Facebook’s cryptocurrency plans could rake in $19 billion in revenue for the social media giant. This is according to Ross Sandler, an internet analyst with Barclays. In a note to investors, Sandler stated that ‘Facebook Coin’ provides a new and lucrative avenue for Facebook to dominate payments.
The Menlo Park, California-based company has grabbed the headlines for the wrong reasons in the recent past. It was at the heart of the Cambridge Analytica data breach scandal. It also had other smaller scandals such as the sudden resignation of the founders of Instagram. All these culminated in the loss of confidence by its users on its ability to protect their data.
However, exploring a new business line could change everything, Sandler stated. At its current stage, Facebook is in a ‘sore need’ of a new revenue option. The company’s income is almost fully dependent on advertising revenue currently.
Any attempt to build out revenue streams outside of advertising, especially those that don’t abuse user privacy are likely to be well-received by Facebook’s shareholders.
As we previously reported, the new crypto will focus on remittances. Reports have also revealed that Facebook will target India first, the world’s largest remittance market. It intends to use WhatsApp, a messaging app that’s very popular in India.
Sandler also believes that the crypto would revive the premium content industry on Facebook. Publishers would be willing to ‘re-establish themselves as partners’ if Facebook uses the crypto for micropayments.
Second Time’s the Charm
This wouldn’t be the first time the social media giant has tried its hand in micropayments. In 2010, it launched Facebook Credits, a virtual currency similar in some ways to modern cryptos. Users would purchase the credits through their local fiat currencies and use them to pay for content on Facebook.
Based on our checks, the first version of Facebook Coin may be a single purpose coin for micro-payments and domestic p2p money transfer (in-country), very similar to the original credits from 2010 and Venmo today.
The venture wasn’t successful and fizzled out after a while. Sandler believes that one of the major reasons was the exchange costs. The company took it upon itself to settle these costs, and this ate into the profits.
However, the second time could be the charm. The rise of cryptos has opened up people to the use of virtual currencies. Facebook has also added hundreds of millions of users in that time, giving it a wider target audience. It has also acquired WhatsApp and Instagram, with the latter offering a big platform to publish content.
With all this in mind, Sandler believes that the new crypto could bring in $19 billion for the firm by 2021. Conservatively, it could at least bring in $3 billion if successfully implemented.
The analyst based his estimation on the success that Google has seen with its digital distribution service, Google Play. The service now reportedly generates $6 in net revenue per user. It has 900 million users by the latest data. Facebook, on the other hand, has three times that number and could therefore see much higher revenue.