook profits from users' profiles. They can argue that users are willing to trade off their privacy for the "free" service, but it's just a sneaky way to get users information to monetize on. Given that, why do you think they should have more respect in other kind of interactions?
- girlvinyl 14y ago
  There are lots of reasons they /should/ have more respect. But my whole point was that I don't think they ever /will/. Putting a high touch endeavor like financial dealings on top of a no touch venture like a social network is dumb. Basically, looks like you and I agree.
  - shmerl 14y ago
    Yes, we agree. Really Facebook is not fitting to be a social network, but at the same time it has such a huge number of users at the moment. Hopefully real social networks like Diaspora which are built for social interactions and not for ripping users off on their privacy, will eventually gain more traction.
    - girlvinyl 14y ago
      You inspired me to write a little blog post. http://www.sherrod.im/81/just-give-them-their-money/ http://www.sherrod.im/81/just-give-them-their-money/

Ryan_Shmotkin 14y ago

why stop at credit card processing how about a Facebook Credit Card !

georgespencer 14y ago
Cannot tell if serious. If so: a credit card would be picked up by a tiny number of people worldwide in comparison to the numbers who would use a "pay with Facebook" button, and the latter is already an area of expertise for Facebook (or at worst a logical extension of their current expertise).
salmanapk 14y ago
They're already giving out those to white-hat hackers btw..

TazeTSchnitzel 14y ago

Dammit, then I'd have to reactivate my Facebook account. And then Facebook would know everything I buy.

darkstalker 14y ago
What if I refuse to use facebook, would be unable to pay?
- jiggy2011 14y ago
  It's in a companies interest to make sure that there is a way to give them money, they are unlikely to want to throw away good customers just because they don't have a FB account. What I would expect to see however is discounts offered if you use FB payments and allow your purchases to be automatically shared with your friends.
  - truncate 14y ago
    allow your purchases to be automatically shared with your friends. This is one of the creepiest feature one can get. I already hate these social readers which automatically share what you read (I've stop reading stuff on FB because of that, even if many of them are of my interest). However I'm hoping they would provide some reasonable privacy options with that.
    - jiggy2011 14y ago
      I don't imagine it would become compulsory. After all people need an avenue to buy their porno and health related products in privacy. You would get something like "10% off for you and 5% off for all of your friends, if you allow us to repost on your wall" The problem of course becomes spam, if FB ever gets to such a poor signal/noise ratio then people will simply stop using it.

DanLivesHere 14y ago

Too late, I think. Facebook has scared off a lot of the "moms" out there by their bad bad bad privacy history. Do you really want to pay for things using their service?

Kiro 14y ago
I'm pretty sure my mom has no issues with Facebook's privacy history.
- bmuon 14y ago
  My mom is a lot more worried about seeing pictures of relatives she doesn't like than about privacy.
slig 14y ago
Maybe the subset of moms that frequents reddit and HN.
roc 14y ago
While I tend to agree, they could throw in an RSA fob or a smartphone-based two-factor equivalent. They probably should already.
- deleted 14y ago
  [deleted]
- Splines 14y ago
  I like two-factor authentication too, but casual users don't care about this sort of thing until it's too late.
  - roc 14y ago
    There's a large and growing number of casual users who've dealt with or watched a friend or family member deal with fraudulent charges. I think a sufficiently streamlined phone app and pitch could net quite a few. Say, demonstrating the feature by showing someone making an Amazon purchase and then getting a phone notification to approve the charge and approving with a simple PIN entry.[1] [1] Said notification ideally showing merchant, amount, scan location, warnings if it's a card not present transaction, etc.

perlgeek 14y ago

> People will think twice about losing their ‘Facebook Credit Score’ over a few $ for an online presence they spent (literally) years building and cultivating. Which keeps them from using that hypothetical service, because they don't want to risk losing the account over a transaction that went wrong. Or maybe not. Who knows?

zdw 14y ago

Seriously? Linking your checking account with Facebook? It would definitely be the next step in user lock-in, but you'd start competing with banks and everyone else who offers a way to pay. Now, I wouldn't complain if they bought some "bypass the credit card companies" service like Dwolla...

tatsuke95 14y ago
>"bypass the credit card companies" I have both an American Express and a Visa (because Amex just isn't accepted some places). The customer service has been nothing but amazing, even when dealing fraudulent charges. And the cards are accepted everywhere. What I'm saying is, I don't feel any need whatsoever to bypass my credit card company to pass my information off to a start up.

viraptor 14y ago

I really don't want that to happen. Sure, it may be a good idea for them, but I'm already tired of services that won't let me register without a Facebook account. When it comes to payment, they better have a good alternative available. With credit cards we have a number of "hidden alternatives". We've got multiple processors, multiple card companies, etc. It's a number of layers there. With Facebook and Paypal... you're not able to pay when they say you're not able to pay (or be paid). They're not even controlled banks, so there's little you can do about some issues. Think about all the problems when Google cut someone off and didn't provide any way of contacting them. Do you have a good way to contact Paypal, or Facebook now? (besides forms that result in canned responses) What are the incentives for changing it?

rhnoble 14y ago
I definitely don't want it to happen either. But from Facebook's standpoint it's not a bad space to start looking at. The reasons you listed above worry me as a consumer, but unfortunately the average user isn't as scrupulous. If FB made paying for things as easy and simple as "liking" something, I'd be very surprised if it wasn't successful.

msy 14y ago

Why not, it worked out so well for Google with their deep search history, world-beating teams of big data specialists, deep pockets and massive Gmail/Gapps userbase... http://www.bloomberg.com/news/2012-03-21/google-said-to-rethink-wallet-strategy-amid-slow-adoption.html http://www.bloomberg.com/news/2012-03-21/google-said-to-reth...

mtts 14y ago
Google Wallet is actually fairly useless. To load it up you need a credit card. If you have a credit card, you could just as well, uhm, use a credit card.
- jurre 14y ago
  I think your parent was being sarcastic. We need a sarcasm tag in HTML.
  - mtts 14y ago
    I was aware of that. But parent did raise an interesting point. Google Wallet isn't doing too great. Why?
    - naitbit 14y ago
      I cannot talk for everyone, but I use paypal instead of Google Wallet, because it allows me to pay without using credit card. I do think that current model of credit card payment is broken so I refuse to use it. Sure if dishonest merchant purges all my cash from credit card I could get it back by contacting bank, but money lost would be covered by all bank clients. I don't have much trust in paypal, but I can transfer to it appropriate amount of money from bank just before the payment, so possible damage is much lower. That said my level of trust with facebook is so low that I would probably refuse to put on their account even 100 USD.
    - iamgilesbowkett 14y ago
      the sheer number of possible answers is overwhelming, but pretty much everything Google does fails, except for search and email. (I can't be the only one who's afraid to find out what their cars are like.) so I'm going to say the reason Google Wallet failed is because it was neither search nor email. I guess you could say Android is only half a failure, because the constant catch-up game they're playing with Apple isn't going as badly as the constant catch-up game Google Plus (and Wave, and whatever they called the other one) plays with Facebook. but seriously, business failure can happen for so many reasons, it doesn't really mean anything at all, unless of course you see a string of people failing at the same thing.

crag 14y ago

I've been on FB since the beginning. And I've never clicked on an ad. What makes you think I will to actually buy something? I barely trust Paypal, you think I'm gonna trust FB with my CC details. You gotta be kidding. There are a few steps FB must do before I'll trust them with anything other than bs about what games I'm playing now: 1. Convince me they take my security and privacy seriously. 2. Convince me they aren't selling my personal data (statistical or not) without my permission. 3. Allow me to export (backup) ALL my data to my drive easily. 4. All me to cancel my account (not that I would). And by cancel I mean remove all my data. No questions, no sales pitches to stay - just delete everything in my profile (and off their, FB, drives). FB says they do this, But there are plenty dead folk with active profiles. Despite families begging FB to delete them. Until all this happens, FB gets nothing from me except an occasional post about my Skyrim adventures. Oh and commenting on the latest high school gossip (the latter being funny. I mean, there's a reason I left town 25 years ago and hardly kept in touch. But here we all are, FB friends.)

omonra 14y ago
You seem to conflate [1 - what I want FB to do with regards to privacy] with [2 - what FB needs to do so I trust they won't steal my money]. The two have nothing to do with each other. Realistically speaking, 1 may never happen, 2 is already there (even if you're only liable for $50 from unauthorized cc transactions).
- ktizo 14y ago
  3. What facebook needs to do so I trust that other people can't steal my money through facebook.
  - jusben1369 14y ago
    If you're entering a CC then it's not your money that's on the hook.
- Zak 14y ago
  What if what I spend my money on is private? I don't really want my spending habits to be social.

eli 14y ago

Right, because the main obstacle to international online payments is having a strong brand.

deleted 14y ago
[deleted]

ruswick 14y ago

I wouldn't trust or use something like this. 1) I don't trust Facebook to transact payments quickly or safely. 2) I don't want Facebook to take my money. I'm guessing Facebook would capitalize on this by exacting a higher rate than other options. Because they can. I want the max amount of money to go to the creators of a product, not to Facebook. 3) As it says, Facebook already knows everything about people. Should they really have access to our credit cards as well?

jiggy2011 14y ago

Are online payments such a big unsolved problem? It takes me all of 10 seconds to type my CC number and associated security codes. Sites that I use a lot tend to allow subsequent purchases without re-entering them anyway. If everyone's facebook account has CC details attached and a 1 click "pay now" button you are only 1 XSS vulnerability from fraud on an unprecedented scale.

SonicSoul 14y ago
Credit cards suck for many reasons other than just convenience of use. Credit card companies are big cartels with hefty fees to retailers, slow and unpredictable turnaround between when a payment is made, and when it gets to retailers bank, and infrastructure that's not well suited for micro payments, or peer to peer payments. http://www.wired.com/magazine/2010/02/ff_futureofmoney/all/1 http://www.wired.com/magazine/2010/02/ff_futureofmoney/all/1
- jiggy2011 14y ago
  It depends if we are talking about FB simply providing a service for taking payments similar to google checkout (using existing Cards) or whether you suggest that they try to replace card altogether. In order to do that FB would be looking at setting up massive infrastructure and essentially having a "banking division" that would get bogged down in regulations and bureaucracy.
  - SonicSoul 14y ago
    my point is, credit cards suck, and there is plenty of space for alternatives. There is a race in peer to peer and micro-payment space, and currently paypal is the leader, but it is far from perfect. I'm not a big fan of FB, but i think this article is on point, and they are well suited to enter this space. Being able to validate identity (thanks to all the information), and having a brand and cash to back it up. As for the new division, infrastructure, and bureaucracy, it would boil down to how well they can execute.
    - 14y ago

digitalsushi 14y ago

It would be very convenient for someone, somewhere, to establish a widely accepted micropayment system for the Internet. I sure can just whip out the CC, type in the 16 things, the special code, the expiration date, maybe a second screen the CC vendor presents to get my address or phone number for additional verification... But I would never bother for a 3 or 5 cent article. And I firmly believe that's why there is no way to pay 3 or 5 cents for a view of something. But there is a lot of cool stuff we could make or do with this. It should just be easy. Why doesn't it exist? There might be a big business answer that my fellows and myself don't get as we rant over coffee.

kalleboo 14y ago
And Facebook already have "Like" buttons all over the web. They could steal Flattr's model in an instant and make it a huge success.
snowwrestler 14y ago
Micropayments haven't taken off because people don't want to pay 3 to 5 cents for anything. The perception of value is so low that even a one-button form is too much friction in the user experience. If your article is only worth 3 cents, just show it to me for free and put an ad on the page.
- digitalsushi 14y ago
  If the transaction processing costs were 0, do you suppose this payment system would still continue to not exist?
  - Splines 14y ago
    There are very few things that are worth 5 cents that you'd get me to pay for that I couldn't just do without.
    - drivebyacct2 14y ago
      That wasn't the question; what percentage of the economy is from purchases that fall into the category of "I could do without"? The question is, the NYTimes article linked on HN with 120 comments... would you pay 5cents to read it?

tomeric 14y ago

The second biggest social network in The Netherlands (Hyves) introduced something like this in 2010. They mainly intended it to be used to pay back (small) debts to friends or relatives, but also made partnerships that enabled you to order food online or order drinks at a bar. As far as I know, it did not really lift off, but this could be because Facebook overtook Hyves as the most popular social network shortly afterwards.

JackFr 14y ago

It's a possible but hardly compelling: Facebook: ~ 1 billion customers Visa: ~2 billion cards out there. Facebook: ? merchants. Visa: > 10 million merchants. Facebook: potentially disruptive to the existing market Visa: 50+ years experience with electronics payments processing, fraud detection, government relations and consumer credit marketing Facebooks main competitive advantage is(was?) relatively cheap capital. http://corporate.visa.com/_media/visa-fact-sheet.pdf http://corporate.visa.com/_media/visa-fact-sheet.pdf Edit: Corrected years, added reference

waterlesscloud 14y ago
Who works for Visa that Facebook couldn't hire?
rmc 14y ago
Facebook don't have 1 billion customers. They have 1 billion users. If you don't pay for something (Facebook) you are not a customer, you are the product.

Akram 14y ago

With 1/6th of the world population Facebook can very well release it own currency.

timharding 14y ago

I think that "be a payment provider" is a much easier thing to think than it is to do. While it may be easy to build the customer side of the equation you've got to build a vast network of merchants willing to accept payment and that's hard work. Especially if you're trying to convince them to re-price in Facebook Credits? Sure, you could charge 1% but people have added credits to their Facebook account at some point and it probably cost you more than 1% to allow them to do that. How do people buy credits right now? All those cost Facebook more than 1%, right? I buy $100 of credits, it costs F8 a couple of bucks, I then spend $100 of credits and they recoup $1 of it in merchant fees? Doesn't sound like a good business model. Beyond the need to create a financial model that makes sense and then go out to find merchants and convince them there's a massive risk of merchant fraud. Fraudulent merchant X signs up for a F8 Merchant Account. Fraudulent customers A, B, C buy something with stolen credit cards for $100 each. Everyone disappears after merchant X receives settlement. F8 is out of pocket to the tune of the original $300, another $300 in reversals to their bank and then $30-$60 of chargeback fees. If that happens enough then F8 might even have its merchant account revoked... though they're probably big enough to avoid that. It's an excellent money laundering channel too and there's a lot of financial regulation to navigate around that. I know that this stuff can be overcome but it is hard to do and would be a major piece of work. This type of thing nearly sank PayPal back in the day. Perhaps I'm missing the point here though?

fusiongyro 14y ago
There are reasons for and against pursuing this particular niche, but I think Boris is really onto something. Selling ads is a safe bet, but FB really could wager a billion dollar fee to enter a new market. There must be markets where entering the field with a billion signed up users and a billion in capital will work, even if this isn't the perfect example.
kunaalarya 14y ago
Well there's interesting ways to do that with Facebook though. A la you can't start selling large amounts of goods unless you have x number of likes on your page. Same thing, on the user side. You can only buy $10 worth of credits if you have a new account, accounts can be flagged, etc. I agree it's a pain in the ass to do, and much easier said than done. But it's definitely doable and hugely profitable. They can easily take more than $1 in merchant fees, and credit card companies will beg them for their business and give them great rates. Shoot, they can do a Visa or Mastercard exclusive and get even better rates at the beginning.

ecaradec 14y ago

I fully agree. For a lot of people facebook is their identity, linking their identity to paiement is a logical step. They could first allow people to exchange any amount of money with friends for free, add it to their mobile app so that everyone has it anytime. Other apps are doing that, and that's very useful. And they should buy Stripe, bind everything together, displace amex, visa and mastercard. Or may be that's the plan, but it's best to be silent ?

bezaorj 14y ago
I always thought this would be Apple's next plan as well. "Pay with your Itunes account" or something like that.
- ecaradec 14y ago
  That doesn't seems very Apple like move, they don't like to mess with ugly systems and integrate their products with anyone. They have a good place to do that, but I doubt that they'll go that way. But Steve isn't there, and Apple moves might be unexpected.

elorant 14y ago

Why not buying RIM and make a serious move into the smartphone market. Last time I checked RIM's market capitalization is a bit over $5bn and Facebook has tons of money in their pockets after the IPO.

roguecoder 14y ago

It's worked well for Walmart (well, okay, aside from the whole "bribing people in Mexico" thing.) But people seem willing, and even eager, to bank with companies they know and trust. The real problem is regulation. It is so, so much easier to sell ads than to navigate the international financial markets.

ew 14y ago

These articles make me wonder why everyone with a blog thinks they know better than the massive teams of engineers running these companies... Do you really think Facebook doesn't have reams of data and analysis on this exact idea? I bet they've been analyzing the crap out of it for years and for whatever very good reason they have they haven't done it yet. Now, I predict the company who will make a trillion on payments is Apple. They're set up quite nicely to tell the credit card companies to take a hike.

TimJRobinson 14y ago

100% spot on, Facebook could see massive profits if it pulls off any or all of the following: - Upon logging in Facebook lets me know my favourite band is playing in a few weeks, tickets are $25 and I can purchase with one click. - A new episode of Dexter comes out, Facebook knows I love dexter and thus notifies me and allows me to watch instantly in my browser for just $1. - A games company (steam, humblebundle, blizzard, whoever) is running a sale on games similar to ones I've already liked on Facebook, I can view and purchase the bundle through Facebook. All of this is taken care of in one click by my credit card being linked up to Facebook, just like iTunes. They can basically combine the best bits of iTunes + Amazon + All the data they have on everyone on Facebook and build the ultimate relevant shopping directory completely personalized to me. Sure there are sites that already cater for this but it's about the convenience and instant gratification. 50% of their users log into Facebook daily and won't even bother checking out other sites for these things if they're already right there in front of them available with one click. They don't even have to do it themselves initially, just hook into Amazon / Ticketmaster / iTunes data and this shouldn't take too long to develop. This is where the future is and if Facebook does this there's no reason they can't be the most profitable web company in the world.

tomp 14y ago
I reckon most people would quickly turn off this feature after it would produce more than a few bad predictions/recommendations in a row.
- mahyarm 14y ago
  People wont be able to turn it off unless they install adblock.

sharmanaetor 14y ago

You know you don't actually have to click an ad for FB to make money? Companies pay money just to get that ad in front so many eye balls!

dpham 14y ago

I can't take this article seriously because it's so terribly written.

JumpCrisscross 14y ago

>Fraud. Paypal and others use complex algorithms, special teams and God knows what. But Facebook has an unique and unparalleled data base of a user’s history, friends, activities and what not. The author seems to confuse credit risk and fraud risk. Credit risk pertains to the probability of you being unable or unwilling to honour your commitments. Fraud, within this context, pertains to the unauthorised use of funds. Facebook's data may be a uniquely valuable to evaluating the former, but to fighting the latter it is less important than existing transaction history databases. Financial fraud is an immensely complicated problem. An estimate quoted in The Economist recently put the fraud loss rate at approximately 0.35% of transactions and up to 1.8% for online payments [1]. Cross-border payments are a niche unto themselves - even with margins as high as 10%, the fraud risk still poses a high enough barrier to entry that even the banks handle just 5-10% of remittances [2]. It's 11AM and so far Visa and American Express already have 1-3 data points of swipe activity on me. Over the day they'll get 5-10 swipes apiece (+1 NYC). Facebook has a tremendous amount of value in its dataset, but think for a moment about how much Visa, Mastercard, American Express, or your primary bank know about where you live, what you spend on (and by virtue when and where you spend it), and, by aggregating that data, who you tend to spend with. That is what's valuable for anti-fraud and by proxy payments processing. [1] http://www.economist.com/node/21554743 http://www.economist.com/node/21554743 [2] http://www.economist.com/node/21554740 http://www.economist.com/node/21554740

philwelch 14y ago
All told, it's probably more valuable and actionable information than Facebook will ever have about you. Oh look, you claim to "like" some restaurant that gave you a special deal for mashing the "like" button. Isn't that precious--meanwhile, you actually eat more often at this one just across the street.
startupfounder 14y ago
"The Economist recently put the fraud loss rate at approximately 0.35% of transactions and up to 1.8% for online payments" For the ~$2 trillion[1] going through online payments, bringing down the online fraud loss by every 0.1% is equal to $2B, if over time Facebook can reduce that online fraud rate by 0.5% or more there is your $10B. Using your real identity to make online payments could reduce that to real world levels. If this is the case then reducing the fraud rate from 1.8% to 0.35% in online payments (a reduction of 1.45%) would calculate to a savings of $29B for this industry. Thus, if Facebook is able to be a major part of that reduction by using real identities then they will get much of this transaction business. If they are able to pull this off there is no stopping them... Feel free to rip me apart, but there is some validity to may arguments :) [1] http://www.edgardunn.com/uploads/100012_english/100385.pdf http://www.edgardunn.com/uploads/100012_english/100385.pdf

rmATinnovafy 14y ago

Aside from the points the author makes, this would also improve Facebook's advertising model a lot. They would have purchasing information from basically every segment/product/niche/market out there. You put an ad on Facebook. People click on it an buy with FB-pay. You then get a ton of marketing data to better aim your ads. Tine of purchase, day, credit card type, marital status (confirmed versus Fb status), income information, billing address, etc. All in one convenient place. How much would businesses pay for that? A lot. Evidence? Call your local mailing list broker and ask for a quote. Of course, this will set off what I call "the privacy wars". Where the government will step in after some single mother of three is scammed and the story is picked up by some mommy-blogger who then sells the story to the huffington post, who then sells the article to CNN, who then puts it on TV. Then FOX makes a deal out of it, republicans notice, and make some lobbyist-impregnated bill that includes the "single-mommy law for online privacy". But, we've had this coming for a while.

shmerl 14y ago

> To fight the money game you need extremely deep pockets. Not really. You just need different kind of priorities. For example Diaspora challenges Facebook on the grounds where FB is the weakest - privacy. Facebook can't compete on privacy no matter how hard they try (and they simply won't even try since the whole FB is built on selling off privacy).

ratbr 14y ago

I think FB does not have to be a PayPal, and there are many good reasons outlined in these comments already why that is a bad idea. However, it can become some kind of market place. It already knows user locality, it already has people flocking to it. It already has big brand stores sharing discounts and coupons to consumers. All it needs to do is finish the last mile and allow those brands to actually have a "Facebook-only Sale", for example. Also, it can become a great "local market place", and can help local businesses to sell to local customers. TLDR: not just ads, and not necessarily a payment gateway, but a niche market place could be it.

adventureful 14y ago

$10 billion? I don't think so. VISA: $3.36 billion profit | DFS: $2.2 billion profit | AXP: $4.9 billion profit | MA: $1.9 billion profit That's Visa, Discover, American Express, and MasterCard. That's a $12.4 billion profit, if you take every aspect of all their businesses away from them across the board and basically acquire a complete monopoly in transactions. Their businesses go far beyond processing of course, so you'd really need to not only take over all transaction processing but then double the business. Facebook processing payments is maybe a billion profit opportunity for them. Not chump change, but very far away from $10 billion.

staunch 14y ago
Revenue is multiples of those numbers though. Because Visa manages to have insanely bloated overhead doesn't mean Facebook would.
- adventureful 14y ago
  I agree that Facebook could try to be less bloated, however that's not very likely. The history of tech companies is gradual bloat, whether you're talking about Microsoft or Google or Apple. Visa has a $80 billion market cap, $9b in sales, and $3.6b in profit with a mere 7,500 employees. One of the best ratios of any major company. In fact, it's better than Facebook's current employee to sales ratio (and it's worth pointing out that they're nearly at a $10b sales run rate, and $4b in annual profit). Visa has around a 40% net margin, that's beyond extraordinary. There's almost zero chance Facebook can be any less bloated than what Visa is already doing. Discover also has a stellar ratio, 11k employees to $8.5 billion in sales. Ditto MasterCard, with 6,700 employees and $6.7b in sales.
  - staunch 14y ago
    The only reason these companies have such high margins is because these businesses are unbelievably profitable. Being the guy who takes money from someone, puts some of it in his pocket, and hands the rest to another guy is a very very sweet place to be. I think Facebook could tack on a payments business with relatively little additional hiring or resources, and maintain far higher than 40% margins. Whether they would try to be that efficient or not is another question. Most tech companies don't bother with being particularly efficient. Google could have stuck to their search engine and advertising and had > 80% margins if they wanted to.

mseebach 14y ago

This makes very good sense to me: CC payments are expensive (up to several percent), merchant accounts are difficult to come by, accepting international cards is annoying. This is partly because of the fraud risk, partly because of VISA and MasterCard's duopoly. Facebook is pretty well situated to deal with both IMO. And it's not just online payments: The current state-of-the-art in mobile-phone POS payments ("It's exactly like a credit-card! Except it's in your phone!") seems like a dead-end to me. Facebook is in a unique position to move into this area.

onlyup 14y ago

I commented on another submission that was similar to this. http://news.ycombinator.com/item?id=4040519 http://news.ycombinator.com/item?id=4040519

InclinedPlane 14y ago

Just plain silly. People who see a big user base and jump to the conclusion of "payments!" as a future business don't have the slightest clue what they're talking about. Facebook isn't competent at tackling that problem, they don't have the expertise, experience, or relationships. It makes about as much sense as looking at facebook with their billion users and saying "You know what all these people have in common? They eat food!" And concluding that facebook should become a grocery store. Payments is a non-trivial business to enter. Paypal has a nearly 15 year headstart, 100 million active accounts and does a tremendous amount of business in a great many countries, yet it is still only a $4 billion a year company.

stickfigure 14y ago
Facebook's potential advantage in this space is not that they have a billion users, it's that they arbitrate the identity of those users. And payment is inexorably linked with identity, especially WRT avoiding fraud. Certainly it is a difficult market to enter, but a few billion dollars can buy you a lot of expertise, relationships, and time to build experience. The reason Facebook should go into transactions is the same reason Willie Sutton robbed banks: "because that's where the money is".
- InclinedPlane 14y ago
  The problem is that it isn't where the money is, not much more money than Facebook is already making anyway. Not unless facebook intends to commit theft. The money today is in selling digital goods which have a near zero transactional cost. Music, movies, games, books, etc. Not that it makes sense for facebook to get into that business either, necessarily.
  - stickfigure 14y ago
    I don't have the statistics in my hands, but I'm willing to bet that the transaction volume of nondigital goods is at least two orders of magnitude larger than the transaction volume of digital goods. A 1% cut of tens of trillions of dollars worldwide is worth quite a lot more than 30% of a few billions. Granted, a worldwide payment scheme is a Very Hard Problem To Solve for many nontechnical reasons... but this is exactly the kind of problem that large, ambitious companies with lots of street cred should try to attack. If it was easy, everyone would be doing it.

devan 14y ago

Had a similar idea for this - We'll probably play around with this at Kout as soon as we've sorted out our payments infrastructure - Here's a mockup I made a little while back using Twitter - http://bit.ly/Kd0ugW http://bit.ly/Kd0ugW = Inital Idea = You're perpetually logged into a social network, why not pair up a payment method and leverage that connection. Always be connected to a payment method/global checkout - authorised by a 4 digit pin. There's an array of pro's as cons for this. = Issues for Facebook (and Twitter) = The hurdles to get setup as a Payment Service Provider, and have the capability to preform cross-border, cross-country transactions, dealing with multiple currencies, as well as boarding merchants outside of the US, is a complete bitch. It would be completely out of Facebook's internal focus to build and maintain this - outsourcing/partnering is a different story. = Facebook's Cut = Facebook takes a 1/3 cut from developers for FB Credits. They can't take a 1/3 cut from credit card processing. They'll realistically take 2.75 - 3.5% and that would just piss off their developers who are being charged a 1/3, unless FB reduce their 1/3 cut - which I doubt they'd do. Facebook would (probably) make more cash using FB Credits than processing credit cards - The margins are rediculously low with card processing (varies on card type) - It's game of volume. Unless you're PayPal who charge you 2/3% for sending money between PayPal accounts. When all they're doing is ACH transfers between "dynamic bank accounts" they've setup, which costs them under 5 cents to preform. = The trust factor = with Facebook (Guy/Girl's in Social Commerce take notice here). Consumer's/Users whatever you want to call them simply would not trust Facebook with their super sensitive data (Credit Card & Billing Information). They don't have the best reputation when it comes to users data. They might experience some success and sign up a few tech savy users - but ultimately - even if they sort out all of the technical & logistical issues they will constantly face this one. This is why social commerce isn't full circle, or shouldnt be. When was the last time you entered your credit card details into a Facebook app? would you? Social Commerce is really the discovery of products, but when it comes to facilitating the transaction, consumers need to be out of the ecosystem where "public" data is flowing, their friends are talking to them, or irrelevant social data is distracting them. Consumers feel incredibily uncomfortable entering sensetive data into a platform which they use with the mindset of "sharing". Unless of course it could be masked under a "Pay by Facebook" option which doesnt require the user to type in and sesntive information - ha. Those are just my thoughts, and of course you have risk, disputes, charge backs, being the ultimate target for russian hackers etc. I could be completly wrong, but I think a third party needs to step in here. Facebook and a Dwolla/GoCardless partnership - now that would be intresting - you can fake a credit card but you cant fake a bank account.

Yrlec 14y ago

I heard through some friends that Swedish start-up Klarna is actually using your Facebook profile to evaluate probability that you are a real person. If you pay online using an e-mail address that has lots of friends on Facebook then the overall risk of the transaction is considered lower.

pg 14y ago

I'm surprised this got so many upvotes. Does the author really believe that Facebook hasn't thought about this? Or that the ways they make money now are the the only ways they ever will?

dabent 14y ago
I wonder if votes are an expression of interest in the (payments) product. That aside, I not only assumed Facebook had thought of the idea of payments, they might even be working on it. It seems like an extension of the "Like" button they already have on so many sites. Certainly Facebook is certainly thinking about new ways to make money, but they did disclose that ads are a risk factor in their S-1, with special concern for increased mobile device use, where they don't currently display ads.

FiloSottile 14y ago

Well, it would be GREAT also on mobile! All my friends have Facebook, if I could pay them with my phone and only their name I would do it all the time. (Like what PayPal tries to do, but there is not enough adoption)