The Financial Times reported late yesterday that the leading social network is "only weeks away" from launching a service that would allow users to pay each other. The paper said Ireland would authorize the bank to become an e-money institution and that Facebook was exploring a partnership with a digital payment processing company. Facebook shares climbed 3% by 11a.m.
Facebook's reported foray into payments is not surprising given the trajectory of other major Internet players such as Google (GOOG) which has an e-wallet product. Diversifying revenue streams away from advertising is necessary for large Internet companies to keep growing at the double digit rates that justify their earnings multiples. The global online advertising world is $121 billion and growing at a rate of about 6.8%, according to a report this month by Zenith Optimedia, a unit of advertising giant Publicis. Facebook revenues grew 55% last year. It trades at 35X anticipated 2015 earnings.
However, investors on StockTwits.com wondered whether a payment service was a good option for Facebook. They said that CEO Mark Zuckerberg could overpay to enter the space, as some argue he did to enter the messenger space with the $19 billion acquisition of WhatsApp and the virtual reality world with a $2 billion purchase of Oculus VR.