For Facebook, venturing into the cryptocurrency space is a very well thought decision which could add billions of dollars to the company’s revenue stream, if all things work out well.
Facebook has been trying to enter the payment and remittance business for a very long time, for almost a decade. But, what was restricting its entry into this space was the interchange cost, which it had to bear and could have a negative impact on the profitability.
According to Barclay’s internet analyst, Ross Sandler, Facebook reported cryptocurrency “Facebook Coin” could generate $19 billion in additional revenue by 2021. And, conservatively, the firm could see a base-case incremental $3 billion in revenue from the successful cryptocurrency implementation.
“Merely establishing this revenue stream starts to change the story for Facebook shares in our view.”
Facebook in the past decade has made big acquisitions including marquee apps such as Instagram and WhatsApp to rapidly expands its total user base. And, the social media giant will extensively deploy these marquee apps to implement its cryptocurrency plan.
“The new cryptocurrency of Facebook could “re-invigorate that business strategy.”
Facebook in its secretive cryptocurrency plan is reportedly developing a stablecoin pegged against multiple fiat currencies to avoid volatility. The main objective of the stablecoin is to promote global payments through its Whatsapp, Messenger and Instagram apps.
Facebook has been going through a lot of headwinds and political backlash following access to data of around 50 million Facebook users by Cambridge Analytica, which had negatively affected the performance of its shares.
Sandler in its report said:
Expanding into payments could give Facebook a lifeline if investors suddenly become less forgiving. Using some form of cryptocurrency could generate a new revenue option — something “sorely needed at this stage of the company’s narrative.”
“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.”
Join the Discussion on Telegram