Cryptocurrency payments could open a new door of opportunity for Facebook which could create a separate revenue stream apart from its advertising business. Barclay’s analyst Ross Sandler believes that the company could be eyeing a $19 billion opportunity with crypto.
Facebook could up its revenue
Facebook’s cryptocurrency plans are being kept under the wraps, but Sandler believes that the company is sitting atop a multi-billion-dollar revenue opportunity. As per the notes sent to clients on Monday, Sandler said that crypto alone would bring additional revenue of $19 billion to the firm by 2021. If a Facebook Coin is launched, it would see a base case $3 billion incremental revenue on successful implementation, even by conservative estimates.
He wrote, “Merely establishing this revenue stream starts to change the story for Facebook shares in our view.”
What is Facebook planning?
The tech company is working on a digital currency as per reports, that could work like a stablecoin. It would be tied to the value of traditional currencies, and it will be available to use on the company’s WhatsApp messenger, as noted by the New York Times and Bloomberg. Launching a stablecoin could help Facebook keep speculators away from its market, helping avoid aggressive price volatility in the market.
The company’s currency business model became the talk of the town last year, especially after a scandal related to British political consulting firm Cambridge Analytica broke hell. The company collected data on 50 million Facebook users without consent. Despite issues, the company’s earnings have increased, and its share price has grown by 30 percent this year.
A payments business could help the company in staying afloat if another issue or scandal rocks its investors. Sandler says that a new revenue option is something “sorely needed at this stage of the company’s narrative.” He said that moving into an option that brings valuable revenue to the company without abusing user privacy will be appreciated by the company’s shareholders.
Barclay’s analysis is based on revenue estimates off of the Google Play Store, the digital distribution service platform Android OS which generated $6 net revenue per user. Facebook could see a similar result with its 3 billion customer base by 2021.
The company has plans to venture into payments business about a decade ago. They wanted to launch something called “Facebook Credits” which could be bought using local currencies and then used for in-app purchases. Each credit was expected to cost $0.10. Facebook dropped the plans because it had to bear interchange costs which could have affected its profitability negatively. Now that Facebook is a more mature and profitable company, they could be ready to take risks.