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Will Facebook’s Latest ‘Big Idea’ Fly?

EST

With two billion users, Facebook will be sorely challenged to hold onto them as the company tries to re-invent itself. The social media giant has been scrambling to find a new motherlode of revenues to insure against the day when privacy zealots will rightfully bludgeon them into submission. Perhaps even more threatening is the hardly remote possibility that subscribers will one day desert the platform because it has become uncool.

Zuckerberg’s initial feint several months ago was toward facilitating small-group interactions and encrypted messaging for a fee. The jury is still out on that idea, although, as Facebook’s stock chart would seem to attest (see above), investors have treated it as though it were a stroke of genius. Even if this new business model were to take root, which is hardly a given, it seems unlikely to generate the kind of profits Facebook has reaped from selling out subscribers six ways from Sunday.

Libra’s Drawbacks

What to do? Zuckerberg’s latest Huge Idea is Libra, a cryptocurrency that would be tied to a basket of global currencies to keep it stable. Even so, its value would still fluctuate from day to day, making it less useful perhaps than existing digital payment systems. Apple offers a popular one — and so do, for that matter, Visa, Master Card et al. Who needs block-chain money when conventional payment systems are doing the job, especially in the small-transactions universe that Libra would target? Facebook says its initial foray into cryptos would be geared toward money transfers from the U.S. to elsewhere, but that is inviting hard scrutiny from the regulators who will decide whether Libra gets off the ground.

There is also the trust factor. How would you regard money that, in a manner of speaking, had Zuckerberg’s face on it rather than that of Washington, Hamilton or Ben Franklin? Speaking for myself, I place Zuckerberg somewhere between Vladimir Putin and Lori Loughlin on the moral/ethical scale. Of course, Libra will be sold to regulators as entirely detached from Facebook the Social-Media Dominator. Does anyone actually believe that Zuckerberg could resist using the information he possesses on two billion subscribers  to ‘enhance’ the value of Libra? Such concerns will make it a tough sell to regulators. Wall Street for its part seems unconcerned, since all Facebook news these days — even lurid guilt-and-contrition stories — is being treated as good news.  The stock could easily hit new record-highs by mid-summer if the damn-the-torpedoes madness that has gripped Wall Street persists.

Comments on this entry are closed.

PRS June 20, 2019, 11:29 am

Bitcoin is not the only game in town. It’s just the one that everybody knows. There are several “alt coins” that do the job of small payments cheaper and faster than Bitcoin. Litecoin’s transaction cost is around $.01. EOS is free. And there are dozens of others. There is no doubt that Zuck’s coin will be optimized for its intended purpose and will be fully technically functional. As with most cryptocurrencies, the measure of success will be with its adoption and I have no doubt that with Facebook’s prominence they will have no issues with that.

FJ June 20, 2019, 10:40 am

I have to say that I really enjoy your Morning Line articles. They are educational, enlightening and usually bring a smile to my face. Thank you.

PRS June 20, 2019, 1:15 am

Yes, conventional payment systems get the job done but are expensive. A $1 credit card payment can cost over 30% to process. International money transfers are expensive and take days. There’s a lot of competition in this sector but Facebook has the clout and power to hire the right people to make it successful.

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Zuckerberg’s ‘stablecoin’ will need to succeed where blockchain money failed. High transaction costs have made bitcoin mainly a speculative medium used to store value rather than to buy small things. Bitcoin’s lack of utility was embarrassingly unforeseen by its designers. RA



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