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No, Facebook Will Not Lose Money on Mobile Payments

March 25, 2024         By: Michael Foster

A new article in Time magazine argues that Facebook will lose money on its mobile payment venture. This is a statement so silly it could only be written in a mainstream magazine.

The argument is largely guilt-by-association, as Time notes that Venmo, Square, and Snapchat “aren’t even trying to make money transactions,” citing an analyst who notes that these money transfer services aren’t generating revenue.

So why are they doing it? It’s a “value-add” according to Time—a way of creating user stickiness that keeps people on the platform and helps them sell other services. In Facebook’s case, this means keeping them on Facebook so that they can serve ads.

A few problems with this.

Firstly, Facebook’s payments will be available on the Facebook Messenger app, which has been separated from Facebook’s main news feed—the mobile ad behemoth—for a while now. Facebook may want to keep people using its apps, but it doesn’t seem too eager to keep people using the Facebook app itself where it serves almost all of its ads.

Secondly, the stickiness argument makes no sense with Venmo, a service that is all about money transactions and really doesn’t do anything else.

And thirdly, it ignores a crucial factor about mobile payments: the infrastructure is extremely cheap to maintain for a company whose business model is transferring data. Account amounts are really just database entries, and changing these entries is about as easy as updating a Facebook profile. Yet Facebook doesn’t get a fraction of a penny every time you update your profile.

Imagine if they did. Facebook is imagining it, which is why they are getting into this business which, despite Time’s silliness, will become an extremely high margin and highly profitable business that will provide convenience to users, revenue to mobile payment providers, and profits to its shareholders.