(Content originally posted on HLNTV.)
Are you surprised that Facebook wants to enter the online banking business? Or become an online stock trader? Or be a place where you can find your next job? Or let you share all your musical likes? Or be your local movie theater?
Some might even ask, “Is Facebook taking over the world?”
The day Facebook went public was the day it stopped being able to answer only to itself. But note this: Being beholden to the public actually means being beholden to Wall Street—a Wall Street that demands a steady increase in revenue, whether done through advertisements, sale of goods and services, licensing fees, revenue shares, or any other business model.
And herein lies the crux of what we see happening in and around Facebook with its foray into the world of online banking, jobs, music, movies, and more. Facebook must find more and more avenues to make money or its stock will continue to be challenged.
So is it really surprising that Facebook appears to be entering into every type of activity that humans do in today’s commercial society? Facebook was originally grounded on the oldest activity on the planet Earth – socializing. Facebook took something so basic and core to the existence of the human race and simply put it online. And nearly 900 million people showed up.
Now Facebook is looking for ways to help these 900 million people do everything else they already do in their physical lives – bank, listen to music, watch movies, look for jobs, and perhaps in the future buy books, give gifts to their friends, and on and on and on.
And the magic in all this is that Facebook doesn’t even have to do any of it on its own. It simply has to partner with the businesses that are already doing it in the physical world.
Facebook has what all these businesses want and need – a deep understanding of its millions of people. These businesses have what Facebook wants and needs – the ability to sell a good or provide a service with a solid revenue stream to go with it. To capitalize on the relationship, Facebook can give access to its people and take a snippet of every transaction done through its new business partner.
Snippet by snippet, the gold mine will grow and Wall Street will stop scowling and start smiling.
By getting into online banking in particular, Facebook can develop a solid transaction gateway without all the hassles that the heavily regulated banking industry has to face every day. Even the security of the transactions remains the problem of the banks.
But the one thing Facebook can’t hand off to its newfound business partners is trust. The trust we all place in our Facebook friends will without question be exploited by those intent on committing crime like identify theft, fraud, and financial theft using basic phishing scams. Facebook will have to increase awareness of these scams and provide what I call “teachable moments” to prevent victimization.
Facebook users should also expect more targeted advertising based on the types of Facebook services they engage with, the friends they interact with, and the types of goods and services they purchase. Debates rage on about the pros and cons of targeted advertising, but the reality is, it’s here to stay and Facebook will use it like every other online company that’s built on advertising.
At the end of the day, it may feel like Facebook is taking over the world, but the one thing it can’t take over is user trust, which brings customer loyalty. This it has to earn just like every other business does – by putting customers’ needs and wants first.
Whatever Facebook does to get a bunch of short terms wins, it will certainly lose in the long term unless it gains user trust. Only then will it have 900 million loyal customers anda Wall Street full of smiles.