Full transcript: Facebook Messenger head David Marcus on Recode Decode

On this episode of Recode Decode, host Kara Swisher hands the mic to Recode’s Senior Social Media Editor Kurt Wagner, who visited Facebook’s Head of Messaging David Marcus at the company’s headquarters in Silicon Valley. Marcus, who was previously the president of PayPal, now oversees Facebook Messenger and its 1.2 billion users. The two discuss why Marcus didn’t become a banker, Messenger’s strategy and how bots can and can’t be successfully deployed in a messaging environment.

You can read some of the highlights from the interview at that link, or listen to it in the audio player below. We’ve also provided a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Google Play Music, TuneIn or Stitcher.

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Kara Swisher: Hi, I’m Kara Swisher, executive editor of Recode. You may know me as the person on the street telling you to stop looking at your phone, for fuck’s sake — unless you’re reading recode.net, of course. But in my spare time, I talk tech, and you’re listening to Recode Decode, a podcast about tech and media’s key players, big ideas and how they’re changing the world we live in.

You can find more episodes of Recode Decode anywhere you listen to podcasts. We’re on Apple Podcasts, Google Play Music, TuneIn, Stitcher, Soundcloud, and more. Or just visit Recode.net/podcasts for more.

Today, I am once again handing the reins over to Recode’s Social Media Editor Kurt Vogner, also Kurt Wagner. He recently spoke to Facebook’s Head of Messaging David Marcus at the company’s headquarters in Silicon Valley. Before he came to Facebook, David was president of PayPal. Now he oversees Facebook Messenger, which has 1.2 billion users. Take it away, Kurt.

Kurt Wagner: Thanks, Kara. I’m here at Facebook headquarters, the old headquarters, not the new headquarters, with David Marcus, who’s the head of all Facebook Messenger. David, how are you? Welcome to the show.

David Marcus: Thank you, I’m good.

I have a million things I want to talk to you about, but I want to set the stage here, ’cause we’re at Facebook HQ, but the old HQ. You guys got the new big building across the street, but this is building 15. You guys slum it over here, I guess at the old sustainable home that was Facebook, or still is Facebook. Is this your building specifically here? You guys have the whole thing or what?

Yeah, so we actually moved back from the new fancy building, 22. It’s not actually that fancy. And we came back to the old, what we call Classic Campus.

Classic Campus. What was the impetus for that?

Well, you know, we kind of ran out of space in the other building, and I personally prefer that side of their campus than the other side. I think the outdoor space is nice, and the fact that we could have all of Messenger under one roof was a big driving force, because it’s kind of a nice space for the team to get together and to really understand that this is the Messenger HQ.

Yeah, so you guys are all together. I didn’t know you could run out of space at the old one, but I’ll take your word for it.

So I want to kind of get into how this whole thing is structured, but before we do that, I kinda want to hear a little bit more about you. I’ve interviewed you a bunch of times, we’ve chatted a bunch. But I was realizing as I was preparing, that there’s still a lot about you that I don’t actually know. So maybe we could try and figure out how you made it here to Facebook. I know you were born in France.

That’s correct.

How do you get into tech entrepreneurship from France? Did you go to school to be, were you interested in tech from your childhood?

I actually fell into tech very young. So, I was fortunate enough to have access to a PC when I was 8 years old, and was completely fascinated by the world of technology from that age. And then I grew up in Switzerland actually. I was born in Paris, stayed there until my early teens, moved to Switzerland after that with my parents, and then followed the typical Swiss framework of “you’re going to work in a bank” or something. But went to university in Geneva. Then dropped off for family reasons, where I needed to go to work to support a family overnight, and ended up working in a bank for a year, which I really didn’t like.

I didn’t know that was a real thing that happened. I thought that was just a cliché.

No, no. It’s not.

It’s the banker thing.

It’s the thing. And then I actually realized I didn’t like being at a bank, because I was working in all kinds of financial-related things while building all of the PC infrastructure of the bank on my free time. In ’95, the telecommunications market opened up in Switzerland, and I decided I was going to build a fixed-line telco to start to compete with the established incumbent in Switzerland, and that was the beginning of me starting companies.

Were your friends like, “Yo man, what’s the deal? We’re bankers over here. What are you trying to get into this telco stuff for?”

Yeah, it was pretty much that.

That was the vibe? So you get into the telco industry. I believe you’ve started a handful of companies, right?

I did.

Three or four?

Yeah, GTN was the telco, which I sold in 2000. Then started Echovox, which was kind of this mobile media entertainment company, mostly focused on the European markets, which actually created another company called Vox Telecom as well, and Zong. Which ended up being the company that I came here to the Valley to build.

Zong is what brought you to Silicon Valley.

Yes.

Tell people what Zong is. What a name, by the way. Did you come up with that name?

Well, we wanted a really short url.

Punchy. It’s very punchy.

Punchy. And that worked, that had a .com that was affordable.

Okay.

And Zong was, and still is, without the brand, but still operates on their PayPal, a mobile payments company that leveraged the carrier infrastructure, mobile operator infrastructure, to process payment. So we basically cut deals with about 250 mobile operators around the world, and at that time it was really focused on digital goods. So that was my first interaction with Facebook.

In 2008 when Facebook had the first virtual gift stores, and then Facebook credits, and all these things, basically if you were buying a virtual cow on virtual farm on Farmville, and you were using your credit card, halfway through entering your 16 digits and you’re like, what am I doing?

Right.

So removing all kinds of friction in the payment experience with mobile payments was actually very effective in increasing conversion.

So I could buy my fake farm or whatever through my telecom provider, and then they would just bill me with the rest of my bill?

Correct.

I guess I didn’t realize. I mean I knew, but I didn’t realize that you’d kinda been working with Facebook for quite a while then.

Yeah.

Zong gets acquired by PayPal.

Correct.

You had a nice job at PayPal. You were the president of PayPal, right?

Well, that didn’t happen immediately.

No, but it was over a couple of years.

Nah, it actually happened pretty quickly. Not immediately. So I joined and took over the leadership for the Mobile group at PayPal, that was focused on building the mobile side of the house, which really needed to be the next big thing because people were moving away from desktop to mobile. And then five months-ish in, Scott Thompson, who was then leading PayPal, left for Yahoo and, to my surprise, a month later or so, I was asked to take over.

That’s pretty immediate in the world of executive shuffling, I would say.

It is. Yeah.

It’s fast. It’s fast. So, my point being, you had a nice job. You had a good job at PayPal. I’ve always wanted to ask you, what led you to want to come to Facebook? You had run a lot of startups, you had grown your own businesses. Here you were joining a company that was not a startup anymore. It was very big. What was it like? Did Mark Zuckerberg give you a call? What was the recruiting process like?

Yeah, it definitely started like that. But the big thing is, I think that actually being the president/CEO of a very large public company is very overrated. I’m not sure that a lot of those CEOs are actually that happy, although they can’t say, or they can’t tell. Because you can’t admit that it’s not a happy place. But it’s not a happy place, especially if you liked to build impactful things and being involved with the creation process of great products.

You don’t get to do that that much. You’re focused on culture and processes and making sure that all the trains leave on time and that you can actually drive the future of the company in the right direction. That part is actually quite interesting, but we went through a massive, massive culture change at PayPal when I took over, and we were coming on the other side of it, after having acquired Braintree, after really reinjecting some talents that could actually basically bring PayPal back to its technology roots. And at that point, I was starting to think about moving on.

That’s when Mark reached out. At first, I was like, “No, I don’t think this is right.” But he had a very compelling vision for the future of messaging and how important messaging was going to be in the world, and especially the assets that were early stage at that time that Facebook had, and the unique position that we had to really have a massive impact. And that ended up convincing me.

What was his pitch to you? I know you said it was compelling. I think at the time, Messenger was still just a part of Facebook. It was the one-to-one chat option, but within the Facebook app. At that point, was he like, “Hey, we’re going to spin this thing out, it’s going to be its own business.” Already, did he know that?

Yeah. And the Messenger app already existed back then. You still had the ability to message within the Facebook app. There was a real vision here of building an important platform for the world using the assets that we had. It was a very compelling vision over the very long run. And when you think of all the platforms that come of age, messaging seemed to be at that time, according and through Mark’s lens, a really big and important platform for the next decade.

And then I’m like, okay. I can go start a new company, I can stay at PayPal, I can go do other stuff. But it felt like the opportunity of building a huge platform that connects not only, that would connect over time, billions of people, and now we have 1.2 billion people using the product every month. But also on the other side, tens of millions of businesses and create a very compelling platform that would completely reinvent how people communicate, not only with one another and their loved ones, but also interact with businesses and services of all kinds. It was a very compelling proposal, especially at that scale.

Right. You said that running a publicly traded company isn’t always as glamorous as perhaps people think. I kind of think of you as the CEO of Messenger. I know that’s not technically your title, but you run Messenger. What’s the biggest difference between being a CEO below the CEO versus the guy who has to be on the earnings call every quarter?

Well, not being on the earnings call.

Okay, well, there’s one obvious one.

No, I mean, it’s actually that. You get to work with your team and with other teams that we also worked very closely with, whether it’s the ads team here, or the global marketing solutions team here, or other platform teams at Facebook. But you work with your team, and you get to come to work every day, and you get to actually dream of the things that you want to build in a product that touches the lives of 1.2 billion people. And you do that with the absolute best infrastructure anywhere in terms of the ability.

I mean, we ship a new version of Messenger every week for Android, for iOS, and for all of the languages that we support across the world. And so the ability to build capabilities, to build the product at that scale with that velocity, and focus most of your time on that rather than all of the externalities of running a large company, it’s great. It’s a very rewarding thing to actually focus on that.

Do you guys have a nickname? When a private company gets a billion dollar valuation, they’re a unicorn, right? I don’t think there’s a nickname for a billion user product. Do you guys just call it, do you get to walk around campus with an “I’m a billionaire” mug or something like that?

I don’t think that would work very well ...

That wouldn’t fly here? We’ll come up with a name after this. One of the very first things that you did ... So you leave PayPal, here you are at Facebook, Zuckerberg sells you on this great platform vision for what he has for Messenger. One of the first things you did was pretty much anger all the Messenger users because — and not you specifically, but Messenger got pulled out of the Facebook app and people were like, whoa. Now we have to download this mobile app.

What was that experience like for you? ’Cause you had just joined when that had happened. Were you sitting there going, “Uh, what’s going on?” Or were you pretty confident? What was the backlash like?

No, so first of all, this was a decision that was already made during that summer, and I knew it was going to happen. And yes, the backlash was very real, but I think that it was a very, very clever move. For many, many reasons. Like, number one, you cannot be a main, core messaging app, because it’s top intent is for people to go to a phone, tap on that icon, and message people or receive messages.

If you’re actually embedded in an app that’s already very big and has a bunch of functionality attached to it, you can’t win. So the whole concept of separating Messenger had two objectives. One was to create a really best-in-class messaging experience. Two was actually that when you message one another, you need to make sure the person on the other end responds really quickly. And if you don’t have push notifications turned on for the entire network, it just doesn’t work.

Mm-hmm. People miss messages, basically.

Yep. And if they miss messages, then you text them or you use whatever other mechanisms you have at your disposal to actually message them. And the second-order network effects of even a few people not responding are really, really bad for a messaging app. So that enabled us to really get to a place where almost every single person using Messenger has push notification turned on, which is not the case on Facebook. And it also enabled us to decouple the code base so that we could iterate really quickly and build product and capabilities much faster.

So that’s the kind of stuff that someone inside the building would certainly know. For those outside the building, that wasn’t as clear, right? Was there ever a moment where you said, “Oh my gosh, what have we done? I’m seeing all these people freaking out."

No.

You were never concerned?

No. You know, look. This whole app thing happened, I think it was my week two or three here, so I had to deal with my first crisis right away.

Welcome to Facebook.

It was great. But the reality, though, is I knew this was the right thing, and I actually really appreciated the fact that I joined a company that had the foresight and the courage to make a hard decision to deliver a better product experience even though it wasn’t evident for most people at the time. And when you look back, if you look at the number of messages that were sent on the Facebook messaging stack when it was part of Facebook and the number of messages that are sent on Messenger, it’s not even close, right?

So, people are more engaged. They send more messages. They’re starting to make Messenger for some of us our main primary messaging app, rather than this thing that it used to be for your friends you didn’t have a phone number for. So, it is changing. It is working. It was the right decision. I think we educated decently well on it, and the results are here.

Yeah, we’re going to talk about them in just a second. But I’m going to take a quick break, for a word from our sponsors.

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I’m here at Facebook headquarters, the classic campus, with David Marcus who runs messaging products for Facebook. We were just talking about the decision to take messaging, create its own app, you alluded to how this has kind of been able to let you guys build all kinds of features, which I want to get into now.

The way that I think about Messenger, and I want you to correct me or tell me how great my idea is, I know it’s super original. A lot of people are looking at a WeChat. Which is in China, for those of you who are unfamiliar. It’s a messaging app, but it does so much more. People are paying their bills, or booking travel, they’re going shopping, and they’re doing it all within one central app.

I think when people think about the Messenger strategy, and I know do, I think of that. I think of that as what you guys are aiming for. Is that right? How do you describe what you guys want to accomplish here?

I think it’s a bit different than WeChat, and the reason is, when WeChat started building capabilities, they were the app in China, where everyone was. And everyone was using WeChat for communications, and then they built this whole platform, an ecosystem around it, and basically there’s no such thing as dedicated apps to perform those tasks.

Here it’s a little different because we have a vibrant app ecosystem, and for all of those things that you’re going to use regularly, as in daily or weekly, you’re going to most likely going to an app. That’s not the case in China. You want to hail a taxi, or something, you do it through WeChat. You don’t have Uber and Lyft set up. So for those things, I feel like we are at a point where it’s pretty clear that apps are the way to do this.

So our approach is actually slightly differentiated in the sense that we have 1.2 billion people using the product every month, and on the other side of the network, we have 70 million businesses that are active on Facebook network, on Pages. And if you look at the interactions between people and businesses right now, they’re still fairly broken. The vast majority, 65 percent of the interactions that are not in person between businesses and people are still conducted over the phone, which is very unpleasant for us consumers and very costly and impractical for businesses as well.

And so the real question here is, as a baseline, can we reinvent how people interact with businesses and services, and if it’s services, then what are those services that are actually not making the cut of that home screen of yours for apps, and that could work inside of a conversation in Messenger where you have the identity of both parties and you have all of these tools that we’ve built on the platform?

When you describe it that way, it sounds a little customer service focused. Is that by design? Is that just one use case in your mind? Is that the biggest use case?

Well, actually it’s not only customer service. Clearly customer service is product market fit because no one likes to call a large company and stay on the phone for 15 minutes.

Sure.

It’s got a bunch of disadvantages, like it’s synchronous and not instantaneous. You have to stay on the phone, you can’t put it down and go do something because the other person is going to pick up the phone at the time you’re going to put it down and they’re going to hang up on you. It happened to us many many times. And so messaging has a lot of advantages. One is, it’s instant but asynchronous, and you’ve got notifications to bring you back when it’s worthy of your attention.

You can go live your life while you’re waiting on it.

Yeah. And it’s got identity, and it’s got context — unlike email, by the way, that doesn’t have context every time you start a new conversation. It’s a new thread. So it’s got a lot of advantages, where actually customer service on Messenger is probably an order of magnitude better than calling or emailing a company. But that’s not the goal, right? When I talk about interactions between businesses and people, you have all kinds of different interactions. And now, more and more, you see companies thinking about the customer journey. And customer journey starts from consideration, goes all the way through customer acquisition, through servicing, and through providing the actual service, because servicing can have two definitions ... which are actually providing the actual service you’ve sold or are offering for free, and actually providing customer service. And all of these lines are blurred.

The whole notion of the phone tree of you wanting to press 1 for the sales department, press 2 for customer service, consumers don’t think about it that way. They just want to interact with a company. It turns out that sometimes they interact with a company to buy something. Sometimes they are subscribed to something and they get value from it, from the content or the service. And sometimes they just need help, which is customer service. So customer service is only one small part, important, essential part, of what we’re building.

But not the whole thing. So how do you change the mindset then? If, ideally, I’m going to talk with a brand about a recent purchase, my gut instinct is to pick up the phone and call. Maybe send an email. I don’t think to say, I want to find that brand on Messenger and basically text them.

That’s right. Yeah.

How do you change that? How do you get people to say, “Oh yeah, I should go to Messenger for this?”

Well, there are two ways of doing this. The first one is to actually get people to start their intent of finding businesses and communicating with businesses and interacting with them on Messenger. You need to have enough of those businesses and you need to have enough interactions ...

They need to be there when I go to look for them, right?

Exactly. And you need to have had enough interactions in the past, because we know how hard it is to build new habits. So unless you’ve had like six, seven, eight, a dozen, whatever it’s going to take, interactions with businesses on Messenger, you’re not going to start going to Messenger to find those businesses. So there are two angles to that.

One is actually, more and more, getting businesses to direct people to Messenger from properties that they own. So in your case, if you’re thinking about a business, you’re most likely going to go to their website and try to find their phone number, their contact page, or something. And so we have plugins there that in one tap can take you from there to a conversation in Messenger. And now, more and more what we’re also doing, if you’re called a company, they can send you a text message and say, “Hey, skip the line and chat with us right now. Here’s an m.me url.” You tap on it and get into a conversation in Messenger. So that’s on the companies to basically do that.

And then on the other side of that, what we’re doing and what we announced at F8 is we’re now rolling out a discover interface inside of Messenger where you’ll see all these businesses. And gradually when you go there, and combined with the first part of the effort which is absolutely essential, we think that over time we can build that habit. And the nice component of this, which makes me think we’re actually going to be successful at this, is that businesses are actually having unbelievable business results.

When you look at large mobile operators that are increasing their customer satisfaction by 65 percent by providing service on Messenger, you look at conversion rates for people who are acquiring new customers that are three times as high as redirecting to a mobile webpage, and you start thinking. Okay. The thread, the conversation, is the place that is going to deliver all of that customer journey interaction and lift for the business that we’re talking about.

Are businesses excited about the idea of directing people to a new destination? I imagine that at the very least, the phone and the email stuff, they probably got down. Maybe they’re not good at it, but they at least know how to do it. Is there any thought of hey, we’re going to incentivize you financially to use something like this, or is it simply it will be a better experience?

The best financial incentive that businesses can have is driving better outcomes for themselves. And that’s what’s happening. So it’s hard, at first, because you need to think about your operations and the way you run things a little bit differently. Sometimes you need to work with third parties to add automation, but the lift that they’re seeing, whether it’s conversion for acquiring new customers or customer satisfaction lift on providing customer service, is such that it’s become a no brainer for almost every business out there.

For them to use it.

Yes.

A little more than a year ago, you guys started rolling out bots. Like a bot platform to basically automate some of this interaction that we’re talking about. I think I’ve heard you, and I think I’ve heard Zuck say, these bot things have been maybe a little overhyped. I know there was a lot of talk when you guys first announced it. People were like, “Oh, we’re going to talk to a human-level AI,” and then they ended up getting something a lot less than that. What did you learn from the bot rollout from a year ago?

Well, I think that it’s always interesting to see how enthusiastic people can get when you open a platform that was then leading to 900 million people on the other side. It generates a lot of excitement.

Yeah, there was a lot of excitement around it.

And then, the learning is really that if you’re trying to push for something that has a different user experience and user interface, then you have to assume that there is going to be a learning phase of trying to find out what’s the right balance of the different elements that you can put into a conversation to make the experience awesome.

And at first everyone, to your point, over-rotated on it. Rotated on, okay, this is actually the power of the conversation, and everything needs to be conversational. And the reality of it is, if you can tap on a button that has a word in it, rather than typing it, you’d much rather do that, right?

Mm-hmm.

And so, the learning was, we needed to educate the whole ecosystem. We needed to build all kinds of different capabilities on a platform, and since the first F8, we’ve had like five major releases of the platform that added a lot of capabilities around UI elements and native elements and payments capabilities and more. And we’ve built a huge ecosystem of 100,000 developers that are building on the platform right now. And we’ve put in place systems and community systems so that we can share all of the learnings as a big community of developers, and the results are here now.

And I think also, the one thing that I’d say is that the intention was never to say to everyone, “You need to build a bot.” A bot is actually a term we use very freely with developers, as a means to say, “You can automate some of those interactions.” People, consumers, don’t want bots, or interacting with bots. What they want is interacting with businesses or services, and they really don’t care whether it’s automated or not automated, whether it’s actually a bot or not a bot. They just want a great experience.

And so I think from that standpoint, clarifying that if you’re a business, you can either completely manage whatever flow you want to manage manually with people, or you can automate some of it or all of it, depending on what drives the best outcome for you and your customers and provides the best consumer experience. And that’s a much better framing of what it is that we’re actually doing than having to think about bots as this thing that comes after ...

That replaces all human conversation.

Right.

Is there a downside to that over-rotation? Was there a user frustration, like, “Hey, I thought this bot was going to be great and now I’ve given up on bots.” Or a developer thing?

No. I mean, look. One of the biggest pushbacks that we had from the community, the developer community, is, “Hey guys, why don’t you have a discovery interface inside of Messenger?”

Right, hard to find the bots, basically.

Yeah. And, a whole point was, let’s first get great experiences on the platform, then let’s build the discovery service. Because to your point, you don’t want to lead many people to experiences that are far from perfect. And that’s why we took so long to actually build the discovery interface, because we wanted to make sure we all had the learnings, we built all the right capabilities to deliver great user experiences. And I think, by the way, this is not done. We’re in a much better place, but we still have a ways to go to create massively delightful experiences.

There are some on the platform, and a number of really cool experiences is really growing, especially around driving business objectives for companies and electing users, customers, on the other side of it because it’s easier for them to do things.

What is the most popular use case for bots right now? Is there a certain thing that either caught you off guard, or you’re like, we didn’t think people would use it in this way?

What we’ve seen is actually that a lot of the experiences that have to do with core interactions with businesses, whether it’s for commerce plus customer service, or customer service and then commerce, are actually working quite well. Brand activation stuff is working really, really well. So I gave a bunch of examples, but Absolut is one that I keep on coming back with, because they had this campaign where they were giving away free drinks.

Everyone loves free drinks.

Exactly.

That’s a pretty good campaign.

Right? It’s a popular thing. And, the original one was Facebook ad to mobile webpage. They tried to do Facebook ads to Messenger.

So you click on an ad in newsfeed, brings you to Messenger.

Bring you to Messenger, brings you to a thread, you have this virtual bartender you’re having a pseudo conversation with, you pick your drink, you say the city you’re in, and then you get a code that you show up with at the bar and you get a free drink. They’ve seen like 3X redemption rates.

Yeah, free drinks, that’s like ...

Free drinks! No, but that’s why I use this example so much. It’s like, it’s a free drink, so even there, a lot of people would go even on mobile web. And 3X more free drinks. And I can go on and on. There are a bunch of examples with subscription-based services where companies have built the experience inside of Messenger rather than redirecting to an app, and they’ve seen massive lift in conversion as well.

So you don’t just have to give away free alcohol to have a successful bot, is what you’re saying.

No, it’s not the only thing.

Great. I’ve got plenty more questions, but we’re gonna take another quick break.

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We’re back again with David Marcus who’s the head of messaging and Messenger at Facebook. We’re here at Facebook headquarters. So you were just telling me all about how to get some free vodka, which sounds pretty nice.

You really like this drink thing, don’t you?

You know your audience. You picked a really great example. But I want to talk a little bit about payments. Because this is what you did before you came to Facebook. When you and I last spoke, actually, I asked you about payments, and you were like no, I told you a million times we’re not doing payments, we’re doing ads, that’s how we’re gonna make money from this thing. I wrote a story and people were still surprised. Like there was still disbelief you were going to set up a conversation between me and Nordstrom, I’m going to order a pair of pants and buy them right within Messenger, and Facebook or in this case Messenger might take a little cut of that. You guys don’t want to do that? Why is that a bad business?

Well, it’s not necessarily bad business. It’s just that the goal here is to help businesses grow their business. And when you help a business grow their business, it’s a much better business ... Lots of businesses in this sentence ... than just taking a cut at the very end of the funnel. Which is A) a very different conversation, B) a much smaller cut than advertising per se, because a new customer from the top of the funnel is actually way more valuable than an optimization at the bottom of the funnel.

And so in your example, actually, those things are already happening right now. For instance, take all of the merchants that are on the Shopify platform, have a presence on Messenger. And by default, you can actually go there, look at product and buy product and do all these things, and it’s working really well, especially as a re-engagement channel for those companies.

But the goal here is that if we create a space inside of Messenger threads/conversations for businesses, and we create value for them, then they will buy ads to open more of these conversations. And then invest in that space, which is theirs, to actually provide an awesome experience to people. And that’s way more valuable than just closing the loop at the end. So the one thing I’d say is, we’re continuing to invest in payments, because we want to make sure that we can remove friction from that funnel, and we want to make sure that we can really create a flow of things that is uninterrupted.

You don’t want me to have to leave to go actually finish that purchase.

Yeah, because otherwise, you’re like, you’re in an engaged experience inside of a Messenger conversation, and then you have to leave it. It breaks. So we have to have the best possible payment experience inside of Messenger. That doesn’t mean that it will be our business model.

Gotcha. And so the way that it works now, I know that I could send you money. We could do peer to peer. We could get in a group of people and send each other money.

Yep.

Am I paying Nordstrom for my pants right within Messenger right now?

Yeah you are. I mean, not specifically Nordstrom ...

Not specifically me or Nordstrom, but are people doing that?

Yeah.

Can you tell us how many people are doing that?

No, we’re not sharing these numbers. But no, it’s definitely happening, and we have two modes of payments, by the way. We have what we call Payment Bubble, which is very appropriate for reorders. So let’s say you’re buying shaving blades or something, and you know exactly what you want. So getting a ping once a month from whomever you’re buying your blades from, and you tap, and in one tap you pay, is very convenient inside of that bubble.

The other thing we’ve done is also extend native payments to our enhanced mobile web views. So that you’re in a conversation, and within that conversation in Messenger, you load a web view and you can determine the height of that web view to still remain in context of the conversation you’re in with that business, and you see a product and you want to buy it. What we did was, we plugged into the existing checkout flows that those businesses have and bring just a sheet that’s native to Messenger at the time of payment, a real removal of friction.

So payments aren’t necessarily how you will make money directly, but you’re saying this is still a huge priority in terms of where you guys are putting time and resources.

Yeah, because again, if we drive business outcomes for businesses at a higher rate, those businesses will want to open more of these conversations, and as a result, will buy ads to open these conversations.

Yeah. So, moving then to ads, because that is how you guys are starting to experiment with revenue. It’s obviously how Facebook makes all of its money. You know, ads within a messaging inbox, that in a way feels more like a personal space. At least for me. A lot of my private messages feel different than my Facebook newsfeed, where I know that I’m sharing to friends or I’m reading from friends. How do you walk that like? I imagine you’ve thought of this. But how are you thinking about making sure that you can give someone a targeted ad that’s relevant, but also not freak them out because it’s all of a sudden showing up next to their text with their grandmother or whatever?

Umm ...

I know, do grandmas use Messenger? I imagine some do.

Yeah, of course.

Of course.

So, two things. First is, the first part of this are newsfeed ads that open conversations. And this is already out since late last year, and a lot of advertisers are buying those ads and directing people to ...

You mentioned that earlier, right? You click on newsfeed, it kicks you right into Messenger.

Right. And when you pause for a second and you think about it, the capabilities that we have when it comes to targeting the right audience for an advertiser, and then going from a group, a targeted audience, to one-on-one conversations — whether they’re automated or not — is pretty awesome. That combination is really awesome and very powerful.

So then the question is, okay, that’s the demand side of the advertising side. Can we create more supply for Facebook inside of Messenger? and that’s something we tread very carefully with to the point you raised earlier. Because we want to make sure that when people see ads inside of Messenger, it feels like it’s adding value to them and not subtracting value.

I’m actually pretty passionate about this. You know, ads sometimes have a bad rap with people. It’s like, “Oh, no ads.” But actually, the right ad at the right time for something you deeply care about is adding value, it’s not subtracting value. And not all ads are bad. Like if it’s an ad that’s not for you then it’s a bad ad and you never want to see it. But if it’s the right thing at the right time, it actually provides value. And so the question is, how do we do this in a way that’s additive, and not subtractive of value for people?

Would you consider an ad-free version of Messenger? Like, hey, if this just freaks you out, regardless of how accurate you think you can be with the ads, you can use Messenger ad free for whatever, two bucks a month or three bucks a month?

Well, traditionally, we haven’t done that with Facebook. So, unlikely.

Unlikely. So, you can’t opt out.

No, we just have to make it an awesome experience. And I think we have many opportunities. We have a discovery interface that’s rolling out, and in that discovery interface, it’s going to feel very organic for businesses to have sponsored placements. We don’t have this right now, and we’re not even actively working on this right now, but it’s a logical step forward. And as we’ve shared with you, we’re testing some form of ads in the inbox in Australia and Thailand right now, and we’ll see where we go.

But, we’re being very deliberate and very thoughtful about this because we don’t ever want to get in the way of you sending the message you want to send really quickly. And performance is a big deal, and we never want to get in the way of you actually seeing a message that’s going to you. So, it’s not easy to do, but we feel pretty confident that we can get to a good equilibrium with this.

We’ve talked about a lot of different things. Bots, payments, now advertising. You guys have obviously built a huge audience on other people’s operating systems, right? I mean, I’m using an iPhone. I’m using iOS. Or Android or whatever. But I also will say, I do the vast majority of my messaging through iMessage, partly because it’s built into the phone. Would you ever consider doing an OS? Taking a run at Facebook Phone 2.0 or something like that, where you actually control that ecosystem?

Not that I can imagine in the near future, no. I think the real question here, as far as I’m concerned and as far as Messenger is concerned, is can we build an ecosystem that serves the purposes of enhanced messaging? And when I say enhanced messaging, it means that you can do all kinds of different things that you cannot do anywhere else. So for instance, group video chats are extremely popular on Messenger, and people are using it more and more. And that drives even more engagement, not only on the video chats, but also on messaging. And you can apply effects while you’re on video chats. Like masks and all kinds of different things.

There’s a lot of startups right now that seem to be hot in that same space.

Yeah, but the thing is, actually when you think about group video chats with effects, I don’t think that there’s anything that operates at the scale that we operate on Messenger that enables you to do that with all of your friends, because they’re all on the same platform. So, this is really an area that we’re doubling down on and we’re investing on because we see that people really enjoy that real-time communication vehicle. So there’s all of that, there’s all the visual messaging and the enhanced messaging that we’ve gotten to a better place with our new camera and all kinds of different things.

So that’s one angle. And the other angle is just back to the question that you asked, can we actually be this place that connects all of the businesses and services that are already on Facebook to the 1.2 billion people using Messenger? And can we do it in a way that the experience for people is an order or two orders of magnitude better than what it currently is, because the baseline is really bad right now. And as a result, can we drive engagement, not only on the people-to-people side of things and group side of things, but also on the business side of things. And when you think about this, it becomes a platform in itself that’s connecting, that’s making all of the most important connections in your day-to-day life.

So basically, you can accomplish what you want to do without owning the operating system, is what it sounds like.

Yeah.

A couple months ago, you guys rolled out a Stories feature. Instagram has one, WhatsApp has one, Facebook has one, now you have one. How does something like that come about? Instagram was first — I feel like I remember them saying, maybe to me or maybe I read about it, but they were kinda like, “Oh no, we just saw Stories and we thought it fit with Instagram and we wanted to go for it.”

But then when it showed up in basically every one of Facebook’s products, it seemed like it was, okay, this is clearly an orchestrated effort, at least in terms of making this product a big deal. How does something like that work in terms of Messenger? Does Mark call you up and say, “Hey, your turn! Get Stories going!”

No, that’s not the way it works. Actually, we were working, and we’ve been working on this for a while. And, independently of any coordination or coordinated efforts across Instagram and Messenger and the other ...

It seems pretty coincidental that you guys were all working on it at the same time.

No, but like, it is a thing. Like a format that actually deserves to be, I think, in a core messaging app, because having context of what your friends are up to makes for much better conversations. And makes for conversations that wouldn’t have happened otherwise. And so we’ve been working on this for actually a long time, and then Instagram went and then we went and then WhatsApp went at approximately the same time I think, a couple of weeks apart.

But the bottom line is, it’s a format, and it’s a format that people enjoy and that’s complementary to the other formats that we have, whether it’s feed or messaging. And the way that we’re optimizing our product is actually specifically around messaging. And you’ll see more and more of that in the months to come, where it’s going to feel even more integrated inside your messaging experience.

Yeah. It feels different though, because a lot of messaging really is like, if it’s not one to one, at least you’re very specifically broadcasting or sharing with a couple people. You and I are in a group text with Mark, and I know that I’m sharing to you and him. This is more mass broadcast, if you will, in that ... You know, I know you can set the settings to see who sees it and whatnot, but really you’re putting it out there and saying, “Hey everybody that I’m friends with can come check this out.” It feels like a different way of sharing. For Messenger, does it feel different for you?

Yeah, but I think the real question is the point that you’re raising specifically. Do people want to share with a smaller targeted audience in a messaging product? And the goal here is not mass feedback of the number of people who’ve seen your story, but actually valuable connections and conversations that are happening because of the content that you’re posting. And that’s the focus, right? The focus here, right now, is to actually evolve continually — because as you know, we built something and we continue to evolve it — to evolve the product to become more and more this conversation starter for you. And the ultimate goal for you would be meaningful conversations, not necessarily the number of people watching.

Got it. So because you just saw what I posted on my story ... Or you guys called it Day. It’s called Messenger Day, right?

Yup.

So because you saw that I was at Facebook HQ, that might prompt you to send me a message.

Yeah! Yeah, exactly.

Are messages up? Is it working in that way? Or is it too soon to tell?

It’s too soon to tell, but for me personally, I can share that I’ve had a number of conversations on Messenger that I wouldn’t have had if it wasn’t for the product.

Okay.

And meaningful, good conversation. And I’m not making this up for the sake of this podcast.

No, but, this I would be shocked if you’d said anything other than that.

But it’s the truth.

It can be both. It can be the truth and it can also be good for Messenger Day. So we have just a few more minutes. I want to ask you a little bit about WhatsApp. WhatsApp is the other messaging service that Facebook owns. How closely do you guys work together? Do you and Jan, the CEO of WhatsApp, get together and share notes or strategy? Are you working in tandem? What’s the relationship like?

We’re running those two products fairly independently, actually completely independently. We use a lot of common sense to get as much learnings as we can from one another, but we’re running fairly independently.

Okay, so what kind of stuff, like how often might you get together? What’s an example of something you would talk about or work together with?

Right now there’s none, because we’re running independently. But there are a ton of learnings. So, we have a ton of learnings to share around video and all kinds of different things around real time. They have a ton of learnings to share with us and they did when we launched encryption inside of Messenger. And they started working on it like a year before we did, so they had a lot of learnings that were super helpful for us. And I think the next couple years there’s going to be a ton of learnings around how we’ve opened the platform, and we have a lot of learnings with businesses and how we make that successful. And hopefully there’s going to be valuable learnings for them as they start that phase.

Do you think there’s going to be overlap ultimately in terms of the services that you guys are building to connect people with businesses? Do you think that they’ll kind of take a lot of that as well, down the road? Or are they not thinking about that yet?

I think it’s too soon to tell, but it’s probable that over time, those things will look similar.

Show up in both. David, thank you so much for being here. This is great.

Thank you.

Thank you.

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This article originally appeared on Recode.net.