6 ways David Marcus transformed Facebook payments

August 12, 2020 12:01 AM

It was an attention-grabbing decision when Facebook hired PayPal's president, David Marcus, in 2014. At the time, Facebook didn't have much of a dedicated payments business to speak of; when people thought of spending money on Facebook, they typically thought of in-app purchases in Farmville.

What was more confusing was that Marcus wasn't helming a new payments unit but instead Messenger, a chat app with no built-in payments capability. The obvious path would be to shoehorn a P2P payments functionality, making Messenger operate more like Venmo. But that wasn't meant to be the endgame.

"We have a lot of work to do and we could take the cheap and easy approach and just try to put ads in or do payments and make some money in the short term, but we're not going to do that," Facebook CEO Mark Zuckerberg told analysts in 2014.

This story was compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald, David Heun, Michael Moeser and Daniel Wolfe.

Management style

David Marcus, president of PayPal Inc. poses for a photograph with a new chip-and-pin payment device for small businesses at the Mobile World Congress in Barcelona, Spain, on Monday, Feb. 25, 2013. The Mobile World Congress, where 1,500 exhibitors converge to discuss the future of wireless communication, is a global showcase for the mobile technology industry and runs from Feb. 25 through Feb. 28. Photographer: Angel Navarrete/Bloomberg *** Local Caption *** David Marcus

Angel Navarrete/Bloomberg

What's it like to work for David Marcus? One of the few public insights into his management techniques came from a leaked memo in 2014 that VentureBeat described with the headline: 'PayPal chief reams employees: Use our app or quit.'

The Marcus memo reportedly criticized some PayPal employees for forgetting their PayPal passwords and refusing to install the PayPal app during a mobile payment test. By contrast, other employees were so motivated to use the PayPal app that they hacked into Coke machines to force them to accept PayPal payments, Marcus said in the letter.

“In closing, if you are one of the folks who refused to install the PayPal app or if you can’t remember your PayPal password, do yourself a favor, go find something that will connect with your heart and mind elsewhere," the email concluded, according to VentureBeat.

While some saw this as harsh, others saw it as motivational. Anuj Nayar, who worked at PayPal for a little over nine years and was there during Marcus’ tenure from August 2011 through July 2014, told PaymentsSource that he “loved working with David at PayPal," and that the VentureBeat story "showed his passion for products."

Modernizing Messenger

David Marcus, VP of messaging products speaks during the Facebook F8 Developers Conference in San Francisco, California, U.S., on Tuesday, April 12, 2016. Facebook in the last year or so has started to shift Messenger -- which more than 900 million people use each month to exchange text messages and silly Gifs with their Facebook friends -- into a way for businesses to interact with their customers. Photographer: Michael Short/Bloomberg *** Local Caption *** David Marcus

Michael Short/Bloomberg

Even though Zuckerberg promised Facebook wouldn't simply add payments to an existing product, it was still low-hanging fruit to add such a capability to the Messenger app. In less than a year, Marcus did just that, allowing the social network to have a product that compares to Venmo but also built on its own history with payments.

"A dependable and trusted payments processor for game players and advertisers since 2007, Facebook processes more than one million transactions daily on the site and also handles all the payments processed on Messenger," Facebook said in a 2015 blog post.

Messenger also added invoicing partnerships with PayPal and brought payment functions in closer proximity to advertising.

When Marcus left PayPal, he explained the decision by saying: "I realized that my role was becoming a real management one, vs. my passion of building products that hopefully matter to a lot of people." At Facebook, Marcus once again had a product to build on and improve.

Unchained

David Marcus, head of blockchain with Facebook Inc., waits for the start of a Senate Banking Committee hearing in Washington, D.C., U.S., on Tuesday, July 16, 2019. Facebook won't launch Libra, the controversial cryptocurrency it's planning to build with dozens of partner firms, until regulators' concerns are fully addressed, according to Marcus. Photographer: Andrew Harrer/Bloomberg

Andrew Harrer/Bloomberg

There's only so much Marcus could do with Messenger; his talents were soon called upon for a newer project: blockchain.

In 2018, Facebook put Marcus in charge of a group responsible for developing blockchain use cases at the social network. It would be the first of several moves for Marcus within Facebook, and it came in the context of a larger executive shakeup that comes amid backlash from the U.S. presidential election and ties to the Cambridge Analytica scandal.

But even with such a high-profile move into a relatively hot, new technology, Facebook provided little context on what exactly it was that Marcus was supposed to be building.

Face of Libra

Facebook's David Marcus and the 'Zuck Buck'

Andrew Harrer/Bloomberg

Marcus' work finally came to light in 2019 with the public reveal of the Libra cryptocurrency project, alongside a Facebook subsidiary named Calibra, which Marcus would lead.

The original goal was to treat Libra as a mainstream cryptocurrency, backed by a reserve of assets, with 27 partners including Coinbase, Mastercard, Visa, eBay, PayPal, Stripe, Spotify, Uber, Lyft, and Vodafone. But the regulatory backlash was severe for Facebook, and its partners started to drop from the venture.

Marcus soon had the unenviable role of defending the Libra project before the Senate Banking Committee.

Sen. Sherrod Brown, D-Ohio, the committee's top Democrat, said Facebook's past data security issues raise questions about whether consumers and policymakers should depend on the company for financial services.

“Now Facebook is asking people to trust them with their hard-earned paychecks,” said Brown. “It takes a breathtaking amount of arrogance to look at that track record and think, you know what we really ought to do next? Let’s run our own bank and our own for-profit version of the Federal Reserve for the world.”

Facebook was receptive to the feedback, and started to propose changes to Libra's structure, such as by backing the Libra currency with local currencies as a way to adhere to country-specific regulations.

Novi

David Marcus, vice president of messaging products for Facebook Inc., speaks during the Wall Street Journal D.Live global technology conference in Laguna Beach, California, U.S., on Wednesday, Oct. 18, 2017. WSJ D.Live conference brings together CEOs, founders, investors, and luminaries to discuss the global technology environment and how to move the industry forward. Photographer: Patrick T. Fallon/Bloomberg

Patrick T. Fallon/Bloomberg

To put some branding distance between Facebook and Libra, in 2020 the company chose a new name for its Calibra unit, with Marcus still at the head. “People were confusing Libra and Calibra all the time … in hindsight it’s hard to blame them," Marcus told Bloomberg News.

Under the new name "Novi" — a combination of two Latin words: novus, meaning “new,” and via, meaning “way” — the Facebook unit planned to launch a digital wallet for Facebook apps. By choosing the new brand name, Facebook also hoped to dispel concerns that Libra users would have to hold funds in a Facebook-owned wallet.

Facebook Financial

An attendee looks at a mobile phone while walking the demonstration room during the F8 Developers Conference in San Jose, California, U.S., on Tuesday, April 30, 2019. Facebook Inc. unveiled a redesign that focuses on the Groups feature of its main social network, doubling down on a successful but controversial part of its namesake app and another sign that Facebook is moving toward more private, intimate communication. Photographer: David Paul Morris/Bloomberg

David Paul Morris/Bloomberg

Without leaving his role in charge of Novi, Marcus will also oversee the newly created Facebook Financial — a team that absorbs the many payment capabilities that Facebook has created among its distinct business units including Messenger, Marketplace, Instagram and WhatsApp.

This also puts Marcus atop of a group that includes Facebook Pay, a digital payment system announced in November 2019 and run by fellow PayPal veteran Stephane Kasriel.

The reveal of Facebook Financial came several months into the coronavirus pandemic, which prompted an abrupt and strong shift to digital commerce and payments; Marcus' colleagues at PayPal reported their best quarter since spinning off from eBay in 2015. If Facebook is to keep up, it must make clear that it supports an entire payments ecosystem and not just a suite of disparate digital wallets.

“There is no value to Facebook if a user leaves their ecosystem to make a purchase, except for a possible piece of the transaction … increased stickiness along with the decreased friction of embedded payments keeps a user in the space and that’s a good thing for Facebook," said Thad Peterson, senior analyst at Aite.