InnovationInspiration

Facebook Connect + Facebook Payments = World Domination

Facebook is nearing 700 million users according to AdWeek, and in parallel, about 10,000 sites are adding Facebook Connect each day according to a December article. I couldn’t find the total number of sites that use FB Connect out there, but my guess is it’s in the millions (10k sites per day = 300k sites per month, if those statistics are well grounded). Anyways, the point is the distribution of Facebook, and in particular Facebook Connect is staggering.

So many sites already have Facebook Connect installed, why not also add a payments platform component to FB Connect that would let sites easily charge their users? Imagine if I entered my credit card and personal details only once on Facebook, but then could instantly have the ability to pay on any site where I have FB Connected. No more re-entering my address everywhere, or verifying my expiry date - all that could be taken care of. My visa just became a lot more slippery.

I’d love to have the option to say to the users of The Shared Web (our startup) - hey, you’ve connected with Facebook, and we’ve just added all these pro features, want to sign up for a 2 dollar a month subscription? Yes or No? And with the click of a button, payment via Facebook is made! It would instantly become the easiest, best distributed way to pay on the Internet.

Now, we’re not thinking of adopting a subscription model at The Shared Web any time soon (who knows what the future holds). But, we have been thinking about different ways of compensating people for creating, and curating content - and perhaps it could be paying on an item by item basis rather than a monthly subscription. A Facebook Payments platform could enable all sorts of different payment models, including micro-payments such as these. Facebook could make these types of easy one-click payments, across the Internet, painless for developers and end users! The amount of money flowing through our intertubes would skyrocket I’m guessing - we’d certainly be removing a great deal of friction. It’s true PayPal exists, but I think it’s a far cry from the type of integration I imagine Facebook could offer.

And that’s the holy grail of money making really - taking a transaction fee (or percentage commission) on all the transactions that occur on the Internet. Now Facebook is only making revenues of $2 Billion, which is roughly about 2% of what some speculate their IPO valuation may be around (it ranges between 50 - 100 billion from what I’ve read). So, is the valuation merited? I think so given that they have the prospect of becoming the standard payments platform on the Internet.  I know I’m not saying anything ground-breaking here: given Facebook Credits (their virtual goods payment system), I’m sure they’re hard at work on this already. But, it is interesting to really envision the impact they could have in the near future, and why this may justify their large valuation. Beyond that, payments is just one of the many untapped spaces that Facebook has yet to go after. 

But, Facebook is not alone in wanting to become your online wallet: there’s PayPal, Google Checkouts, Amazon Payments, and a slew of other payment options. More importantly, there’s a company that readily comes to mind that has already mastered the art of seamless payments: Apple. I would say that the Apple App store feels like the most pain-free way to spend money on the Internet right now (beyond discovering the apps(which sucks) once you find the app you want, it’s just a click of a button to give your money away). My credit card is already directly linked to my iTunes account, and this makes it beguilingly comfortable, and thoughtless, to spend money on both apps, and in-app purchases. The App Store model is an economic behemoth - Apple makes money off the app developer’s successes, proportional to their successes (they charge a 30% commission on every app purchase!). The more developers build apps that gets developers rich, the richer Apple gets - they’re an ecosystem through which money flows, and gets siphoned off in large chunks as it flows through the system. As far as I can think, there’s no better business model (that includes sales, subscription, advertising, or anything else that came to mind). 

Now, there’s a company here in TechStars New York called OnSwipe and their motto is ‘Apps are Bullshit’. They identified the problem that a lot of publishers are spending tons of cash each seperately building native apps for various mobile devices, instead of building an HTML 5 website once that works across all devices. They’ve built a really compelling platform that enables publishers to turn their pages into beautiful, native-feeling HTML5 websites, without the price of hiring a huge team of iOS developers to build native app experiences. It’s a great concept, and I think it’s likely the strategy of the future. But, the only thing that still makes apps a somewhat compelling alternative to an HTML 5 mobile site is that it’s damn easy to charge people through apps. Once it’s equally as easy to charge people in web apps, then I think the contest between the two mediums will become even more interesting.

Google, Apple and Microsoft all want to be your mobile wallet, and the introduction of NFC technology is going to bring the vision of your phone as your wallet a step closer in the coming year. Twitter, LinkedIn, Facebook, and Google are also identity platforms - and that gives them a potential advantage  in the net payments race:  I can sign in to other sites with any of these options, but only Twitter and Facebook have had widespread adoption. On the other hand, your wallet may not be linked with your online identity (Facebook, Twitter, LinkedIn) immediately, or perhaps ever. It may be that your phone becomes the crux of your identity on the Internet, because it is closer, and corresponds more closely to your real-world social, and commercial interactions. I think you’ll likely have many online identities, as we do now, and it may be that what you use for your payments, e.g. your phone identity, is largely separate from your online identity.

But, the same argument that I’m using for Facebook here applies to Apple and every other company that has some form of pervasive identity and payments technology. Perhaps soon you’ll be able to sign in with Apple, and pay with your iTunes account on every site too? Perhaps they should introduce this as a feature for HTML 5 web applications? Payments in general are going to be an integral component in this next phase of the web - and I think it’s going to be the catalyst for the real online revolution that’s about to occur. Online payments is one reason I don’t think we’re in a bubble this time around. The ease with which we will be able to charge users, and their familiarity with making payments online, is going to make these next few years substantially different from the late 1990s.

Sidenote, Interesting TIL:  I checked out how much money Visa makes while I was writing this - and it’s only 8 billion dollars. Gotta say I was a bit surprised - maybe it’s not the holy grail after all.