Facebook and the Virtuous Advertising (and Payments!) Cycle

Facebook and the Virtuous Advertising (and Payments!) Cycle

Karen Webster

Karen Webster

Karen Webster, CEO of Market Platform Dynamics, works extensively with the most innovative players in the financial services, mobile, B2B and technology sectors to identify, ignite and monetize innovation.

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Facebook has made its name in social media, but could the newsfeed giant find new revenue opportunities among payments?

It's not such a leap of faith if you think about the stops along the way that get us from social media to checkout carts — particularly, advertisers and outside companies that could give Facebook a bit more topline torque.

As Facebook seeks ever stronger global reach, it has also been expanding its presence in advertising, breaking free of the standard confines of being 'only' a social network.

An overgrowth of ads

Over the last several years, the company has become a behemoth of advertising, with a topline in 2016 of a consolidated $27.6 billion. That hefty sum was carried almost completely by ads, and those ads were in turn sold to firms looking to get their imprints and messages in front of millions of eyeballs.

And what of payments? In context of the ad revenues just mentioned, the payments topline contribution seems to be an afterthought at $753 million in 2016 and waned from $849 million in 2015. The payments business may have had its heyday among FarmVille, which fizzled out amid apps taking over as the preferred conduit for games. Gift cards also came to Facebook — and went.

And yet, might payments still be a glimmer in Facebook's eye? A case of try and try again? Immediately the answer that springs forth is — no.

None other than COO Sheryl Sandberg seemed to shut the door even further on the payments ecosystem à la Facebook by stating that, "The core of our focus is still very much focused on ads and how we can do ads at the product level." The focus, it seems, is definitively cemented to contextual and targeted ads.

The true value of Facebook

For Facebook, the value proposition lies in its users and the data that comes right alongside those users. The data is real and constant, and comes in the form of what is shared on an individual basis as people click through their news feeds — all to the tune of $20 in average revenue per user (ARPU). Group data is valuable, data on favorites is valuable, comments are valuable. This all gets fed into data aggregators, with insight into income, mortgages and other loans and demographics.

All told, there are 1,300 data points that are of use to advertisers as they seek the most receptive eyeballs. With targeted placement inside newsfeeds — with such apps as City Guide featuring travel arrangements and city information, with all the goings-on in Boston and New York City — recall and brand awareness get boosts by double-digit percentages. Dynamic ads, in example after example, have the ability to lure users off Facebook and onto advertisers' websites, where, of course, buying is consummated.

A perfect partnership

To that end, Facebook has linked up with Amazon to take its audience network off its mothership site and utilize the latter’s header bidding system to entice more brands to that ad system. Video also looms as a growth area for the company, and is where the most direct challenge to Google might be. Facebook has 90-second-long ads in place that allow consumers to jump right from the ads to the point of purchase.

Ads harmonize well with Facebook, which dovetail well with mobile. Roughly 90 percent of the company's users access the site using their devices that, in turn, during e-commerce forays, bring them to merchant sites that are also enabled for mobile.

Breaking and Creating a Cycle

And here is where friction reigns in the form of checkout fail, where clicks do not translate into sales at the final reckoning. This is also known as shopping cart abandonment. The failure here is likely why Facebook ad rates are not all that expensive, but a salve can be seen with payments.

What if Facebook hewed close to its ad revenue generating strategy, but streamlined the checkout process to be a bit more intuitive — especially when users jumped off Facebook and clicked through to a brand's website?

Cutting the shopping cart abandonment can be a boon to those companies advertising on Facebook, and bring value to that advertising relationship, boosting the prices Facebook charges for its advertising, all in a virtuous cycle.

And virtuous cycles make everybody happy.

The statements and opinions of the writer do not necessarily reflect those of TSYS.

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Karen Webster

Karen Webster, CEO of Market Platform Dynamics, works extensively with the most innovative players in the financial services, mobile, B2B and technology sectors to identify, ignite and monetize innovation. This work often includes the development of new products, platforms, business models and ignition plans. As an entrepreneur, Karen has successfully developed and launched several new ventures in the loyalty, online media and social networking sectors, each of which was focused on introducing disruptive business models and product solutions to fill a market need. This includes PYMNTS.com, the leading media property focused on innovation in the payments sector, and a joint venture with Berkshire Hathaway's Business Wire.

Karen also serves as a member of the board for several emerging companies and helps these innovators develop and implement business strategies that drive market adoption for their products and services. Karen is a frequent speaker and author of numerous articles on the sources of innovation, strategy, loyalty, product design/bundling and pricing and platform strategies.

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