Facebook partners with world’s largest carriers to bolster mobile web-based payments

  • SHARES

By Kim-Mai Cutler Comment

Facebook has partnered with some of the world’s largest carriers to make the experience of paying with Credits more seamless on the mobile web.

The company has done a deal with AT&T, Deutsche Telekom, Orange, Telef√≥nica, T-Mobile USA, Verizon, Vodafone, KDDI and Japan’s Softbank Mobile Corp to let Facebook users pay more seamlessly with Credits through carrier billing. The deal comes at a critical time for Facebook as Apple’s iOS and Google’s Android platforms threaten to cut the social network out of influencing and earning revenue from the mobile app ecosystem.

Facebook’s chief technology officer Bret Taylor said that the current system for making web-based payments has too many friction points to make it useful to consumers or developers.

“Right now, the payments experience on the web is just broken for end users,” he said in a keynote at Mobile World Congress in Barcelona. “Even with operator billing support, most require a step called SMS device verification. That means if I’m in the middle of the game and I want to pay 99 cents, I have to wait for an SMS to arrive.”

After that, the user has to verify that the device is connected to their Facebook account.

“Then I have to awkwardly memorize the code and resubmit the transactions,” he said. “If I manage to make it this far, then I can finally go back to playing the game.”

With the new solution, third-party developers will be able to integrate a single SDK that lets their players charge their monthly phone bills in a single step through Facebook.

Having a fluid payments flow could go a long way in convincing developers to spend as much time on their HTML5 apps as they do on their native ones. To make HTML5 viable for mobile developers, Taylor said Facebook needed to focus on three problems: 1) discovery 2) fragmentation and 3) payments.

Facebook is addressing discovery with new viral channels for mobile apps that it launched last fall. On the second problem, Facebook also announced an industrywide group today that will push mobile web standards forward in concert with the W3C, or World Wide Web Consortium.

The payments agreements address the third problem. The only thing that seems certain about this new arrangement is that Facebook must be paying a lot — if not nearly all — of its 30 percent revenue share to carriers in this deal. Google knows this situation well, as it had the same hurdles in negotiating revenue share for carrier billing on Android.

The other problem that Facebook is confronting is that it likely only has a tiny percentage of users that are sharing payments information with it. Apple has more than 250 million iTunes accounts with billing information attached to them. In contrast, I would bet that Facebook has payments information or credit card data on around 30 million users or less, considering that around half of its 845 million monthly actives play games, and then 2 to 6 percent of those monetize through virtual currency purchases. The platform’s biggest developer Zynga saw only 2.9 million of its 153 million monthly unique users pay for virtual currency last quarter. So Facebook is likely facing the same uphill battle Google has been dealing with in convincing more users to pay on its Android platform.