Zoe Schiffer* says the Facebook CEO has told US lawmakers that making money is not the main motivation behind the company’s cryptocurrency proposal.
Libra will make money for Facebook by increasing the price of digital ads, Facebook CEO, Mark Zuckerberg told a US Congressional hearing in Washington, DC, last week.
The answer came in response to a question posed by Republican Congressman David Kustoff, who cut through Zuckerberg’s typical explanation about the project being largely charitable.
“When you came up with this idea and went to your board of directors, how did you tell them that Facebook could monetise or profit from the creation or use of Libra and Calibra?” Kustoff asked.
“Well, Congressman, you may not believe this, but that’s actually not the first thing that we talk about at the company,” Zuckerberg responded.
“We focus on building services that are going to create value in people’s lives, and we believe that if we do that, that we’re eventually able to get some of the value downstream.”
If more of these purchases happen on Facebook than, say, Amazon or Google, the social network will be able to snap up a larger portion of the ad market.
“The way that this will help Facebook over time is that basically in our ads system, it’s an auction,” Zuckerberg explained.
“If you’re a small business, we don’t have a rate that you have to pay — you bid and tell us what the ads are worth to you if you can get customers into your store or if you can complete a transaction.”
“And what we basically see is when we eliminate friction for a customer buying something from a business, then the value for that business of advertising on our system goes up, so they bid more in the ad system.
“If we can make that now, in addition to finding businesses that people want to interact with, people can also transact with them directly.
“I would expect that over time that will lead to higher prices for ads because it will be worth more to businesses so they will bid more on the ads system.”
Zuckerberg hasn’t said anything about whether Libra will have transaction fees – a key part of why people like decentralised cryptocurrencies (which don’t have them) and a key question for his project (which isn’t decentralised, and thus could).
A less charitable read on Zuck’s response could also be that if converting Libras into dollars is difficult, people will be forced to spend money — and advertise their goods — on Facebook since it’ll be too hard to do so anywhere else.
This is all predicated on Libra actually getting off the ground.
So far, Facebook’s planned cryptocurrency, which launched in 2019, has been plagued with regulatory concerns from international lawmakers, wary financial partners in the US, and looming competition from China.
“But in order for that to happen, we have to build a system that passes all the regulatory approvals, it has to be useful for people, if all that plays out then we may see a positive business impact,” Zuckerberg finished.
Sure, sure.
* Zoe Schiffer is tech reporter at The Verge. She tweets at @ZoeSchiffer.
This article first appeared at www.theverge.com.
