Many Facebook users are not aware that they can pay for items in Facebook without leaving the company’s ecosystem. The social giant’s payments system, called Credits, has worked with apps that run on its platform for several years. But this functionality never really transferred over to its mobile initiatives. That changes today as Facebook rolls out a payments system for mobile Web apps tied to its platform.
There are several ways a company can create an online mobile payments system. It can become the processor itself and store credit cards on file. It can work through banks and payment processors like Visa, America Express, MasterCard or even PayPal to execute transactions. Or, it can team with the mobile operators to create direct-to-carrier billing where you make a purchase with your device and it shows up on your cell phone bill.
The last option is what Facebook has chosen for its mobile payments initiative. The company has partnered with mobile operators in 30 countries to create a direct-to-carrier billing system for mobile Web apps available through Facebook. That includes all four major carriers in the United States (AT&T, Sprint, T-Mobile and Verizon) and the United Kingdom (02, Orange, T-Mobile, Three and Vodafone).
The goal is to make it much easier to pay for in-app purchases. It is well known that the more steps users have to go through to verify payment information on a mobile device, the more likely they are to abandon that purchase halfway through the process. Previously, trying to verify a transaction in Facebook could take as many as seven steps. That is five or six steps too many when all you are trying to do is buy $2.00 of extra game credits in Farmville.
Facebook is in the process of building out its mobile app ecosystem. That includes the Facebook App Center that was announced last month and, now, an easy-to-implement and easy-to-use payments system. Those are two very important ingredients when creating a flourishing apps ecosystem: a central application repository and a way to pay for those apps. Apple, Google, Microsoft and even Research In Motion (with the BlackBerry App World) have all been able to do this effectively. Facebook’s efforts to date have been haphazard and have worked against it creating a distinct mobile ecosystem for its platform.
Essentially, Facebook is getting organized for a mobile push. One of the company’s greatest fears is that the platform will be relegated to being a mobile presence and not a mobile player. In that scenario, while Facebook has a robust presence on mobile devices as perhaps the most-used application of all time, it lives at the mercy of the other mobile operating systems such as iOS and Android. That is fine for many companies. But those companies did not just have a $100 billion initial public offering and see their stock price drop more than 30% shortly thereafter.
Facebook cannot be just another app. It is too big and too important to too many people (developers, users, marketers, advertisers, its own employees) to take a passive route in mobile. That is why it must consolidate and simplify its mobile approach. For a long time, Facebook believed that all it had to do was tie its robust application ecosystem to its extraordinarily large social graph and people would share and download apps en masse. That decentralized approach proved not to work, hence the App Center. Now, Facebook has to support App Center and the first step is a simple payment system. That is what is being rolled out today. Search, discovery, customer support, rankings and other support structures will likely come in time.
In the grand scheme, what does this mean? It means that Facebook aims to be a mobile player, not just a presence. It means that Facebook aims to stand next to Apple, Google and Microsoft in the platform wars. It means that Facebook has a strategy to make money off mobile that is more than just advertisements and turning user data into effective banner displays.
Is the fact that Facebook is acting on its mobile strategy a sign that it plans to come out with a Facebook smartphone? Not necessarily. It is a lot harder to create an operating system than an app store. But, if Facebook does plan to create its own device, it should have all the ingredients to help it succeed from the moment it is released.