Seriously? Ads?

http://blog.dinkevich.com/seriously-ads/

by Ryan_Shmotkin • 14 years ago

283 211 14 years ago

blog.dinkevich.com

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

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• 14 years ago

They're already giving out those to white-hat hackers btw..

TazeTSchnitzel• 14 years ago

Dammit, then I'd have to reactivate my Facebook account.

And then Facebook would know everything I buy.

darkstalker• 14 years ago

What if I refuse to use facebook, would be unable to pay?

jiggy201112• 14 years 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.

DanLivesHere• 14 years 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• 14 years ago

I'm pretty sure my mom has no issues with Facebook's privacy history.

bmuon• 14 years ago

My mom is a lot more worried about seeing pictures of relatives she doesn't like than about privacy.

slig• 14 years ago

Maybe the subset of moms that frequents reddit and HN.

roc2• 14 years ago

While I tend to agree, they could throw in an RSA fob or a smartphone-based two-factor equivalent.

They probably should already.

Splines2• 14 years ago

I like two-factor authentication too, but casual users don't care about this sort of thing until it's too late.

Dirlewanger• 14 years ago

Your average suburban mom out there know nothing of Facebook's tussles with user privacy.

perlgeek• 14 years 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• 14 years 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...

tatsuke953• 14 years 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• 14 years 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• 14 years 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• 14 years 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-reth...

mtts4• 14 years 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• 14 years ago

I think your parent was being sarcastic. We need a sarcasm tag in HTML.

Akram2• 14 years ago

Well, Google is also struggling with Social. It doesn't mean that if Google checkout failed no one else can do anything good.

eli2• 14 years ago

I think the point being made is that simply having a strong brand and bright engineers does not mean you can solve any problem you try to tackle.

jusben13692• 14 years ago

Yeah but let's be honest. Google's track record is littered with failures that seem more around focus and execution than opportunity.

roguecoder2• 14 years ago

Google failed at implementing Facebook too.

diminish• 14 years ago

Why not "Coca Cola Buy" NFC payment chip in every bottle too to be used in restaurants/bars? My mother knows the brand Coca Cola, and if Coca Cola hires 1000 engineers to provide an NFC chip in every bottle; they may get 1% from global.....

gringomorcego• 14 years ago

that's what happens when you don't fight for what you want. they let others rule the nfc area, what the hell did they think was going to happen.

crag• 14 years 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• 14 years 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).

ktizo3• 14 years ago

3. What facebook needs to do so I trust that other people can't steal my money through facebook.

Zak• 14 years ago

What if what I spend my money on is private? I don't really want my spending habits to be social.

iamben• 14 years ago

But you probably don't represent the average Facebook user. Most of my non-tech friends share everything - FB knows pretty much everything about them, and certainly for some of the younger ones, FB has become their primary communication platform.

For most of them, paying with Facebook would just be easier than using something else / remembering more details etc etc. And they probably trust FB more than they trust other companies with far less visibility (although most them have used their CC without any thought or concern on a load of different websites).

FWIW and personally, I completely echo your thoughts - although I'm sure I'd end up giving my CC details to FB as soon as a website that I needed to buy from offered no other method to pay than the FB one.

Omnipresent2• 14 years ago

You might not trust FB with your CC info but elderly/non tech savy people will. Remember, there is less of us and more of them. Point is to capture a bigger market, which clearly trusts FB with their most intimate details then why not CC?

batista3• 14 years 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?

FB has several billions of revenue from ads.

What makes you think you are not an insignificant outlier and that this move or any other doesn't concern you?

Just think people, if everybody did what I do on FB, would FB still exist? If the answer is no, then what you might or might not do, doesn't matter with regards to FB.

pessimizer2• 14 years ago

Most people don't click on ads, but the minority that do can generate billions of dollars of revenue. The minority that do follow the ones that don't.

tatsuke953• 14 years ago

Despite the fact that FB makes money off of ads, do you think people would prefer to have ads on Facebook, or to not have ads?

I think the answer is obvious: people prefer no ads. "Advertisement" is a dirty word. People want a free, ad-less product, despite the fact that it's economically unfeasible.

That's a problem. What happens when it becomes more widespread or easier to install things like adblock? What happens if a browser comes along that blocks Facebook cookies and ads by default, but still allows the basic functionality of FB? Don't say it can't happen. We're just getting to the point in society where having everything about us on someone's server is "normal". Wait until there's a disaster of some sort, a major security breach, and see how fast people change their habits. It can happen overnight.

bad_user• 14 years ago

     FB has several billions of revenue from ads.

Groupon is also generating "billions" in revenue.

So far I haven't seen statistics or proof to indicate that advertising on Facebook is effective, although I've heard anecdotes to the contrary.

If advertising on Facebook proves to be ineffective, then they are in big trouble.

kunaalarya2• 14 years ago

FB allows you to buy gift cards from stores for credits, so for an outlier that doesn't trust Facebook with cc details, there's another option. Through buying Karma, they can bring gift giving into Facebook credits, so for someone's birthday you can buy a gift card through Facebook, and you can take your phone to the store and use your gift. This has tons of potential and you can for even more through Facebook. Think of buying tickets for events, or going to a small business' store and buying an item (Etsy style). Or Etsy, Amazon, eBay, etc setting up apps where you can use Facebook credits to buy (long term). I have two cousins visiting from India, and it's amazing watching them use Facebook. They're constantly on. Using it to connect with friends, play games, etc. This is a whole market the most people don't think of. These markets are huge. And as another user pointed out, all these kids using Facebook these days are growing up with it and will continue to use it, and trust it. It's a whole different experience that we don't really see.

snowwrestler4• 14 years ago

I've never clicked on a Facebook ad either, but I've run ads on Facebook and they got clicked a lot. The cost per new user was lower than Google Adwords.

I'm not sure it's a good idea to dismiss Facebook's chances at making money from ads yet. I've never clicked on a TV ad either, but stations make hundreds of billions of dollars from those ads every year. That industry took many decades to grow to that point though.

tatsuke953• 14 years ago

It's not whether Facebook makes money off the ads. We know they do. It's whether the advertisers make money from the ads that will demonstrate if there is a sustainable business model there.

27182818284• 14 years 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'll offer a counter anecdote. I've been impressed by their targeted ads more than once and clicked!

It has to get hyper-specific though. Not like gender-targeting, for me it read that I liked linguistics at one point in my profile and offered me an add to by a Wug shirt. I was super impressed and spent time in their online store.

smsm423• 14 years ago

I'm definitely not gonna trust FB with credit card or anything private. It is a company built on sharing, with repeated history of privacy issues. It's one thing posting there about my vacation and what I think of latest Hollywood blockbuster and quite another to give them a line to my bank account. For the latter I would rather have some company that has better privacy traditions.

reneherse2• 14 years ago

Precisely. The ethos of the Facebook notion of sharing and privacy is antithetical to what a financial service needs to have.

One big reason I trust Paypal for everyday transactions is because they make money off of each transaction directly, whether through direct fees or merchant fees. I can understand their business model, and the service has a certain simplicity.

The OP wants me to give financial data to a company where my data is their product, and who is always trying to prise more "openness" from me through a byzantine privacy UI and borderline surreptitious app installations? I'll pass, thanks.

eli2• 14 years ago

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

ruswick• 14 years 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?

jiggy201112• 14 years 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.

mtts4• 14 years ago

Credit cards are big in the US, maybe, but in the rest of the world not everyone has them.

jiggy201112• 14 years ago

For the purposes of most online payments a standard debit card can be used interchangeably with a credit card.

Omnipresent2• 14 years ago

I don't want to waste those 10 seconds which feel like eternity trying to fill all the fields. That's why amazons "1 click" checkout button is so successful. Make me, the user, do as less work as possible.

CamperBob22• 14 years ago

It's frustrating how the Google Toolbar solved this problem perfectly 10 years ago, then stopped working consistently.

I should never have to type in a password, credit card number, or address if I don't want to... yet nobody except a few proprietary browser plugin vendors treats this as a problem worth solving.

otterley• 14 years ago

Have you tried 1Password? Its automatic form filler usually works quite well.

kalleboo2• 14 years ago

Whenever I shop on a site that has the option of typing in my credit card details vs pressing a "Pay with PayPal" button, I always go for the latter, since I'm lazy. Looking at the stats from my job, I'm definitely not alone.

jiggy201112• 14 years ago

That's kind of my point, Paypal , Google and Amazon all offer quick solutions to online payments. I'm not sure there is really a need for one more.

What might make more sense would be for FB to allow linking a paypal account with a FB account which could then allow users to login to Paypal via FB.

This would mean they could use paypal's more mature backend and let them deal with the messy stuff, while facebook could still potentially get all the fun of spying on your purchases.

emillon• 14 years ago

For that reason, sites are not allowed to store CVV2 numbers : a user input is always needed.

SonicSoul2• 14 years 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

jiggy201112• 14 years 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.

run4yourlives3• 14 years ago

>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.

The consumer doesn't give two flying fucks about any of this. This is a very important point.

stef25• 14 years ago

Almost every time I use my ccard I get redirected to my bank's website where I have to login. This involves entering two fixed digits (long and tough to remember) and a third token using using a little calculator like device which they supplied me, for which I also need my bank card and its pincode. Once I've passed this step I have to generate another one time token using this little device.

If I want to use my ccard online, away from home I need to have all kinds of codes remembered or written down, my normal bank card and this little device.

Using my ccard online has become quite the pain in the ass.

dredmorbius• 14 years ago

I wish my bank (well, credit union) offered this.

olalonde2• 14 years ago

It takes me at least 5 minute just finding my cc.

planetguy4• 14 years ago

This is gonna sound crazy, but I wrap mine in a piece of dead animal skin and stick it in my pocket.

pwny• 14 years ago

You don't remember your CC details and have to actually get it out? Wow!

digitalsushi2• 14 years 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.

kalleboo2• 14 years 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.

snowwrestler4• 14 years 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.

digitalsushi2• 14 years ago

If the transaction processing costs were 0, do you suppose this payment system would still continue to not exist?

debacle• 14 years ago

That's patently untrue. Micropayments haven't taken off because it's impossible to make money on transactions less than about fifty cents.

rmc5• 14 years ago

It would be very convenient for someone, somewhere, to establish a widely accepted micropayment system for the Internet.

Google Adsense fills that niche. People who run a website get money from teeny little clicks that their vistors do.

tomeric• 14 years 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• 14 years 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

Edit: Corrected years, added reference

waterlesscloud• 14 years ago

Who works for Visa that Facebook couldn't hire?

rmc5• 14 years 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.

Akram2• 14 years ago

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

timharding• 14 years 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• 14 years 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.

kunaalarya2• 14 years 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.

ecaradec2• 14 years 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• 14 years ago

I always thought this would be Apple's next plan as well. "Pay with your Itunes account" or something like that.

ecaradec2• 14 years 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• 14 years 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.

roguecoder2• 14 years 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.

pajju• 14 years 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• 14 years 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• 14 years 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.

TomGullen2• 14 years 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_hobart2• 14 years 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.

TomGullen2• 14 years ago

Do you think facebooks payment implementation would be naive enough to allow anything like this?

girlvinyl3• 14 years 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.

shmerl4• 14 years 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?

girlvinyl3• 14 years 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.

ew• 14 years 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• 14 years 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• 14 years 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• 14 years ago

People wont be able to turn it off unless they install adblock.

sharmanaetor• 14 years 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• 14 years ago

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

JumpCrisscross• 14 years 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

[2] http://www.economist.com/node/21554740

philwelch• 14 years 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.

startupfounder3• 14 years 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

planetguy4• 14 years ago

Using your real identity to make online payments could reduce that to real world levels

How many of your friends have had their facebook accounts stolen? For me, it's a few percent. "Oh look, another random acquaintance is stuck in Abu Dhabi and needs me to wire them some money"

Facebook security isn't nearly good enough to be handed my wallet. Actually it's not my wallet that's the problem, it's the wallet of everybody who uses "password" as a password.

excuse-me• 14 years ago

But pay-with-facebook is also going to be limited to what you can buy - so thewir risk is greatly reduced

They don't have to worry about stolen cards used in the high street, they don't have to do cash advances, they don't have pin pads skimming people's pins in stores.

pbreit• 14 years ago

It's the opposite: Facebook data can mostly help out with fraud (identifying, authenticating users) and is nearly useless for assessing credit risk.

kreilly• 14 years ago

Facebook data is not useless for assessing credit risk. People with high credit scores are likely to be connected to each other via social networks. The converse is likely also true.

Although it is controversial, banks seem to be starting to look at this.

chris-deskpro• 14 years ago

Facebook does have data that can be used to fight fraud; e.g. "which of these 10 photos if your friend" or "which of these 10 cities did you visit last year".

Visa/Mastercard/Amex only have your transactions to go on so naturally they have spent billions building fraud tools around this data; that's not to say there are not a lot of other data points to build these tools.

rmATinnovafy• 14 years 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.

shmerl4• 14 years 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• 14 years 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.

adventureful3• 14 years 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.

staunch2• 14 years ago

Revenue is multiples of those numbers though. Because Visa manages to have insanely bloated overhead doesn't mean Facebook would.

adventureful3• 14 years 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.

mseebach• 14 years 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• 14 years ago

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

InclinedPlane4• 14 years 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.

stickfigure4• 14 years 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".

InclinedPlane4• 14 years 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.

devan• 14 years 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

= 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• 14 years 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• 14 years 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• 14 years 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• 14 years 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)

Seriously? Ads?

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