Facebook’s Libra Cryptocurrency: Why You Should Care
By Ben Heiser, Senior Social Strategist, and Andrew Van Aken, Cryptocurrency Expert
The Headlines You Need To Know:
• Facebook is launching a cryptocurrency, open to everyone globally, but especially targeting the world’s unbanked
• It will exist to enable P2P payments and commerce in WhatsApp, Messenger and Facebook
• It will be governed by an independent body called the Libra Association, including Visa, Mastercard and PayPal
• Brands should keep an eye on public adoption, but acknowledging Libra could be an opportunity for brands to demonstrate modernity
WHAT IS LIBRA?
The Basics
Project Libra is a cryptocurrency that Facebook has developed in an attempt to bringing a new financial system to the masses. But, unlike Bitcoin or other existing cryptocurrencies, Facebook has built Libra to be a “Stablecoin”—meaning that its value is pegged to a basket of traditional currencies.
Libra Will Be Its Own, Independently Governed, Walled Garden
Facebook announced it won’t directly manage Libra. Instead, a body of partners, called the Libra Association, will govern the currency to ensure that individuals’ purchase and transaction data doesn’t intermingle with Facebook’s audience data.
The consortium includes brands including Mastercard, Visa, PayPal, Uber and Spotify. To become a partner, brands will have to invest $10 million.
Facebook’s goal is to get 100 members join the final governing association, all of whom will be able to access and view the network. The Libra Association will be headquartered in Geneva, Switzerland as a not-for-profit organization.
“Libra doesn’t offer any advantages for those currently served by traditional payments (credit/ debit cards) and emerging mobile payments (Apple pay, Venmo), with little incentive to convert dollars into Libras. Facebook will also face a enormous challenges getting physical money of the unbanked into a digital form.”
Andrew Van Aken, Cryptocurrency Expert — Ogilvy
It’s Built For P2P and Commerce— Both Online and In Store
Whatsapp, Messenger and Facebook’s own native app will be able to access Libra. The goal is to enable seamless and secure P2P payments and commerce (online AND brick and mortar). Libra will also enable in-app and in-game transactions.
WHY WOULD FACEBOOK CREATE A CRYPTO?
Libra Gives Facebook A Chance To Compete With AliPay and WeChat In Emerging Markets
Of course, Project Libra is motivated by more than just global altruism. Outside of the U.S., Facebook faces two juggernauts: Alipay and WeChat Pay. These companies already own the vast majority of all payments in their home country of China (where people transact without credit cards or bank accounts), but both are rapidly and aggressively expanding to India and Europe.
Libra Could Increase Facebook’s Dominance In The Duopoly
Facebook’s VP of blockchain recently explained his thoughts about commerce using Libra: “If more commerce happens, then more small businesses will sell more on and off platform, and they’ll want to buy more ads on the platform so it will be good for our ads business.” If Libra helps Facebook become a bigger player in commerce, it could draw ad dollars away from Google.
WHAT DOES THIS MEAN FOR BRANDS?
The Libra Association Could Have Exclusive Access To A Unique Data Source
If Libra is successful in gaining adoption among developing nations and the unbanked, it will amass transaction data on an entirely new global audience. It remains to be seen on how partners will be able to access the blockchain and if they can even use it. However, Libra could provide exclusive access to a treasure trove of data.
Advertisers Won’t Be Able To Target Based On Libra Activity
Users real identity won’t be tied to your publicly visible transactions and Libra payments won’t mingle with Facebook data, so it can’t be used for ad targeting.
Libra Could Threaten 1st Party Data
If Libra does the world by storm, more and more transactions will happen on platform—reducing first party transaction data owned by brands.
Everything Hinges On Adoption
The Libra Association allows Facebook to claim the cryptocurrency can be trusted to be secure and private, but will the public buy in? If Facebook can overcome the trust hurdle, they still have to get people to start using it. Brands should keep an eye on initial adoption before diving into Libra planning.
AUTHOR SPOTLIGHT
"Facebook’s goal for Libra to ‘serve as a solid foundation for financial services, including a new global currency…’ is an admirable, but lofty ambition. If global central banks allow it to even exist, Libra’s relevance hinges on adoption—which is entirely dependent on a renewed sense of public trust in Facebook."
Ben Heiser, Senior Social Strategist — Ogilvy