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Pay the piper “Senator, we run ads.”
Mark Zuckerberg ’s glib, smirking reply to Sen.Orrin Hatch at a 2018 hearing was a hit at Facebook headquarters, with some employees making T-shirts carrying those words.
But it belied an unpleasant truth about the fragility of the social network’s business: It remains overwhelmingly dependent on advertising.
The news that Facebook had formed a new unit, Facebook Financial , and tapped David Marcus , the former PayPal chief who had been shepherding Facebook’s troubled cryptocurrency project, to run it, suggests that Zuckerberg might want to have a more nuanced answer the next time someone asks him how Facebook makes money.
Facebook Financial will include the Libra cryptocurrency project Marcus oversaw, Facebook Pay, WhatsApp’s new payments service and other related products.It simultaneously elevates Marcus, a trusted lieutenant who previously ran Messenger, and the status of payments products within the Facebook hierarchy.
Facebook’s attempts to tack a payments service onto its social network date back more than a decade.In 2011, I wrote about the creation of Facebook Payments Inc., a subsidiary created mostly to handle payments to game developers, back when Facebook and “FarmVille” were practically synonymous, and in-game purchases were Facebook’s big hope of persuading users to fork over cash.
As Facebook evolved, so did the dream of tacking payments onto social connections.Adding Instagram and WhatsApp meant more avenues for transactions and transfers.
Instagram now lets people shop with a credit card stored in Facebook Pay.
Payments is a difficult business, and while it can be profitable at scale — Visa is currently worth $434 billion, and PayPal $222 billion — it has proven difficult to translate the vision of social shopping that Zuckerberg has long advanced into reality.Other social companies like Pinterest and Twitter have stumbled with integrating commerce, too.
Marcus’s biggest challenge may be Facebook’s corporate trust deficit.An effort to persuade banks to fork over customer data so that the financial institutions could provide customer service over Messenger ran aground over such concerns.
And people go on Facebook to connect with friends, not type in credit card numbers.(Instagram may be a different story, and it’s probably where Marcus should focus his efforts.)
The prize may not be picking up a small cut of transactions, but instead — as with everything Facebook does — collecting data.Knowing that someone saw an ad, or clicked on it, is one thing.Seeing that the purchase actually happened is quite another.
If Marcus is good at his job, Facebook may have a nice financial hobby that solidifies its grip on our online lives.
Quote: of the week Coming up Earnings Wednesday: Cisco , Lyft , and Apple supplier Foxconn .
What I’m reading David Gilbert on caste discrimination among Indians in Silicon Valley.( Vice )
Anna Kramer on Google ’s plan to turn Android phones into earthquake detectors.
( San Francisco Chronicle )
James Hibberd on how the country’s last Blockbuster store is turning itself into an Airbnb .( Entertainment Weekly )
Tech Chronicle is a weekly newsletter from Owen Thomas , The Chronicle’s business editor, and the rest of the tech team.Follow along on Twitter: @techchronicle and Instagram: @techchronicle.