Facebook has revealed the details of its Project Libra crypto coin, an ambitious plan to bring digital currency like Bitcoin to billions of people worldwide. The plan will be carried out with dozens of partners, including Uber and MasterCard, and could remake the global payment industry. But what’s in it for Facebook?
For starters, Facebook will be able to use Calibra, its new digital wallet, to compete with the likes of PayPal’s digital payment app Venmo, while also offering cheaper cross-border payments. Facebook’s new currency, called Libra, could also help the company save on transaction costs. But if you had to guess Facebook’s main motive, the best answer is that Project Libra will help the social network do what it does best: collect data and sell advertising.
Specifically, the new currency gives Facebook an opportunity to bolt a payment service on top of Instagram and WhatsApp, and let customers make instant purchases in response to ads they see on those platforms.
Marketing and e-commerce executives tell Fortune this will be a boon for Facebook and its advertisers. According to Will Luttrell, CEO of payments startup Amino, the digital currency will let the company better compete with Amazon’s growing ad business. He predicts that Facebook will have unprecedented insight into when a user makes a purchase in response to an ad—delivering specific “return on investment” metrics that marketers crave.
Jeremy Epstein, who has worked with marketing technology for decades, likewise mentions Amazon upon hearing a description of Facebook’s project.
“It makes sense in terms of a closed loop. It will bring payments back in house and show Facebook who’s buying what,” Epstein says. “Right now, Facebook doesn’t know the last mile like Amazon does.”
All of this, however, is premised on Facebook having access to the payment data of its users. And in its Project Libra announcement, the company explicitly stated the two systems are not connected, and that its Calibra wallet will be operated as a separate subsidiary.
That may well be, but Facebook’s promise comes with an important disclaimer. As my colleague Robert Hackett explains, the data can be blended if users give the go-ahead. “If someone were to explicitly agree to link their Calibra account to another Facebook product—importing their WhatsApp contacts, say—then this would open up the data pipe for sharing,” Hackett writes.
It’s a good bet most users will give this permission, especially if the company asks them if they would like to use Facebook to add friends to the Calibra wallet, or to connect the wallet to Instagram to make purchases.
The upshot is that Facebook is likely to gain a trove of new data about how its users spend their money, while merchants that accept Libra will gain the ability to target specific ads, as well as see exactly how effective those ads turned out to be. Effectively, it will be like opening a cash register at the end of the day and knowing the source of every dollar.
None of this is a sure bet, of course. Facebook has much work to do in getting the Libra currency ready for its 2020 rollout, which includes building out a blockchain network with an unwieldy consortium of partners. And then it must also persuade its users to give the cryptocurrency a try.
According to Alanna Gombert, who leads ad tech at the blockchain group Consensys, Facebook will likely introduce rewards systems that give users Libra to spend in return for doing tasks like watching videos.
“There has to be an ease of use that you didn’t have before, such as when you can use Apple Pay to sign up for the New York Times,” she says. “It’s really hard to force people to adopt as a currency.”
More must-read stories from Fortune:
—What do bitcoin and Las Vegas have in common? The size of their carbon footprints
—Ripple takes $50 million stake in MoneyGram in push to deploy XRP
—Facebook’s Project Libra: 5 things to know about the new cryptocurrency
—Scammed porn watchers have paid nearly $1 million in bitcoin blackmail
—Fintech startup Tally raises $50 million to automate people’s finances
Sign up for The Ledger, a weekly newsletter on the intersection of technology and finance.
