Facebook's Cryptocurrency Could Bring the Firm $19 Billion, Barclays Analyst Claims

Ross Sandler, a Barclays analyst, has recently claimed Facebook’s reportedly upcoming cryptocurrency, often referred to as ‘Facebook Coin’ could bring the social media giant between $3 and $19 billion in additional revenue until 2021.

Per Sandler, the possibility of Facebook adding a new revenue stream “starts to change the story” of the company’s shares, in Barclays’ view. This, as in 2017 the California-based giant brought in $40.6 billion in revenue, out of which $39.9 billion were generated through ads served on its own platform.

To Barclays, Facebook’s cryptocurrency – which is believed to be a stablecoin pegged to fiat currency - could give investors a lifeline after various high-profile setbacks and a volatile stock price history. Using the stablecoin to generate revenue is “sorely needed at this stage of the company’s narrative, Sandler added:

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.

Barclays’ Facebook estimates were based on Google’s Play Store earnings, which generate $6 in “net” revenue per user. Facebook currently owns both WhatsApp and Instagram, making its user base over 3 billion strong.

Facebook Under Fire

In the last few months Facebook has been under fire over privacy concerns. Mark Zuckerberg’s company saw British political consulting firm Cambridge Analytica collect the data of over 50 million of its users without their permission, unleashing a chain of events that ultimately saw Facebook (NASDAQ: FB) drop on stock exchanges.

According to Yahoo Finance data, the social media giant saw its shares drop from a $218 all-time high to a $124 low, before the company started recovering. FB’s shares are currently trading close to $172, as this year they’ve rallied roughly 30%.

Facebook's stock price performance in the last 5 years

Notably, former Fidelity portfolio manager Gavin Baker has also shared his thoughts on Facebook’s upcoming stablecoin. Per Baker, it could see the social media giant pose a threat to Visa and MasterCard.

Payment Ambitions

As CNBC points out, Facebook has tried to get into payments nearly a decade ago, as it created a digital currency called “Facebook credits.” The currency wasn’t based on a blockchain, and was buyable using credit cards.

The social media platforms users could then use these credits for in-app purchases, with each one costing around 10 cents. Per Sandler, the experiment failed as Facebook was bearing the interchange cost “which negatively impacts the profitability of the business, especially when making high volumes of lower-value transaction.”

The analyst noted that since them technology has evolved, and Facebook has expanded its reach by acquiring both WhatsApp and Instagram. As a result, it’ll be able to compete with firms like PayPal in peer-to-peer transactions. The analyst said:

Based on our checks, the first version of Facebook Coin may be a single purpose coin for micro-payments and domestic p2p money transfer (in-country), very similar to the original credits from 2010 and Venmo today.

If the stablecoin is successful, he concluded, Facebook could potentially get into consumer lending, and physical and remittance payments. Facebook’s cryptocurrency hasn’t been officially announced, although it’s believed it’ll be launched this year.

The tech giant has acquired a blockchain startup earlier this year, and has formed a team that focuses on the development of blockchain technology. Reports suggest Facebook has even reached out to cryptocurrency exchanges to list its new stablecoin.