From social media platform to world domination: all hail the rise of Facebook 2.0
Facebook’s new cryptocurrency, Libra, can handle 1,000 transactions per second (Bitcoin can only deal with seven) and early investors include Uber, Paypal, Spotify and Mastercard.
Mark Zuckerberg and the company he created in a Harvard dorm room 15 years ago reach more than two billion people every day. This figure, easily more than a quarter of the world’s population, is enough to make the eyes water; but one of the most telling indications of Facebook’s ever-increasing dominion is that it is becoming difficult to imagine a world in which the company doesn’t exist. As its tentacles probe more and more invasively into our homes, our polling stations and, now, our wallets, it is worth pausing to reflect: exactly what kind of platform is Facebook becoming?
In June this year, Facebook – who already owns Instagram, WhatsApp and Messenger – announced that at the dawn of 2020 it will roll out its own cryptocurrency. The Guardian says that the name, Libra, derives from the Roman word measurement for weight (£ comes from the ’L’ in ’Libra’ and ’lb’ is the shorthand for a pound). But Jemima Kelly from The Financial Times points out that the name could also be a jab at the Winkelvoss brothers, who created the digital currency exchange Gemini in 2014. Libra has also been disparagingly referred to as ’Zuck-bucks’ or ’Face-coins’ in various reports.
This money move wasn’t a shock to anyone who had been listening to the company’s CEO; at the beginning of 2018 Zuckerberg had explained in one of his notorious (and slightly odd) public ’resolutions’ that he wanted to study the upsides and downsides of cryptocurrencies. By May, Facebook was establishing a blockchain division and the infrastructure began to take shape.
In a whitepaper, Libra’s founders declare that their mission is to help the 1.7billion people who “remain outside the financial system”; people with less money pay more for financial services, and Facebook hopes (it claims) to empower them through cryptocurrency. Its target seems ostensibly to be the developing world, a sector in which, though Facebook growth is happening most rapidly, the company may actually be struggling to make money. Its efforts to laser in on areas like South-east Asia through the Libra prism therefore make sense.
Seyi Taylor, a tech product manager who has written about the impact of the new currency on the developing world and who speaks to me from Nigeria, talks about people in the developing countries having Facebook and WhatsApp but not necessarily being sources of money for Facebook. This may be partly because they are less likely to buy things online; in south Asia, about 625million people don’t have a bank account. The advertising sectors in these countries are also a fraction of those in the West. To actually make money off these users, says Taylor, would involve providing them with a service that’s more necessary – “more than just providing a platform for people to advertise to them, you might provide a way for they themselves to do some basic financial transactions”.
Libra can handle 1,000 transactions per second; Bitcoin – the ready comparison in any discussion of Libra – can only deal with seven. In order to move Libra around, you can use Calibra, the digital wallet that Facebook will implement (though other wallet providers will be available). Libra’s development will be handled by a Geneva-based not-for-profit consortium called ’Libra Association’; each of its members – there are 28 at the moment, including Facebook – has to pay $10million to join. Uber, Paypal, Spotify and Mastercard have done so already, and Facebook hopes that by the time Libra launches there will be 100 members.
When Sky News’ technology correspondent Rowland Manthorpe heard about Libra before it was announced, his first reaction was “I don’t get it.” He texted a friend who knows about cryptocurrencies and asked them if it was a cryptocurrency. The friend told him not to be ridiculous; one of the hallmarks of a cryptocurrency is that it’s decentralised, and a currency owned and operated by Facebook is “the very definition of centralised”. But he realised that a semantic discussion was a red herring; the fact that Facebook is entering the money arena was huge news, irrespective of whether or not you consider Libra a cryptocurrency (he doesn’t). “Having lived through the last 15 years of Facebook,” he says, “I never underestimate what Facebook can do.”
In some developing countries, says Manthorpe, where Facebook basically is the internet and there are already problems moving money, Libra could be huge. But Facebook’s motivation won’t be a solely altruistic effort to help the unbanked: as Manthorpe points out, there are already companies like Azimo or Transferwise trying to make this problem easier, and Facebook could have simply partnered with them. I speak to Jonathan Taplin, author of Move Fast and Break Things: How Facebook, Google and Amazon Cornered Culture and Undermined Democracy, and he is of very much the same opinion. “It’s not as if there aren’t ways to deal with this problem without handing all the data over to Facebook,” he says. “Imagine, once Facebook knows exactly what your bank balance is and what your total net worth is, them using that on an e‑commerce platform…or selling data like that so that somebody can charge you more for an aeroplane ticket than they charge me because they know you have a bigger bank balance.”
With Facebook, as ever, it comes down to privacy and data. Facebook claims that Libra won’t be able to use your data to sell ads if you don’t want it to. But, Manthorpe says, you will need to consent to it using your data to sell ads because it will be too difficult to use Libra if you don’t. “If you do opt in, obviously Facebook will then have access to your social graph and they’ll be able to see who you’re sending money to and why.” When I ask Facebook about this, a spokesperson says that people can open a Calibra account without having a Facebook or WhatsApp account, and that, “aside from limited cases”, Calibra won’t share account information with Facebook. “The limited cases where this data may be shared reflect our need to keep people safe, comply with the law, and provide basic functionality to the people who use Calibra.”
Manthorpe doesn’t think there’s much evidence that the Cambridge Analytica scandal has changed people’s decision-making about the social network. (Facebook is expected to be fined around $5billion by the Federal Trade Commission for allowing a political consulting firm to access millions of users’ data, which influenced the 2016 US elections.) When the system works, Manthorpe thinks, people use it. For most people, Facebook works.
One group who are worried about Libra is the US Congress, who issued Facebook with a moratorium on July 2. “The scant information provided about the intent, roles, potential use, and security of the Libra and Calibra exposes the massive scale of the risks and the lack of clear regulatory protections,” the letter read. As Taylor puts it: “Governments might not be comfortable with a corporate entity with a user base larger than the largest country in the world essentially launching its own currency.” (The Facebook spokesperson: “We look forward to working with lawmakers as this process moves forward, including answering their questions at the upcoming House Financial Services and Senate Banking Committee hearings.”)
But no one I speak to thinks that this warning will make any difference to Facebook, and they describe the government as forever being several steps behind Silicon Valley. Taplin goes so far as to say that this is one of the motivations behind Libra’s inception: “The whole reason to have a currency that is outside the control of any government is so that you can do things that you don’t want governments to know you’re doing. If you go onto any illegal drug market online, what do they use? They use bitcoin.”
Congress doesn’t understand Facebook, says Dennis Yu, a digital marketer who helped build Yahoo’s analytics almost 20 years ago. Facebook and Google are like Coke and Pepsi, he says – laws unto their own. “They’re now so big that there needs to be some regulation but they want to avoid it.” In Europe the regulators have been quicker to clamp down on vast tech companies; America, the land of the free, is playing catch-up.
I ask Yu if Facebook might be moving into currency as a sort of plan B – in a decade, people may not post anything on Facebook but in the meantime they may have become dependent on Libra. Yu says that it is “less of a plan B and more of a graduation that they knew has been coming all along”. Years ago, Facebook saw that microcommunities were becoming more important and that cryptocurrencies were taking off; now, it is concentrating its efforts on these two areas. (“I believe a privacy-focused communications platform will become even more important than today’s open platforms,” Zuckerberg wrote in March.) Besides, Yu points out, it doesn’t matter if users drift away from Facebook to another network because Facebook, as it has with comparative upstarts Instagram and WhatsApp, can simply buy anyone it considers to be a competitor. As Antonio Garcia Martinez points out in his book Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley, Facebook has two priorities: growth and monetisation. It has been difficult to prove that anything else matters.
Taplin, however, thinks that Facebook could be worried. Trust in the company has plummeted and growth in the US has stalled. He thinks the right mentality for a Silicon Valley company is, as the the American businessman Andrew Grove once said, “Only the paranoid survive.” To the man on the street, says Rowland Manthorpe, it is easy to regard colossal companies like Facebook as “unstoppable behemoths; but in reality they are likely to be looking over their shoulder, ever-anxious that a newer model might replace them. “There’s a lot of ambition that drives them,” he says, “but also a lot of anxiety.” This is the mindset that creates Libra: Facebook still needs to find more ways to keep people attached to Facebook.
Taylor thinks that Libra could have immense benefits for the Facebook Marketplace app. The app is already beginning to integrate shipping services into Facebook Marketplace, strengthening its position against retail giants like ebay and Amazon. But with Libra, Taylor explains in his blog, instead of just connecting buyers and sellers, Facebook might be able to take part in the transactions themselves. The following will depend on the “limited cases” in which Facebook shares users’ data but if you use Calibra to buy an advertised product, Facebook – and in turn the advertiser – may have more information about your transaction habits, making it easier to target advertising to you.
The platform to which Facebook might be aspiring, says Yu, is WeChat, the multi-purpose Chinese messaging app used by more than one billion people a month. “On WeChat you do everything,” he says. “It’s like Facebook plus AirBnB plus Google – it’s everything all in one.” WeChat already has a digital payment wallet, WeChat Pay, embedded into its system, and the app is considered a potential competitor to giants like Visa and Mastercard. When Facebook has become more like WeChat, says Yu, it will outstrip the competition. “They become stickier,” he says. “People will live their lives around Facebook.”
Becoming stickier, becoming truly essential, is what a company as ambitious as Facebook must aspire to. Looking around at the breadth of its domain and seeing that there are very few worlds left to conquer, it is the only option left – to grow until everyone is using it. Libra could be the golden ticket to convert the unconverted. “Once you have a large role in the way that money moves around, then you are essential,” Manthorpe says. “If Facebook plays a big role in how we move money around, it doesn’t matter if everyone stops using Facebook and moves onto a cooler social network like TikTok or whatever – Facebook will be in their lives.”
The well-documented role that Facebook has played in syphoning users into echo chambers, oblivious to people unlike themselves, has made its former – ’making the world more open and connected’ – increasingly ironic. It would be difficult to say this motto out loud with a straight face in 2019. But Facebook has survived the storms that have battered its sails and it shows no sign of sinking. As for Libra, its fate is yet to pan out, and, as Tapli says, “It’s a fool’s errand to try and predict what will exist in 50 years.” But whether it flies or whether it flops like many forgotten Facebook ventures, for the time being Facebook isn’t going anywhere. Its scope is too wide, its dreams too grand. To quote Taplin one last time: “It’s not so easy to knock off the king.”