There’s a massive upside for Facebook entering the crypto space, according to tech analysts on Wall Street. The Facebook cryptocurrency, which will reportedly be used to facilitate cross-border payments and will have stablecoin properties, is worth at least $19 billion in revenue within the next two years, CNBC reports.
Ross Sandler is an internet analyst for Barclays. He bases his math on the success of Google Play, which reportedly earns $6 per user. If Facebook has similar usage with its payments platform, its annual revenues will jump by $19 billion. The social media giant has just over 3 billion users.
Sandler believes the stock will gain renewed confidence as soon as Facebook begins finding ways to profit outside of advertising and other means that compromise user privacy. Entirely optional revenue models, like the ability to send low-fee payments across borders to friends and family, are likely to receive praise from Silicon Valley to Washington, DC.
Sandler told CNBC:
“Merely establishing this revenue stream starts to change the story for Facebook shares in our view. 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.”
Facebook and Google are both masters of targeted advertising, which has led to extreme criticism and regulatory investigations. While Google continually launches services that earn non-advertising revenue, Zuckerberg and company have been slow to adapt to a changing landscape. The Cambridge Analytica scandal remains fresh in the public’s memory.
However, user growth has continued at an impressive rate. The company has around half the world on its platforms – even more, if you discount the many millions who are not yet old enough to legally have a Facebook account.
Sandler speculates that the cryptocurrency doesn’t have to be just a peer-to-peer payments mechanism. He thinks Facebook will use the token for things like premium content as well.
Monetizing the platform will create a lot of unique opportunities for the company. For example, investing groups could charge for access. Or social media personalities could sell exclusive access to live streams. Consultants could use the currency to manage cross-border client payments.
Perhaps most importantly, in regions like Venezuela, where the local currency is unreliable, Facebook users can have a more reliable stablecoin-like currency in a mostly-secure digital space. The company should have less difficulty offering the service to its global user base by using blockchain – particularly in regions that ban Facebook, like China.
To justify his speculations, Sandler notes that the head of the cryptocurrency’s development team is former PayPal executive David Marcus.
One question that arises is where else Facebook payments might integrate. The company’s user base outsizes many payment platforms. If all one needs to use it is a Facebook account, it’s not hard to imagine businesses accepting it for goods and services.
However, getting into the money services business presents as many challenges as it does revenue opportunities. The industry is highly regulated on a global basis, and the security implications of monetizing every account are more than obvious.