Facebook's difficulty and the choice of Mark Zuckerberg
First, Facebook is a company valued at over $ 500 billion with more than 1.5 billion users worldwide. The total number of Facebook users is 2.7 billion, bringing in annual revenue of more than 10 billion dollars.
But, being one of the largest companies in the world as well as the most profitable, Facebook also has its own concerns. Many of them relate to the method of payment by this social network very much depends on advertising.
Over the years, more than 90% of Facebook's revenue comes from advertising and this number is still growing rapidly. The latest quarterly financial report shows that the company's revenue is 12,972 billion USD, with advertising revenue accounting for 98.5%.
In order to maintain this level of revenue, Facebook needs to collect a large amount of user data for accurate distribution. Therefore, it will certainly touch the user's privacy and make the public angry. In March 2018, Facebook was involved in the scandal of information disclosure of Cambridge Analytica. This event caused Mark Zuckerberg to undergo a 10-hour hearing before the US Congress.
Facebook is losing users, investors' trust and advertising partners.
But its consequences have not stopped there. According to statistics from Stastata in December 2018, Facebook became the most unreliable technology company in the US. The image of the company was seriously destroyed. This impact not only causes Facebook to lose users, but it also reduces the trust and dependence of advertisers on this social network, which in turn affects the company's revenue and actions afterwards. will be limited by privacy issues.
To prevent possible problems, Mark Zuckerberg must seek a new positioning, as well as a shift in revenue structure based on advertising. And WeChat, with 1.1 billion active monthly users, opened up for Facebook bosses to see a new possibility and opportunity, which is integrating mobile payment, finance, ecosystems of small programs. and advertising ecosystem. The profit model is not only limited to games and advertising, as well as local financial and service services. Simply put, it is the construction of a powerful closed ecosystem.
Many big newspapers like New York Times, Associated Press, Wall Street Journal … all believe Mark Zuckerberg's vision comes from Tencent's WeChat social media software.
Facebook wants to become Wechat.
In China, Tencent has built a super-versatile environment, encompassing all aspects of life with Wechat as the center. Facebook with stronger product matrices, including WhatsApp, Instagram and Messenger can create a new empire with a larger scale.
But, Facebook cannot reproduce WeChat's development model. The cause lies in differences in national and cultural conditions. In the Chinese market, users of WeChat have a habit and many common interests, the culture of this country also creates a consistency and concentration. Simply put, the geographical and cultural similarities of Chinese people can allow companies like Tencent to intervene deeply and change users' habits, thereby generating revenue. But Facebook can't get it in the US, let alone global scale. It is difficult to create value chains for products and users.
Bet on electronic money, Facebook's "wild" full view
Yesterday, June 18, Facebook introduced its electronic currency called Libra. According to some reports, the company may allow employees to participate in the project and receive new money in the form of wages. Combined with large banks and financial institutions, ordinary users can exchange and use them through devices such as ATMs.
However, why does Mark Zuckerberg want to create a new digital currency tool? At the moment, block chain technology and a series of digital currencies are still being questioned by many people. Most ICO projects are still in the main stage of calling capital. Facebook itself last year also ordered a ban on all electronic money ads because they all contained deceptive content.
Even the most powerful virtual currency Bitcoin is "injured", deeply discounted and difficult to return to the glorious time. A lot of people have wondered why Facebook chose this direction that will surely cause this controversy.
Facebook is betting on "gamble" electronic money.
First, Facebook wants to solve the crisis of user trust. Facebook's advertising model has been criticized by privacy advocates, legislators and media. It mainly involves how to collect and use user data. Many consecutive violations have negatively impacted the reputation of this social network, shaken investors' confidence. The #DeleteFacebook campaign also has significant effects. Even the former co-founder of Facebooke and co-founder WhatsApp Brian Acton also left Mark Zuckerberg. And to end these stories, some changes are needed.
The new virtual currency, using decentralized technology, can ensure customer data is stored directly and locally. It also means that the server will use as little login data as possible, thus ensuring privacy and data security from a technical perspective.
Second, Facebook wants to grow in the payment market. WeChat's success in China is a good example, showing that social networks can also be accepted on this new playground. And compared to mobile payments, digital money is an economic system at a lower level, which can gain users' trust in a natural way, easily exchange values and manage the mechanics. processing payment. Not to mention digital money that can pay across borders. If it is accepted then, Facebook will become a low-cost money receiving channel on a global scale. This will erase the obsession with over-reliance on advertising revenue of this social network for a long time.
Third, virtual currencies can make Facebook applications more connected and more tightly integrated. WhatsApp, Messenger and Instagram are different about how to share data. For example, WhatsApp is an encryption technology that stores only a small amount of user data. When a user registers, WhatsApp only needs a phone number. Meanwhile Messenger and Instagram need more complete personal information. This will create data conversion challenges as well as privacy protection. But with the launch of Libra, this digital currency will become the glue that binds these business units together.
The challenge that Facebook needs to overcome
There are always barriers to new and separate ideas for Facebook, they will not be small. Remember that most countries in the world still disagree and accept the security of electronic money. So Mark Zuckerberg and his colleagues and partners will have to solve a lot of problems.
It is not easy for a virtual currency to become the new currency of the world.
The first is stability. Currently, Bitcoin and Ethereum are the two most important electronic currencies. However, due to the large increase or decrease in value, they are now more like a commodity than a currency to pay. It is not suitable for daily payments and transactions. From this point of view, it is clear that identifying them as a currency is unsuccessful.
Facebook's solution with Libra is to ensure its value by providing bank accounts with a number of USD, Euro and other currencies respectively. This direction is positive, but with it comes a series of additional costs.
The second is the issue of power regulation with Libra. A big question is how many people will control Facebook and to what extent Libra. This social networking company will be responsible for approving each transaction or assigning it to a trading platform. If Facebook is responsible for approving each transaction and tracking each user, it will be no different from a centralized payment system like PayPal. At this point, the blockchain concept will be overlooked.
If the job is delivered to the exchanges, the company will no longer have full control and harder to earn profits. This digital currency can also be quickly used by criminals for many illegal purposes.
Facebook said the non-profit Libra Association will manage the currency. This is the organization that gathers many finance and technology companies, as well as the parties capable of managing electronic money networks. But this organization is created through compromises and they clearly do not solve the problem of hard-to-profit and prevent money laundering.
The third difficulty that Facebook faces is the management of a giant operating apparatus. Once accepted by the public, the number of users as well as the volume of transactions worldwide will be huge. Facebook itself is struggling to manage its social network, it will not be easy to operate a new large-scale mechanism, maybe even bigger than Facebook on it.
But despite all that, Mark Zuckerberg chose this direction. If LIbra really succeeds after its debut, Facebook's digital currency will become a new form of real currency. The profit that Facebook, as a publisher, can receive from it will be unimaginable.