While I focus on crypto, I’ve written a lot about Facebook over the years. I was the original Facebook bull following the publication of the first Wall Street style research report on Facebook in March of 2010. In April of 2017, I started writing about “The Profound Implications of Five Increasingly Dominant Tech Companies” (Facebook, Apple, Microsoft, Google and Amazon, which I refer to collectively as “FAMGA”). I was a Facebook bull for 8 years, until Jan. 2018, when I wrote: “Facebook’s EPIC Run Comes To An End”. This post is about why I’m excited about the potential positive industry impact of the Facebook Coin.
Paying users to watch advertising is nonsensical
There’s been a lot written about how Facebook can use the coin to pay users to watch more advertising. Let’s run the numbers on that.
The average user spends 35 minutes a day on Facebook. Facebook ended last quarter with 2.38 billion members. That’s a total of 506 billion hours a year spent on Facebook. Facebook generated $14.9 billion in revenue last quarter, so they’re on a $60 billion annual run rate. That translates to roughly $0.12 they make on each hour users spend on the platform. That’s $25 a year that Facebook makes off the average user. So if they shared 100% of the advertising revenue with users, that’s $2 a month they have to incentivize users to watch ads. That works out to $0.002/hr. How meaningful is that going to be in impacting user behavior?
It’s All About Gamifying The User Experience To Optimize Engagement
Social platforms grow user engagement until they don’t. Facebook grew user engagement for more than 12 years. The biggest jump in engagement happened following the introduction of the newsfeed in 2006. My enthusiasm for Facebook has always been predicated on their growing engagement. My 2014 revenue forecast in my 2010 Facebook research report was off by just 1% because I largely focused on one thing, engagement.
I remained a Facebook bull for eight years, as they continued to increase user engagement (defined as DAUs/MAUs once the company started reporting results). Social networks are either growing engagement, or they’re dying, and for its first 12 years, Facebook was growing user engagement because their brilliant at gamifying the user experience to drive more engagement. They don’t pay users in dollars. Facebook users other incentives. The whole idea of “liking” something is gamifying the user experience by paying to incentivize the user in status.
The focus on user engagement leads to questionable policies at Facebook that they are still grappling with. Not only was “fake news” prevalent on Facebook, but it was also the #1 thing that people clicked on. In fact, Facebook said it was their effort to cut down on fake news that drove the initial decline in engagement in Q4 ’17. And the engagement has continued to fall ever since:
So Facebook is dying. To save it, they need to turn around the engagement problem. Here’s were Facebook Coin comes in.
Token Economics Is An Emerging Science That The Facebook Coin Can Dramatically Impact
While some cryptocurrencies actually want to be currencies or stores of values, the vast majority of cryptocurrencies are simply loyalty points. Like points or miles, cryptocurrency is a revolutionary tool to gamify the user experience. Incentivizing community members to perform certain activities that help the project. Gamification leveraging cryptocurrency is also known as Token Economics.
While there are a few super smart people focused on token economics, the only people with relevant real-world experience at iterating token economies at scale, did so in gaming economies. We’re in the early days of rolling out different crypto token economies, and there is learning being done, but nothing in Token Economics is happening at scale. And the only way we are going to get significantly better at Token Economics is to have real-world experience, at scale, in crypto ecosystems. This is why the Facebook Coin can be so impactful for the entire industry. Facebook can create the worlds first scaled token economy, and we can all learn from their experience. That’s why I think the Facebook coin could be a watershed moment in crypto
The Atomization of Incentivization
Today, loyalty points remain pretty basic. You get miles for flying on an airline. The Chase Sapphire Card will give you 2X points on travel and dining worldwide. The Wells Fargo Amex gives you 3X points for gas stations, rideshares, and transit. Capital One gives you 10X miles on thousands of hotels via a JV with Hotels.com.
Now we’re starting to see these incentive mechanisms, using cryptocurrencies, in other industries, like healthcare. Gymrewards is an app that rewards people for working out by employing wearables to track a participant’s heart rate and estimated calories burned to “mine” for GYM currency. Embleema compensates patients with cryptocurrency for sharing medical data via medical records and activity trackers.
In the coming years, we could all be being compensated by dozens or hundreds of entities in a given day based on an infinite number of potential micro-actions.
But the only way to get from here to there is with real-world experience at scale. And that’s what Facebook could bring to crypto.
Facebooks Entry Into Crypto Is A Double-Edged Sword For Industry Participants
So bring it on Zuck. I know you want to own crypto like you own social. I know there are lots of Facebook Coin implications for WhatsApp and payments to. So come help educate the world about crypto. Show us some scaled use cases that we can learn and iterate from. We look forward to your help, and we look forward to the “Coming Epic Battle Between Crypto & FAMGA”