Facebook Inc.'s eCommerce Interest Is Nice but Not Game-Changing

Word has it the social-media giant is looking to Ireland to test a new money-transfer service. That's nice, but will always be ancillary to its core business.

Apr 16, 2014 at 7:00PM

There's never a shortage of rumors swirling around Facebook (NASDAQ:FB). And after multiple acquisitions, a couple of which were outside Facebook's traditional "comfort zone," the rumor mill was bound to kick into gear. But the latest scuttlebutt suggesting the social media giant is exploring online money transfer alternatives, a la eBay's (NASDAQ:EBAY) PayPal service, appears to be more than idle gossip.

Investors seemed intrigued by the notion of Facebook entering PayPal's territory, as heavier than average trading volume lit a fire under its share price, albeit temporarily. Naturally, no one involved in the process is talking, but the move to allow online money transfers to friends, and presumably e-tailers, around the globe opens the door to several possibilities, all of which would be good for Facebook shareholders. But even as investors speculate, it would be wise keep your feet firmly planted in Facebook's real world.

The rumored deal
According to news sources in Europe, Facebook representatives have been discussing online money transfers with the Central Bank of Ireland. Word of Facebook's product expansion plans came from "several people involved in the process."

What makes the rumored discussions even more intriguing is that if the Central Bank of Ireland gives the go-ahead, it will open the door for Facebook users to transfer money in multiple countries in Europe. Ireland, so the story goes, was only one stop on Facebook's online money transfer tour. Along with Central Bank of Ireland, Facebook supposedly visited with multiple London-based wire transfer companies.

Rumor also has it that Facebook intends to move well beyond Europe and into emerging markets with its new foray. Which makes sense, considering Facebook CEO Mark Zuckerberg's focus on bringing Internet connectivity to the world.

The opportunity
There's no doubting the potential of the online money transfer business, as eBay's PayPal can attest. Last year alone, PayPal transferred $180 billion in 26 different currencies, from nearly 200 countries around the world. And what did PayPal get in return? Annual revenue of $6.6 billion, which accounted for over a third of PayPal's profits.

Clearly, there's revenue to be had in the money transfer business, and there's a lot more where that came from. According to research from Gartner, online mobile payments alone will more than triple by 2017 to over $720 billion. With numbers like that, it's easy to see why Facebook would like a piece of that awfully big pie.

Putting it in perspective
The opportunity is huge, but so too are the competitors. Amazon, Google, and Apple all come quickly to mind, in addition to eBay's PayPal, as industry heavyweights with plans to dominate the world's e-commerce-related money flow.

To Facebook's credit, it's in the enviable position of being able to slowly build a new business like money transfers, as it continues to do what it does best: generating oodles of ad revenue by utilizing data to target ads like no other. And with the coming explosion in online video ad spend -- eMarketer estimates the market to more than double to $12.3 billion by 2018 -- the roll-out of Facebook's video marketing alternatives, along with finally monetizing fast-growing Instagram, is where near-term growth lies.

Final Foolish thoughts
The latest rumors do raise an intriguing notion, however. As one industry pundit described the recent $19 billion deal for WhatsApp, "[I]t gives it [Facebook] access to millions of credit card records and which has a huge international reach, testing of auto-billing functionality, and now the news of financial service offerings confirm that they consider this space a key component in the larger war to own consumer identity."

Generating incremental revenue, not to mention the value of capturing user's money transfer data, is a sound objective. Added to Facebook's growing emphasis in online gaming, its newest expansion plans would provide another means of diversifying revenue streams. But that's all the money transfer deal is likely to be in Facebook's foreseeable future, which isn't bad, just not a game-changer.

6 more stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, eBay, Facebook, Gartner, and Google-Class C Shares. The Motley Fool owns shares of Amazon.com, Apple, eBay, Facebook, and Google-Class C Shares. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers