Barclay’s internet analyst, Ross Sandler issued a note stating that by launching its own cryptocurrency, Facebook could generate billions in additional revenue for the company. The social network has been reportedly developing its own cryptocurrency to use for peer-to-peer payments, although precise details of the project remain limited.
According to Sandler, the launch of “Facebook Coin” could generate $19 billion in revenue by 2021 and “change the story for Facebook shares”.
By creating a new payment method, Facebook could develop a new revenue stream aside advertising, something “sorely needed at this stage of the company’s narrative,” says Barclays internet analyst Ross Sandler.
Facebook Payment Method
According to Sandler, Facebook’s original payment ambitions started almost a decade ago. The Menlo Park, California-based company created a virtual currency in 2010 called “Facebook credits,” similar to modern-day cryptocurrency. Users would prepay for these virtual coins using domestic currencies, and then use those credits for in-app-purchases. The company required a user to pay using a debit or credit card upfront, and each virtual credit cost about 10 cents.
The major problem, according to Sandler, was that Facebook had to bear the interchange cost, “which negatively impacts the profitability of the business, especially when making high volumes of lower-value transactions.”
Since then, Facebook and the cryptocurrency sector have matured. The company has a much larger user base, and more mega-apps like Instagram and WhatsApp to which it can distribute content. The company’s new cryptocurrency plan could potentially “re-invigorate that business strategy,” Sandler said.
“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,” Sandler said.