Facebook sees strong potential in its Oculus VR platform, but it won't get there without overhauling the way the social network handles payments.
In highlighting AR/VR as "something really powerful" and the fact that Facebook Marketplace gets one billion visits monthly, CEO Mark Zuckerberg acknowledged transacting on Facebook must be made easier.
"On the commerce side, part of this is motivated by wanting to help out small businesses to sell more across our platform, but a lot of it is trying to make the consumer experience better," he said during the company's Wednesday earnings call. "Right now, someone will click on an ad, and it will go to a website, which may not have full context on who you are — and the payments experience will be clunky because of that."
Oculus has benefited from the boom in video game sales that occurred during lockdown. The platform recently added a subscription payment option (primarily for Peloton-style fitness apps) and unveiled plans to port the popular Resident Evil 4 horror game to the Oculus Quest 2.
Revenue from e-commerce transactions and AR/VR rose 146%, to $732 million, in the first quarter of 2021 compared to a year earlier. More growth is possible as long as Facebook smooths out the customer experience.
"When it is seamless, it bolsters a better experience, but also converts better for businesses," he added. "Having built out this robust ad system, we will work our way down the business experience from there … over time, as our payments experiences get better and we have more credentials on file, I would imagine going all the way through the (transaction) funnel is what people will do."
Facebook Pay and the ongoing development and eventual rollout of the company's Novi Wallet for use in the Diem (formerly Libra) payments system would all have vital roles in creating a cohesive payment system that is easy for users, Zuckerberg added.
"We want to enable payments very easily to make it so that the economics all work out for developers," Zuckerberg said.
In late 2019, Facebook prepared for future marketplace growth expectations by consolidating its payment services across the main Facebook app, Facebook Messenger, Instagram and WhatsApp.
The company also was hoping to pick up its share of consumers who were used to making P2P payments through other apps, with
Facebook Shops launched in mid-2020 to support the online shopping experience, mostly to enable businesses to more easily create an online store on Facebook or Instagram.
Facebook has put much of its focus of the past two years in making the marketplace and in-app commerce appealing to sellers, but Facebook Chief Operating Officer Sherly Sandberg agrees the company wants to help boost the customer experience in making transactions easier on the platform.
"We have launched a lot of the shopping tools, and that has been good," Sandberg said. "We really need to work on the consumer side of the experience. It is going to take some work and some time … I'm very optimistic about our opportunity here, but it is going to take some real work."
Facebook reported net income of $9.5 billion for the first quarter of 2021, a 94% increase over the $4.9 billion year-over-year. Revenue came in at $26.1 billion, a 48% increase over the prior-year quarter's $17.7 billion. Advertising revenue was at $25.4 billion, a 46% jump over $17.4 billion a year earlier.
The company reported daily active users rose 8% for the quarter, year-over-year, at 1.88 billion on average. In the most vital category, monthly users were tallied at 2.85 billion, an increase of 10% over last year. In the U.S., daily active users remained flat at 195 million.
Facebook faces some uncertainty moving into 2021, with the Federal Trade Commission examining the company's acquisitions of Instagram and WhatsApp. Furthermore, Apple's iOS 14.5 update this week requires apps to ask for permission to track people's activity online, potentially hindering Facebook advertising strategies and operations.
David Wehner, chief financial officer at Facebook, said the company continues to be concerned about iOS 14.5, mostly for businesses and advertisers operating on Facebook. It will determine what it needs to change on its platform and work with advertisers, but Wehner said the Apple decision could trigger similar scenarios across the technology industry.
