By Mobile Guru
Facebook (FB) is engaged in building products to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family to discover what is going on in the world around them, and to share and express what matters to them to the people they care about. Developers can use the Facebook platform to build applications and Websites that integrate with Facebook to reach its global network of users and to build personalized and social products. Advertisers can engage with more than 1.1 Billion monthly active users (MAUs) on Facebook or subsets of its users based on information they have chosen to share with the Company, such as their age, location, gender, or interests. It offers advertisers a combination of reach, relevance, social context and engagement.
Many initially questioned Facebook’s ability to monetize mobile. Last year, Facebook publicly stated that it didn’t have a way to advertise on mobile devices. This led many to say Facebook is behind the times and that the firm would die along with the PC industry. Then Facebook’s recent earnings came out.
Not only did Facebook beat expectations with revenue of $1.81 billion, but 41% of Facebook’s revenue came from mobile advertising. Mobile revenue jumped from $375 million to a promising $656 million, a 75% increase. Facebook’s monthly active mobile users jumped 51% to 819 million, while daily mobile users reached 469 million.
Facebook’s “Mobile First” strategy even surged ahead of Google (GOOG), which, according to research firm Trefis, gets only 32% of its value from mobile advertising. Investors have since taken notice driving the shares to recent highs, up 144% in just the last year and 91% to year to date.
In order to further its strategy, Facebook is now developing a way to allow users to download payment information directly to retail websites such as Amazon (AMZN) and eBay (EBAY).
Storing such data online would save users time, as they would have no need for repeatedly typing in payment information on a small smartphone screen.
One must wonder if this move is merely a precursor to Facebook itself eventually offering its own m-commerce solution. While the answer is most likely yes, that’s easier said than done. In order to monetize its MAU’s, connecting to payments is not as simple as it seems. Mobile wallets and “m-Commerce” references have only diluted the argument of how to solve the challenges with moving money over networked devices. A mobile wallet is similar to an empty vending machine in a sea or competing vending machines. Once an organization or an individual decides to engage within a wallet step 2 is required: How do you meet the demand of those using the wallet? What functionality is required in the wallet and does that meet the expectations of users? What does the wallet connect with to enable commerce? Similar to an empty vending machine, what snacks do we place within to entice the customer (feature and functionality)?
While yes they could attempt to solve the m-commerce maze itself, Facebook and its shareholders best interest will likely be served through using its strong currency to make an acquisition of a smaller emerging player who has already successfully built that platform which can seamlessly be ingested by the company and be immediately accretive leveraging it inside Facebook’s awesome scale. Surely the idea can’t be lost on Facebook in light of last week’s $800M purchase of Braintree by eBay.
This brings me to Spindle Inc (SPDL.ob)., a company recently written about here, “Massive Growth Potential In Spindle Inc.” Spindle owns the technology and intellectual property (USPTO) for an elegant solution to any network connected destination as it blends the payments, advertising, and functionality into a single appliance – think of Spindle a Swiss Army Knife. This functionality may be inserted into a wallet (Google, ISIS, Alcatel-Lucent, etc).
Spindle delivers a toolbox and processing platform for merchants to not only transact but nurture consumers on behalf of merchants but convert them through their MeNetwork’s demand engine.
Spindle’s model could be considered the next evolution and where the payments market appears to be moving. They will launch their full 360 mobile commerce product this week at Money2020 that includes consumer-merchant engagement which changes the commerce equation by enabling a direct one to one relationship between merchants and consumers. Payment is just a foundation component of the transaction once the consumer decides to buy. Spindle helps the consumer find a merchant and decide to buy. A white paper from Mercator Advisory Group speaks the company’s unique offering and positioning.
Facebook is a destination which enables interactions between users (individuals), brands, products and communities. Spindle is the connective tissue, from a payment perspective helping to solidify and monetize these arrangements. The Company’s system is flexible and enables banks, institutions, MVNO, tier 2 Carriers, merchants, and consumers to interact in their most effective manner.
Spindle’s brand promise is simple: Simple, Mobile, and Secure. Enabling payments based on how parties desire to enable payments and based on their specific needs and situations. Facebook payment and commerce direction should be as flexible as its users are diverse. From a functionality and flexibility standpoint, Spindle delivers enhanced PayPal, Square, Dwolla, GreenDot, and BillMeLater capabilities through a white labeled process, or in the case of Facebook, a platform which enables all of their users. Spindle’s Chief Architect developed Sabre and Amadeus, the two global leaders in GDS, and their platform scales intelligently with user demand. This means Facebook, Bank of America, SK Telecom, etc. will grow with the system and are not required to develop continual infrastructure upgrades to meet demand.
From a financial perspective Spindle is a low cost inclusion that would add tremendous value to Facebook, opening up a completely new business vertical. Square currently argues a billion dollar valuation based on their aggregation model and merchants. eBay just acquired Braintree last week and continues to tout the value of owning the payment systems which drive their online and mobile auctions. Amazon, Overstocked, and other major networked retailers feed their largest competitor, eBay, through the use of PayPal (most of which drops to the bottom line for eBay). PayPal is worth billions to the value of eBay yet it locks-out 3,000 banks and institutions.
Spindle, on the other hand, delivers increased features and functionality at just a mere $26M current valuation.
Facebook has the capital to acquire most companies in the payment space and most would be happy to join the team, however with Spindle they would not need to acquire five or six companies to gain the comprehensive offering Spindle alone would afford them. Spindle’s intellectual property also provides a strong barrier to entry against other mobile payment companies that have only been in business a few years and do not own any intellectual property.
Are you listening Mark Zuckerburg?
The following is a guest post by fellow investor mobile guru, whose interest lie within the mobile revolution, start-ups & IPO’s, and intellectual property.