Facebook (NASDAQ:FB) recently hired eBay (NASDAQ:EBAY) PayPal chief David Marcus to head its messaging products business. This move raised a lot of questions, but following BlackBerry's (NASDAQ:BBRY) first-quarter conference call, we might finally have answers.
What did BlackBerry tell us?
On BlackBerry's conference call, CEO John Chen talked about its Messenger service, also known as BBM, and its future. BBM has been widely successful, and Chen estimates that by year's end it'll have 100 million monthly active users.
Analysts naturally asked questions about how BlackBerry will monetize this large user base, and Chen's response was fascinating -- especially as it relates to Facebook. Specifically, Chen briefly and almost accidentally brought up mobile payments, saying, "it's the next big thing."
Chen pretty much ended the discussion there, but not before disclosing that the company already has contracts signed for a per-transaction business model, meaning we now know why Facebook hired Marcus to head messaging products.
What's this mean for Facebook?
Marcus is a well-known industry veteran with an uncanny ability to monetize services in software and the consumer space. He helped monetize PayPal into a $6.6 billion business last year with near 20% annual growth.
Investors didn't understand what was so appealing about Facebook's Messenger services. Some even speculated that Marcus had joined Facebook to help it monetize messaging services with advertisements, but very few had flirted with the idea of making payments via text or messaging.
Messaging payments makes a great deal of sense in that it connects consumers to businesses by using a communication platform that is used worldwide and most often on smartphones. Facebook's payment-processing initiatives have been widely covered in the last few months following news that it applied for a license to launch an electronic money service in Ireland.
However, there have been no clues on the instrument that Facebook would use to send money or make purchases, as many assumed the company would use its social networking site as its transaction instrument.
Instead, Chen's comment about mobile payments and messaging might give investors a better idea of Facebook's plan. Facebook has already solved the problem of messaging rates by acquiring WhatsApp, a company that uses WiFi or data to send messages and make calls. Looking back, this might have been a smart move if the company is preparing to handle a great deal of transactional volume via messaging.
What's the fundamental implications?
Chen gave no details outside of BBM payments being a per-transaction model like PayPal. PayPal creates its billions in annual revenue from 143 million users. BBM is expected to have 100 million users by year's end, many of which are in the enterprise space, where transferring capital is a daily activity. If we assume BlackBerry charges a rate similar to PayPal, then investors can use their imaginations to see how mobile payments could be a big business for BlackBerry in driving revenue higher.
As for Facebook, its Messenger application has more than 200 million users, mostly consumers, and many who would likely purchase and sell via text. Already, Facebook would have more users than PayPal, and if utilized with the thousands of businesses that have Facebook pages with products and services to sell, this could become a gigantic business for Facebook.
The real winner in this equation is Facebook, a company that seems to be serious about payment processing both on PCs and in mobile. The Marcus hire all but validates this assumption, as does the words of BlackBerry CEO Chen. The outcome could be explosive year-over-year growth for many years to come.
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Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends eBay and Facebook. The Motley Fool owns shares of eBay and Facebook. 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.