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The facts:
- Facebook plans to expand mobile payments on its WhatsApp messaging app in London, which the social media giant selected as the hub for the effort, the Financial Times first reported. The company chose London because the city attracts multicultural talent from countries where WhatsApp is popular.
- WhatsApp sent engineers to the U.K. last year to help recruit about 100 people in London and Dublin to support its payments development. Even though WhatsApp is one of the most popular apps in the world with 1.5 billion users, the company only has around 400 employees, most of whom are in California.
- While Facebook plans to expand payments on WhatsApp, the social network also announced a crackdown on ads for financial services that are associated with predatory behavior. On June 5, Facebook no longer will allow ads for contracts for difference (CFDs), which are complex financial derivatives that let traders speculate on the price movements of markets, per a blog post. In addition, Facebook eased up its policy on ads related to to cryptocurrency.
What you need to know:
The expansion of WhatsApp’s office in London is another sign that Facebook CEO Mark Zuckerberg is following through on plans to monetize the messaging app with mobile payments as part of the company’s much-discussed pivot to privacy. Because WhatsApp provides end-to-end encryption of messages, the app’s ability to collect user data is limited compared to Facebook’s other apps like its main social network and Instagram that depend on data collection to provide better ad targeting for mobile marketers.
Zuckerberg last week announced at Facebook’s annual developer conference that WhatsApp’s mobile payments would kick off in several countries this year. He said he was “particularly excited” about the expansion after an initial test in India. WhatsApp is most popular in India, Brazil, Indonesia and Mexico, but the company hadn’t established an office in any of those countries before last year, when it hired an executive in India.
“Payments is one of the areas where we have an opportunity to make it a lot easier. I believe it should be as easy to send money to someone as it is to send a photo,” Zuckerberg said at the conference.
Payments are an important way for Facebook to diversify its revenues and reduce its dependency on digital advertising, whose growth has slowed as the market matures. While social media ad revenue expanded 31% to $28.9 billion last year, that rate is much less than the 47% compound annual growth rate from 2012 to 2018, according to the Internet Advertising Bureau. The mobile payments market is forecast to grow more than 33% a year to $457.4 billion in 2026, per IT Intelligence Markets, making it a potentially lucrative business for the social network as it seeks to diversify its revenue streams.
Meanwhile, Facebook continues to clean up and optimize its ad ecosystem with a pair of moves. By cracking down on ads for predatory financial services, the company can get in front of the type of complaints and lawsuits that have resulted from discriminatory ad targeting practices. Likewise, the removal of preapproval for cryptocurrency ads finds the company listening to user feedback in the wake of last summer’s conditional ban reversal.
