- Facebook on Tuesday announced a bevy of new shopping features for its various apps, setting a business foundation for the company's pivot to privacy.
- Shopping could drive more ad sales for Facebook and help the company create a new revenue stream.
Facebook CEO Mark Zuckerberg is excited about payments and private commerce.
"When I think about all the different ways that people interact privately, I think payments is one of the areas where we have an opportunity to make it a lot easier," Zuckerberg said on Tuesday at Facebook's F8 annual software developer conference in San Jose, California.
At F8, Zuckerberg and company announced several new shopping features for Facebook's various apps. These new features are part of a broader effort by Facebook to move the company toward e-commerce and payments, two areas that fit more comfortably within the company's ambitions to be a privacy-focused social network. If successful, the move could not only bolster its core advertising business, which makes up nearly all of of its revenue today, but could also create a significant new revenue stream in payments.
The move will also pit Facebook more directly against other big tech companies such as Apple, whose Apple Pay service is a cornerstone of its move toward becoming a services company, and e-commerce stalwarts like Amazon and eBay.
At F8 on Tuesday, Facebook announced three key shopping features:
- On Instagram users will soon be able to buy products directly from influencers, who are famous Instagrammers often paid by advertisers to promote products in their photos.
- On WhatsApp, businesses will be able to upload their product catalogs.
- On the Facebook app, the company is adding support for shipping so sellers can send products to buyers across the U.S.
Already in India, the company is testing a WhatsApp payments feature that is being used by 1 million users and will roll out to more countries later this year, Zuckerberg said on Tuesday.
"I believe it should be as easy to send money to someone as it is to send a photo," Zuckerberg said at F8.
The move could help Facebook's business in two ways.
First, it could boost its core advertising business, which accounted for $14.9 billion in revenue during the first quarter, a whopping 99% of its total.
Speaking with analysts last week, Zuckerberg said the company envisions a future where brands and businesses will pay for more Facebook advertisements as a way to drive sales through Facebook's commerce features.
"What we expect is as we build out more commerce-related features around shopping and Instagram and Marketplace and Facebook and certainly the private social platform that I've been talking about, I think will lend itself to private interactions around payments and commerce and interacting with businesses in that way," Zuckerberg said on April 24.
This is already starting to happen.
SnapTravel, a startup that lets users book hotels via Messenger, increased its Facebook advertising budget by more than 200% from 2017 to 2018 and is expecting to do so again in 2019, said CEO Hussein Fazal.
"If we can spend money and drive people into Messenger and see them spend money, that's going to allow us to reinvest back into ads," Fazal told CNBC at F8.
Besides driving ad sales, Facebook's focus on payments could develop into a business similar to that of Venmo, which is owned by PayPal.
With more than 40 million active users, Venmo is now generating revenue at a $300 million annualized run rate, PayPal said Tuesday at the company's investor meeting. The company generates half of that revenue by charging users for the ability to instantly withdraw their money while the other 50% comes from a mix of services that include credit card fees and fees from merchants that accept Venmo payments.
Last year, Facebook generated nearly $56 billion in revenue, so $300 million is a drop in the bucket. However, Facebook operates a much larger scale than Venmo, claiming 2.1 billion daily active users across its various apps.
Facebook's pivot to privacy requires a major shift in thinking for the company. But investors have reason to be excited by the new business opportunities available if the company can pull it off.