Saturday, February 4, 2012 at 1:12 pm.
Facebook’s Payments Business Is Already 15% The Size Of PayPal — Sort Of
Facebook’s IPO filing this week revealed that its payments business is growing at a healthy clip, and represented 15% of Facebook’s revenue last year. (Up to 17% of its sales during the fourth quarter.)
How does it compare to eBay’s PayPal, the online payments leader? Right now, as measured by net revenue — the money from digital transactions that the companies actually get to keep — Facebook’s payments business is already 15% the size of PayPal, up from 9% of PayPal’s size in the first quarter.
That’s not, however, the fairest of comparisons. Facebook’s payments business — $188 million* in the fourth quarter — is almost entirely used for the sale of virtual goods in games like FarmVille, and Facebook demands a 30% cut. PayPal’s net revenue, meanwhile, was only 4% of its $33 billion of payment volume in the fourth quarter. (Btw, about a third of PayPal’s payment volume is on eBay.) In short, far more money is still moving across PayPal than Facebook.
As far as future growth is concerned, Facebook will probably have to tweak its model if it ever wants to go after PayPal’s business: No one’s going to buy real stuff with Facebook credits if they lose 30% on the transaction. But the virtual goods market is supposed to keep growing, so Facebook’s fine there. (Facebook also says it “may seek to extend the use of Payments to other types of apps in the future.”)
Similarly, PayPal stands to benefit from further growth of Facebook’s payments platform, as it is one of the ways to fund your Facebook account with real money. Still, an interesting comparison.
*Note: Facebook’s payments business, as reported, also includes “other fees”. But Facebook says those fees have been “immaterial” in recent periods.