Facebook’s reputation has taken a bit of a nosedive lately, which made it all the more surprising when they announced their foray into the world of blockchain and cryptocurrency. The industry is of course synonymous with anonymity, but Facebook’s scandals all seem to involve that very issue, or lack thereof.
For example, data breaches, propaganda, and a lack of privacy are among the various complaints that have hit the news over the past couple of years – and who could forget Mark Zuckerberg’s questionably odd performance during his testimony to US Congress? Simply put, Facebook entering into an industry that prides privacy seems somewhat ironic.
A new focus for Facebook
But what is the endgame for Zuckerberg et al? In a lengthy blog post, Zuckerberg himself says, “frankly we don’t currently have a strong reputation for building privacy protective services”, which makes it all the stranger that Libra is even a thing. It seems as though the definition of what Facebook actually is ever-changing, with privacy now being a core focus. Rather than a social network, Facebook seems to be becoming a network of platforms – including Instagram, WhatsApp, and Messenger. So, it makes sense that this new focus would coincide with the release of Libra and the corresponding payment wallet, Calibra.
So, what’s the point of Libra and what difference does it make to advertisers and consumers?
Social media ad spend hit £3.3billion in 2018, up 24% from the year before, and it shows no signs of slowing down, with a 27% increase on spend YoY in Q1 of 2019. With an in-built cryptocurrency, Facebook could theoretically start competing with PayPal and Amazon by being able to account for every single pound spent, following the consumer throughout their journey. With no need to switch platforms, your customers could see an ad and purchase the product without ever leaving the platform – thereby allowing businesses the opportunity to reap the benefits of this enhanced data collection. Whether Facebook can weather it’s reputational storm enough to cultivate the trust they need from businesses and consumers for Libra to actually work remains to be seen.
Banking for the unbanked
One of Facebook’s promoted reasons for setting up Libra is to help the 1.7billion people in the world that have no access to a banking system. David Marcus, who used to be an executive at PayPal and is now heading up Libra, said to Fortune that it is an “anomaly that the Internet has no protocol for money”, and that this new currency will help provide competitive financial services.
The question on many people’s lips is whether Facebook is really the best platform from which to pioneer this ideology. Well, it turns out that they’re not the first to try and create a wallet for the ‘unbanked’.
Half of the world’s adult population lacks a bank account and Facebook claim the Calibra wallet allows access to financial services in developing countries. But India and South Africa, among others, have been using a mobile banking service called M-Pesa for years. Created by Kenya’s Safaricom, backed by Vodafone, M-Pesa allows deposits, withdrawals and exchanges from kiosks and even the most basic of mobile phones across developing nations.
Although this altruistic idea is admirable, Facebook will still be making money from transactions, although this is unlikely to be coming from peer-to-peer transactions. Rather, businesses will be charged a small amount for every payment that is made with Libra.
Closing the data loop
Facebook hails the introduction of Libra as a way to help the ‘unbanked’ across the world finally get access to financial services, regardless of their country’s banking ecosystem. However, it is hard to ignore the pure data that will be surely be a huge boon for them and their advertisers.
There are a few well-known names that make up the Libra Foundation, a group of companies and non-profits that will take care of the currency together via a foundation in Switzerland. Corporates like Visa, MasterCard, Coinbase and Andreessen Horowitz will all be asked to kick in $10million give Libra an initial boost.
Of course, Facebook’s most lucrative revenue stream is targeted ads. If all users sign for a Calibra wallet, there will be no disconnect between ads seen on Facebook and purchases made through those ads. This is an attractive prospect for businesses and digital marketers as it offers a unified approach from consumer to purchase and beyond, with opportunities for remarketing made more tangible due to the closed loop of data that is being collected.
As we mentioned, being able to compete with Amazon and PayPal in terms, as well as the chance to target Facebook’s enormous user base in Asia (Asia has nearly four times as many Facebook users as North America) with their cryptocurrency and payment method is hugely important.
Having said that, will businesses that understand their customers’ anxieties over misused data be able to trust Facebook in spite of its various issues in that arena? Well, the Libra Association is made up of many businesses with better reputations that Facebook in terms of privacy. The association defines Facebook as having the same weight as every other voting party, meaning the social media giant will not have ownership over the cryptocurrency itself or the associated wallet. Calibra is also an entirely separate company from Facebook. Moreover, if a user does not want to use Calibra, they will be able to use another wallet to transact.
What is the benefit for business?
Libra can facilitate spending through Facebook’s legion of apps, meaning small businesses can improve their ecommerce offering by giving customers the ability to pay seamlessly.
One of the biggest draws for small businesses will be the opportunity to sell across borders and currencies without discrepancies between them. The differences in value of these currencies can be ironed out in the wallet.
Of course, with eighteen months until it launches and still many questions to be answered, it remains to be seen whether this will be a gamechanger for businesses that sink a lot of their budget into social media – both in terms of advertising and ecommerce.
We remain to be convinced – let us know your thoughts!