Facebook Inc (NASDAQ:FB) announced this week that its Messenger app will soon begin to accept native payments. It’s a feature Wall Street analysts have been expecting for a long time as they have pondered ways the social network can monetize the app. The question now is whether Messenger users will actually use the app to make payments or whether the service will be as disappointing as the Facebook Credits feature was a few years ago.
Facebook adds native payments to Messenger
At Tech Crunch’s Disrupt conference on Monday, Facebook executives announced the addition of chatbots that can accept in-app payments to Messenger. Messaging VP David Marcus reported during a presentation at the conference that 300 million people use either audio or video calling through Messenger every month.
According to Forbes, Facebook is working with PayPal, MasterCard, Visa and other partners for the new payments chatbot. The social network hopes users of its Messenger app will store their credit card information in the app and then use it to make payments using the bot. Among the examples Marcus gave during his presentation was the ability to use a Messenger thread to do everything needed to book a flight, from browsing for available flights, speaking with customer service, actually buying the ticket by paying through the app, and getting the itinerary for the trip.
Making the checkout process smoother
Facebook debuted its Messenger chatbots in April at its F8 developer conference, but in the few months they have been available, users have not been quick to adopt their usage. Marcus admitted that they still have much to do to help developers with their bots and improve them, although he also said that when they initially launched the chatbots, they were just trying to “put a stake in the ground” rather than launch a full-fledged feature.
Morgan Stanley analyst Brian Nowak said in a report dated September 13 that native payments inside the Messenger app are important because they represent a major next step in the long-term monetization opportunity. He also believes that storing payment information is extremely important in Facebook’s venture to monetize the messaging app. The reason is because he believes both of these aspects reduce “friction in the checkout process.”
Theoretically, keeping users inside the Messenger app instead of redirecting them to an outside mobile website and also storing their payment information should make the checkout process go more smoothly.
In-Messenger payments as an indicator of ROI for Facebook
If the bid for native payments in Messenger is successful, Nowak expects it to be a major advertising tailwind for Facebook. He explained that transactions that are actually made on the social network’s platform make it possible for advertisers to more easily link the dollars they spend on advertising to actual purchases. As a result, it becomes easier for them to see the size of the return on their investment.
This causes momentum to build because as advertisers see the return on their investments grow, more advertisers will probably be drawn to the platform, including the roughly 60 million small- to medium-sized businesses that have pages on Facebook.
The long game for Facebook Messenger monetization
Nowak adds that in the long term, combining native payments in Messenger with Facebook’s massive collection of user data and its M digital assistant could lead to even more monetization opportunities. One example he suggests is that the social network could remind a user that his wife’s birthday is three days away and see suggestions of two local businesses they could buy flowers from through cost per click ads directly within Messenger.
Of course all of this depends on whether users of the platform readily adopt the payments feature. He notes that Facebook Credits, which was introduced in 2011 and dumped two years later, and Google’s varied wallet solutions since 2011 have all thus far been disappointing.
Shares of Facebook edged lower by as much as 1.38% to $126.91 during regular trading hours on Tuesday.