Payment business model: is this a big part of Facebook’s future?
Disclosing a detailed earnings overview on February 1st, 2012, well in advanced of the much anticipated IPO, Facebook Inc. reported significant revenue from its payment business. Payment revenue for 2011 came in at $557 million, this being a drastic increase from the previous year takings of $106 million. The intention behind publicizing this information is to inform potential investors about the size, scope, and mechanics on how Facebook generates revenue. This document also points to Facebook’s overall payment strategy as well as their goals in continuing to grow in this segment.
Most of Facebook’s revenue is generated through advertising sales and social gaming. Towards the end of 2010, they made own proprietary payment engine, “Facebook Payments”, mandatory for use and saw revenues grow exponentially as a result. All gaming platforms that accept payments are required to use Facebook Payments to process transactions. This platform is multifaceted and can accept a wide array of payment sources such as debit and credit card, PayPal, mobile and gift cards.
As the company continues to develop its platform and services, the current rise in application use and demand will see Facebook carve out its own niche in this market. Focus will be put on developing social applications to integrate into the existing platform, encouraging a diverse assortment of application types and uses, with those that are not free to be paid for using the Facebook Payment processing system, further increasing revenue potential.
With the world continuing to migrate online, it is up to powerful social networking websites such as Facebook to capitalize on the economic prospects within their products, lest they miss out on a chance to grow their business over time.