Over the past few weeks I’ve been warming to Meta Platforms (aka Facebook) as an investment proposition. The company worked hard to reinvent itself after its  Cambridge Analytica disaster in 2018. With the shares down by a third this year alone (see below), value has certainly emerged.
We sold FB out of the BizNews Share portfolio at $155 in the wake of the Cambridge Analytica news, banking a 78% profit but missing out on a price recovery that peaked at almost $400 late last year. More cockroaches did indeed emerge at Facebook, but such was his buoyant mood that Mr Market ignored them.
___STEADY_PAYWALL___
When the facts change, however, minds must also change. Whatever its deficiencies, Mark Zuckerberg’s creation has displayed an admirable ability to admit them, reflect and change direction. Its persistence in doing so suggests the $600bn giant is now a fair bet to pull off the kind of pivot many mega companies attempt but rarely achieve.
The name change to Meta appears to have been a repositioning rather than a rebranding exercise, ergo this morning’s news on drive into financial services via its own digital currency. After reading the FT’s piece below, long-term investors are sure to re-assess the appeal of being a Meta Platforms co-owner. Given the group’s targets, an obvious investment switch would be into its shares from legacy banks.
More for you to read today:
- Fed Signals Faster Pace of Rate Increases, Likely Bond Runoff. Minutes show central bank officials in March spelled out plan for shrinking $9 trillion asset portfolio next month to help cool inflation.
- WSJ Exclusive – Banks Weigh Using Zelle to Challenge Visa, Mastercard. The money-transfer service boomed amid pandemic. Some banks want to expand it to retail payments.
- SA opens renewable energy Bid Window 6 targeting 1,600MW from wind and 1,000MW from solar. Business Day reports programme to provide enough power for Eskom to avoid Stage 2 loadshedding.
- Tech Stocks Sink, Bonds Sell Off as Investors Study Fed Minutes. Minutes of Federal Reserve’s March meeting shed light on pace of further interest-rate increases
Facebook owner Meta targets finance with ‘Zuck Bucks’ and creator coins
The Financial Times assesses the social media group’s second run at crypto currencies after the Libra abort, as Zuckerberg’s creation seeks alternative revenue streams as popularity of its main products decline
By Hannah Murphy in San Francisco for The Financial Times
Meta has drawn up plans to introduce virtual coins, tokens and lending services to its apps, as Facebook’s parent company pursues its finance ambitions despite the collapse of a project to launch a cryptocurrency.
The company, led by chief executive Mark Zuckerberg, is seeking alternative revenue streams and new features that can attract and retain users, as popularity falls for its main social networking products such as Facebook and Instagram — a trend that threatens its $118bn-a-year ad-based business model.
Facebook’s financial arm, Meta Financial Technologies, has been exploring the creation of a virtual currency for the metaverse, which employees internally have dubbed “Zuck Bucks”, according to several people familiar with the efforts.
This is unlikely to be a cryptocurrency based on the blockchain, some of the people said. Instead, Meta is leaning towards introducing in-app tokens that would be centrally controlled by the company, similar to those used in gaming apps such as the Robux currency in popular children’s game Roblox.
According to company memos and people close to the plans, Meta is also looking into the creation of so-called “social tokens” or “reputation tokens”, which could be issued as rewards for meaningful contributions in Facebook groups, for example. Another effort is to make “creator coins” that might be associated with particular influencers on its photo-sharing app Instagram.
Meta has also been exploring more traditional financial services, with a focus on helping to provide small business loans at attractive rates, according to several people familiar with the initiative. While nothing is immediately planned, the company has previously held discussions with potential lending partners, one of the people said.
Most of the efforts are in the early stages of being discussed and could change or be dropped, although its plans to integrate non-fungible tokens, or NFTs, into its apps are more developed. Zuckerberg confirmed an earlier Financial Times report that Instagram would soon start to support NFTs.
According to one memo shared internally last week, Meta plans to launch a pilot for posting and sharing NFTs on Facebook in mid-May. This will be “quickly followed” by testing of a feature that will allow membership of Facebook groups based on NFT ownership and another for minting — a term for creating — NFTs.
NFTs may be monetised via “fees and/or ads” in the future, according to another internal document. Facebook declined to comment.
Meta lost more than $220bn from its market valuation in February on the day it revealed users were spending increasing time on newer rivals, such as short-form video app TikTok.
The company has recently sought to find other sources of revenue and support ecommerce on the platform, delving into cryptocurrencies and blockchain technology. Its Big Tech rivals, such as Google and Apple, have been more cautious about diving into the nascent space.
But the push has been plagued by setbacks and regulatory scrutiny. Earlier this year, the global cryptocurrency project that it spearheaded, Diem, was wound down and its assets sold to a Californian bank Silvergate, after US regulators refused to give the pilot the green light over monetary stability and competition concerns.
Amid internal frustrations, Meta’s financial division has suffered what one former employee described as a “mass exodus” of staff over the past six months. Its head David Marcus left at the end of last year, along with key engineers, compliance staff and nearly its entire legal team.
Those who remain are looking into how to create or support digital currencies in its metaverse — an avatar-filled virtual world that Zuckerberg hopes will eventually generate billions of dollars in commerce for digital goods and services.
Staffers are now trying to find the least regulated way to offer a digital currency, two people said, with a digital token that is not based on the blockchain emerging as the most attractive option.
It would not be the first time Facebook has introduced such a currency to its ecosystem. It launched Facebook Credits in 2009, a virtual currency that enabled users to make in-app purchases, typically in games such as FarmVille. This represented 16 per cent of revenues at the time of its initial public offering in 2012, according to Barclays, but was shut down in 2013 as it was too costly to maintain.
In a memo from late January, the new head of Meta’s finance division Stephane Kasriel wrote: “We’re making changes to our product strategy and road map . . . so we can prioritise on building for the metaverse and on what payments and financial services will look like in this digital world.”
Kasriel, who replaced Marcus when he left the company at the end of 2021, said the company would “accelerate” investments in facilitating payments within WhatsApp and Messenger and in “helping creators monetise their activity”, for example through NFTs.
He also signalled plans to merge its wallet for Facebook Pay — its existing peer-to-peer payments system that does not use blockchain technology — with Novi, the digital currency wallet that was initially supposed to hold the Diem coin.
“The wallet will offer payments, identity and digital asset management within the [family of apps and Reality Labs, its virtual and augmented reality arm,] and over time, to other apps/sites,” he said.
Where some of Meta’s efforts are focused on digital payments, other efforts are part of broader plans to use blockchain technology to introduce more “decentralisation” across its platforms, amid a growing buzz in Silicon Valley around the so-called Web3 movement.
Web3 advocates typically seek to wield distributed ledger technology to allow users more control and ownership over their data and disintermediate Big Tech groups that typically monetise that data as part of their ad-based business models.
But Meta appears to be embracing some Web3 ideals. It is exploring whether to store data on a blockchain, how it might give users more control over their digital identity and whether their identity or accounts can be transferred to, or used across, other platforms beyond Meta’s apps, according to one planning document.
Meanwhile, its plans to reward users for credible content with “social tokens” might allow Meta to remove itself as a central content moderator and give Facebook communities more power in moderating themselves, according to the document.
Additional reporting by Cristina Criddle in London
NB FOR YOUR WALL STREET JOURNAL ACCESS…
As a Premium subscriber you are entitled to full membership of wsj.com (normal price $29 a month). Be sure to action your access through the Premium link on the BizNews website. Because of The Wall Street Journal’s credential requirements, be sure to create a password which has at least 8 characters and includes at least one letter and one number – NB it MAY NOT contain any special characters (ie #, !, @ etc). To maintain access to WSJ.com, you MUST enter our partner’s website via BizNews Premium at least once a month. A final PS, if you had previously signed up for WSJ you’ll need to clear the cookies from your device. Our help desk can assist – [email protected].
