Facebook is finally going hard on payments in WhatsApp as it tries to make the $19 billion acquisition pay off (FB)


facebook ceo mark zuckerberg

  • WhatsApp is adding payments in Brazil.
  • It’s part of Facebook’s big plan to push into commerce and finance.
  • Facebook bets that the efforts will benefit its advertising business — and will also generate income through transaction fees.
  • It’s also a way for Facebook to directly monetize WhatsApp, which it acquired for $19 billion in 2014.
  • Do you work at WhatsApp? Contact this reporter at rprice@businessinsider.com or +1 650-636-6268. Anonymity offered.
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WhatsApp’s big payments play is finally here.

On Monday, the Facebook-owned messaging app announced that it is adding payments tech to its service in Brazil, allowing its 120 million users in the country to send one another cash and for businesses to process purchases in the app.

It’s a significant step in Facebook’s vision to build out a fully fleshed commerce and finance setup across its family of apps — and to help recoup the tens of billions of dollars it has poured into WhatsApp over the years.

Facebook acquired WhatsApp in 2014 for a cool $19 billion. Since then, it has grown to become immensely popular, with more than 2 billion users around the world. But it has never been a runaway commercial success for Facebook, in the same way Instagram has been, which after being snapped up in 2012 for a then-eye-watering $1 billion ultimately became an advertising powerhouse that generated more than $20 billion in revenue in 2019, more than a quarter of Facebook’s overall revenues for the year.

WhatsApp, meanwhile, remains immensely valuable to Facebook because of its popularity around the world — but it’s not contributing to the bottom line in the same way. Attempts to add ads, Facebook’s core business, to the app have been abortive. In early 2020, the news broke that the company was disbanding a team that was attempting to implement ads in WhatsApp. Facebook insists that ads are still coming, but not any time soon.

Payments is an ideal answer to this void.

WhatsApp is increasingly used by businesses and consumers to communicate, particularly in emerging markets like India, and the company has built out a suite of tools to help facilitate this. Businesses can build “catalogs” to show off their offerings, and are offered tools to help manage orders and facilitate customer service interactions.

Adding payments tech, which was first trialed in India, allows WhatsApp to own the entire transaction from start to finish — and make some money in the process. Peer-to-peer payments will be free for users, Facebook says, but it will take a cut of payments made to businesses, in the same way that a traditional payment processor would charge a shopkeeper to use its point-of-sale software.

Facebook’s overall business remains ads-orientated, and it views payments as a way to boost that too. On a call with analysts after Facebook released its first-quarter financial results for 2020, CEO Mark Zuckerberg said he expected increased commerce and payments functionality across its apps to make its ads business more successful. “[Businesses] basically buy ads inside Facebook or Instagram that send people to chat threads. And then as we build out all these tools around that — around making those threads more valuable, we think that those ads will only increase in value, which is the way we’re currently thinking about that business,” he said.

WhatsApp’s payments functionality is powered by Facebook Pay, similar functionality that the company made for its main app. It’s one of a suite of commerce-orientated tools that it has built in recent years — and accelerated work on amid the COVID-19 pandemic that forced businesses around the world to shutter their physical stores.

In May 2020 it announced Shops, a major new feature for Facebook and Instagram that allows businesses to create digital storefronts to list their products online, along with other tools to sell goods via livestreams and other new functionality. Financial services firm Deutsche Bank estimates that Shops could net Facebook an extra $30 billion in annual revenue, through a combination of transaction fees and increased ad spend by businesses attempting to capitalize on the functionality.

For now, WhatsApp is only offering payments tools in Brazil. But if it’s a success, the rest of the world is sure to follow. “Payments on WhatsApp are beginning to roll out to people across Brazil beginning today and we look forward to bringing it to everyone as we go forward,” the company wrote in a blog post.

Do you work at Facebook? Contact Business Insider reporter Rob Price via encrypted messaging app Signal (+1 650-636-6268), encrypted email (robaeprice@protonmail.com), standard email (rprice@businessinsider.com), Telegram/Wickr/WeChat (robaeprice), or Twitter DM (@robaeprice). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by standard email only, please.

SEE ALSO: Mark Zuckerberg’s product boss left Facebook a year ago over ‘artistic differences.’ Now that Chris Cox is back, the key question is whose vision won?

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