Facebook confirmed that Messenger chief David Marcus will head up a small team tasked with researching applications for blockchain, even as rumors swirl that the social media platform is mulling its own virtual currency.
Some experts point to blockchain, a decentralized and thereby tamper-proof electronic database, as a significant threat to social media giants like Facebook, which make much of their billions in profits off of their users’ treasure trove of personal data. “Blockchain is an existential risk for Facebook.” Richard Kestenbaum, partner, Triangle Capital LLC, said.
If someone else enables social media with the same functionality as Facebook but includes blockchain technology along with it, Facebook may find itself obsoleted by the opportunity for users to earn cryptocurrency.
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Brands and advertisers flock to Facebook’s virtually unparalleled targeting capabilities, ensuring their ads are seen by the right consumers. But blockchain-based social networking platform could lure users away, offering them their greater control over their data and their content, and upending the essence of Facebook’s business model.
“If someone else enables social media with the same functionality as Facebook but includes blockchain technology along with it, Facebook may find itself obsoleted by the opportunity for users to earn cryptocurrency,” Kestenbaum said.
This could be why Facebook CEO Mark Zuckerberg finally is launching this exploratory group. The Harvard dropout has shown a remarkable talent for identifying and preempting threats on the horizon—Facebook’s 2012 acquisition of Instagram to ward off Snapchat’s growing popularity with teens is one prime example.
However, a social media upstart with crypto rewards built-in could be too much for Facebook to overcome. “Even if Facebook adapts by including blockchain with its existing structure, I don’t see how they compete against another blockchain-based social media competitor that is offering its users cryptocurrency,” Kestenbaum said. “The opportunity for users to get their allocable share of the more than $40 billion that Facebook gets in revenue every year will be virtually impossible for Facebook to compete against.”
Meanwhile, that line of thinking could be what’s prompted Facebook to consider developing its own proprietary cryptocurrency, for use in peer-to-peer payments in its Marketplace, for example, which functions similarly to Craigslist or other classifieds listings. However, given the growth of brand commerce on the social platform, it’s not out of the realm of possibility to think that a virtual currency could facilitate retail-to-consumer transactions on the platform.
On the other hand, could Facebook’s days be numbered? According to Kestenbaum, the social media giant could suffer the same face as the likes of Kodak and BlackBerry—companies once dominant in their industries that have been left behind by innovation and disruption. “Facebook may prove to be only a transitional technology to the blockchain-based social media formats that come after it,” Kestenbaum added.
Despite these early days in the blockchain ecosystem, numerous industries have shown interest in how the technology could improve areas of business ranging from shipping and logistics to retail loyalty programs and commerce to enterprise software and email marketing to ethical labor and counterfeiting.
And yet at the enterprise level, blockchain is moving slowly, despite major vendors including Amazon launching offerings such as Blockchain-as-a-Service. More than three quarters (77 percent) of CIOs said their organizations are completely disinterested in blockchain or haven’t yet formalized a plan to implement the distributed ledger technology within the enterprise, according to a Gartner survey released in early May. The number of those who have adopted blockchain are far smaller; just 1 percent of surveyed CIOs said their company is actively using blockchain and another 8 percent are exploring applications with it. Still, a Grand View Research report forecasts that the blockchain technology market will reach $7.59 billion by 2024, expanding by a combined annual growth rate of more than 59 percent through that year.
