Recent reports touted some big news in social media: Facebook was going to go head-to-head with PayPal by introducing a pay-with-Facebook mobile app. Technology observers and marketers got pretty excited about the idea, because if Facebook became the main route by which people shopped, it might become utterly and completely ubiquitous. Facebook addicts would never even have to click off the site to do their shopping. Really, they would never have to leave at all!

But the promise (or threat) is not quite what it seemed. Although Facebook is indeed pilot testing a new app that will allow users to pay for purchases from their Facebook page, it is not actually doing the payment processing itself. That is, it is not entering into direct competition with PayPal, which takes the responsibility for processing users’ payments to vendors.

Instead, Facebook’s main goal is, of course, gathering data. By convincing Facebook fans to enter their credit card information and shop through its site, the social media giant gains a new viewfinder into users’ behaviors. The app also promises greater convenience to users, who do not have to fill in their credit card information each time they want to make a purchase through their mobile device.

The greatest benefit might be for advertisers though. By mediating the connection between shoppers and providers, Facebook gives online advertisers new and compelling insights into what drives people to buy. These real-world spending data (unlike surveys that predict behavior) also help advertisers target the right people at the right time with the right offer. For example, imagine a Facebook user clicking on the newest pictures of her infant nephew. A targeted advertisement might offer a great price on a plane ticket to fly out to meet the new baby.

As long as data collection is its goal, Facebook’s payment option seems poised for success. However, as a strict moneymaker, Facebook has a less stellar track record. Its Gifts app, which allows users to send presents to their friends, has never generated any significant revenue, for example.

Source: Jennifer van Grove, “Facebook to Take on PayPal? Not so Fast,” cnet.com, August 15, 2013