Facebook to take on PayPal? Not so fast
The social network wants to collect your shopping data, but it's not trying to become the next PayPal.
Surely, Facebook envisions a future when you shop on your smartphone
or tablet and keep the company in the loop on all your purchases -- but
the social network poses no threat to PayPal.
The company plans to test a
pay-with-Facebook
mobile checkout option, as scooped by AllThingsD, but it's not trying
to take over the complicated payments processing market, as has been
suggested. Instead, Facebook wants to collect more data -- the best kind
of data -- to pass on to its advertisers.
According to reports,
the pilot Facebook feature will let social networkers pass along their
credit card and billing information with a single click when making a
purchase on mobile. The actual transaction, however, will be handled by
the payments provider used by the application in question, according to
TechCrunch,
which means the system works with PayPal, Strike, Braintree, and other
processors. Facebook confirmed to CNET that it is not processing
payments.
"We are working on a very small test that gives people
the option to use their payment information already stored on Facebook
to populate the payment form when they make a purchase in a mobile app,"
a company spokesperson said. "The test is designed to make it easier
and faster for people to make a purchase in a mobile app by simply
pre-populating your payment information."
And that makes a lot more sense than Facebook attempting to become the next PayPal.
The social network needs data -- to continue to boost its burgeoning
mobile ads business -- more than it needs to reinvent the wheel. If
Facebook can act as middleman between mobile shopper and app maker, and
help people quickly get through the often overly complicated mobile
checkout process, then the company can help its advertisers fill in the
blanks between online exposure and purchase.
"By understanding what consumers 'like' and discuss on the platform,
Facebook understands much about their propensities and inclinations,"
Altimeter Group digital advertising and media analyst Rebecca Lieb told
CNET. "But...actual spending data -- knowing what people buy -- breaks
opens the possibilities of advertising, targeting, and messaging in ways
that are extremely precise, valuable, and meaningful to advertisers."
In theory, Facebook's middleman approach to mobile payments could work,
as the company maintains close ties to thousands of developers who've
already put Facebook hooks inside their applications. But Facebook
Gifts, the 1-year-old online marketplace where people can purchase
presents to send to friends, has failed to gain meaningful traction or
generate revenue, highlighting the social network's inability to
convince its 1.15 billion members to mix commerce with their status
updates.
The question is, Lieb said, will consumers want to hand
over credit card info to a company associated with social and sharing?
Early evidence suggests that the answer is no.