The Data Behind Facebook's Libra Project
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The Data Behind Facebook's Libra Project

Dec 27, 2019
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Much has been said over the last few months about Facebook’s Libra project – their upcoming crypto asset due to be unveiled tomorrow, June 18, 2019. The project potentially represents what some have called crypto’s “Netscape Moment” due to the number of users a Facebook-backed crypto asset could potentially expose the industry to. Whilst we expect a lot more detail about the project to be unveiled soon, we can look at the data behind Facebook to better understand the potential scale of the Libra project.

Whilst it is still not entirely clear how the Libra project will fit into Facebook’s existing suite of products, it has been reported that it will be some kind of stablecoin allowing for payments across the company’s various messaging applications. We can look at the data from Facebook’s annual reports to visualize how many users could theoretically be exposed to the crypto asset through their main application alone. Below we plot Facebook’s daily and monthly active users over time since 2015.

As of March 31st 2019 Facebook’s monthly active users (MAUs) had reached around 2.375 billion and we expect both Instagram and WhatsApp to both have MAUs upwards of 1 billion each. Moreover, given the geographic breakdown of Facebook’s users recently, where user growth seems to be driven primarily from the Asia-Pacific and African regions, it seems a sensible idea to focus the Libra project on the remittance markets in those regions.

The stark difference in user growth between the Asia-Pacific and Rest of World regions compared to the United States & Canada, and Europe, is even more noticeable when we take a look at how MAU values change over time.

This data seems to point to the fact that the Asia-Pacific and Rest of World regions have been the drivers of Facebook’s growth in recent times and a remittances payment application powered by the company’s native crypto asset could act as the impetus behind further growth in those regions.

Historically, Facebook’s revenue has largely come from its digital advertising services across Facebook, Messenger, Instagram, WhatsApp, and other applications. The other significant revenue stream for Facebook has been the net fees it has received from developers using their payments infrastructure. Below we’ve plotted the percentage of total revenue generated by Facebook’s payment vertical over time.

The share of revenue brought in by payments has reduced massively since its high of 15.92% in 2012. Due to potential worries over the long-term viability of digital advertising as a cash cow, the Libra project presents an opportunity for Facebook to turn its payments vertical into a significant revenue stream once again.

Conclusion

The Libra project is a strategic move by Facebook to take advantage of potential opportunities in developing economies primarily within the Asia-Pacific and Africa regions. A Facebook-backed crypto asset would have instant access to over 2 billion people across the main Facebook application, WhatsApp, and Instagram – meaning that the project could help expose an unprecedented number of people to the crypto asset market. If successful, the Libra project could help reinvigorate Facebook’s existing payments vertical as the company attempts to move away from its reliance on digital advertising.

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The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction.

Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors.

The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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