Earlier this week Paypal announced closer integrations with Facebook. In a blog post, PayPal is integrating directly into Facebook Messenger, letting users purchase and pay for things on the spot. But why stop there? What would happen if Facebook went out and actually paid for PayPal?.
What Happen if Facebook Paid for Paypal? Should Amazon be Terrified?
The internet is a big place. And the most successful companies online succeed in making the internet a little smaller and connecting people.
Airbnb connects people to places, giving them a sense of community.
Uber connects people to waiting rides, so they get where they need to go when they need to get there.
Amazon prides itself on being an online marketplace having almost anything anyone needs. Members can even order fresh produce and groceries delivered to their home from Amazon within a couple hours.
And Facebook connects people to each other like never before. With over 1.75 billion active monthly users, Facebook has a loyal fanbase. Even those people who are not on the social media site are familiar with it.
But Facebook can be bigger.
Buying PayPal would let Facebook compete with (and beat) Amazon as the largest online retailer.
The social media giant already features “shop now” functionality for business fan pages. And groups are often created with the sole focus of buying and selling common interests. Facebook is even rolling out its own Marketplace, which connects buyers to sellers online for offline deals. However, by acquiring PayPal, Facebook could do more than just connect people with similar interests, Facebook could actually compete with Amazon.
Here’s why that deal makes sense:
PayPal is already an established payment processor with an established reputation and solid systems and procedures. And with about 200 million active accounts, Facebook wouldn’t need to get people comfortable with a brand new system or way of paying for goods, since so many people actively use it. In comparison, Apple Pay has an estimated 3.6-7 million people who’ve tried it at least once, with only 21.3 percent using the service regularly, according to reports by Pymnts.com. While there are other payment options out there, PayPal’s reputation as the first digital payment processor and a secure form of online currency makes for a strong acquisition target.
On top of that, Facebook can afford it. PayPal has a market cap of about $52 billion, meaning a company would have to have big pockets to go bid on PayPal. With a market cap of $384 billion, Facebook can certainly afford it. But so can other companies such as Amazon ($405 billion), Google ($570 billion), and Apple ($642 billion). Yet, out of these companies, Google has Google Wallet, Apple has Apple Pay, and Amazon has its own payment system in place. Facebook is willing to spend for companies (looking at you WhatsApp) and patient enough to focus solely on growth before monetizing those acquisitions. Although pricey, acquiring PayPal gives Facebook access to hundreds of millions of users and a dominant position in mobile payments. And with Facebook’s strong network of users, PayPal could easily go from 200 million users to 1 billion users.
Facebook can also afford to compete on cost. With such a huge user base, Facebook can focus on discounted or waived processing fees for purchases, and even undercut competitor prices for products using those waived processing fees as discounts.
Given Facebook’s desire to connect the world, technological and financial resources, creativity, and worldwide reach, adding a mobile payment service such as PayPal to its platform would elevate Facebook to a new level, and that should scare Amazon.
Want to know how to add Paypal in your business page? Check this video and learn it from Facebook Timeline Marketing.
Don’t be surprised to hear speculation on the subject. And when you do, expect shares of both PayPal (PYPL) and Facebook (FB).
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