redesign | payments: Hiring Stan Chudnovsky shows Facebook might be getting serious about payments

Facebook has frustrated me for a long time: they have such huge reach and engagement that I’ve thought that Facebook should be entering more spaces, rather than just limiting itself to ads on the current product. Facebook has billion dollar opportunities in payments, commerce, television and local, just to name a few.

But Facebook has been laser-focused on mobile. (The last time I interviewed at Facebook, I was told that my ideas were “too big” for Facebook.)

With the hiring of Stan Chudnovsky to work on Messenger (and presumably payments within Messenger) with David Marcus, it shows that the company might finally be looking to diversify beyond the core product. (Stan worked for David at PayPal.)

In much of the developing world, an ad-supported business is unrealistic today. There are a number of reasons for this:

  • Purchasing power. If you make $1 a day, it’s hard to develop an ROI to advertise to you.
  • Lack of audience. Much of the audience still isn’t online. (Though Facebook is working heavily on that.)
  • Lack of infrastructure. Without agencies and similar infrastructure, the complex nature of advertising models is hard to pull off. (Not that a new model can’t be invented — it should — but that takes time.)

Payments is a natural fit for Facebook. People all over the world have to pay. And taking even a penny or two on a transaction could easily dwarf revenue from ads.

Facebook’s best play here is international. In the U.S., there are very well established payment systems. Credit cards are ubiquitous and card networks dominate. It’s a hard market to displace, even at Facebook’s scale. But bring payments into a greenfield opportunity and Facebook has a real chance to dominate.

In the U.S., there are social payment opportunities. Venmo, which David acquired for PayPal, has shown an emerging behavior that has huge potential when paired with the Facebook firehose.

Facebook also has a good team; David and Stan are both entrepreneurs. Working at PayPal was (almost) as odd a fit for them as it was for me. It’ll be interesting to see what they can accomplish when they’re given resources within a company that truly values innovation.

Disclosure: I briefly worked for Stan and David at PayPal, until I decided that PayPal would never be able to move at the pace that I wanted it to.

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