Internet has transformed the face of humankind more than anything else in the past century. Societies that managed to grant their citizens unlimited access to internet have become infinitely more efficient and productive. The relentless access to answers to anything and everything gave people the ability to be immensely better at anything they do. Not unlike book print in the 16th century, the internet has enabled human interaction on an entirely new elevated level. The impact of internet is so profound that there is a valid argument that access to internet should be codified into law like freedom of speech or freedom of assembly – the two pillars of democratic societies.
Most recently, Mr Zuckerberg has been vocal on this issue in his article in the Wall Street Journal. With his purposefully understated demeanor, informal closet and repute of a half-genius Harvard dropout, the CEO of one of the most powerful companies in the world is only a step away from being admired as a great thinker of our age. But there is always story behind a story.
Facebook has grown up
Facebook – once the domain for sharing all social interactions – is losing its relevance among young population. Always informed and agitated, the millennials do not like Facebook, the idea of giving up their privacy and accepting the level of exposure bordering on exhibitionism. The pattern of repeating scandals like the recent news about Facebook’s effort to manipulate emotions of its users by tweaking feed outputs, expose how much control the website has over its users, but also its impertinent readiness to monetize it.
People get agitated, but rarely take a decisive action. With 1.3bn users, Facebook has built a critical mass, which locks users to the website’s ecosystem – it is easier to reach any of our connections through Facebook, because they are all there. Facebook is growing up, as its audience is getting much older, but this may work to the website’s benefit. According to a research by digital marketing agency iStrategyLabs, over the past 3 years Facebook gained 32.6 percent adults in the 25 to 34 year demographic and, even more strikingly, 41.4 percent in the 35 to 54 year user group (http://www.ibtimes.com/facebook-gets-older-demographic-report-shows-3-million-teens-left-social-network-3-years-1543092). Being economically active, the older demographic is ideal to bring advertising revenue. Numbers strongly support this, as Facebook reported shockingly strong performance for the second quarter with doubled profit revenue exceeding analyst estimates. The platform has also added 40 million new users across the world.
Re-write the rules
Advertising dollars look like a pocket change compared to banking. Since the dawn of the mankind banking has been rewarded by a high return. Banking at its core is about oiling the economy – a vast mechanical apparatus – by making sure that money is where it is needed through storing, lending and helping people and companies obtain funds from the markets. For centuries, the business model remained the same. Banking has always been built on trust and connections.
For the Medici family in the 14th century Italy the crux of the success rested on a mafia-like business model. Vast network of people with “favours” and the befriended catholic church have allowed Medicis to manage most of the great fortunes of the contemporary Europe. The wealthy men of the Middle Ages preferred the comfort of having money managed under one roof – frictionless across borders, nations and religions.
Today, banking has become too fragmented. Regional, legal, political and financial frictions make banking expensive and inefficient. Transfer between bank accounts on the opposite sides of world is too costly and time-consuming for digital age. The imminent hurrah around Bitcoin has shown how big the appetite is for online payment system that would absolve us from bank fees and administrative nuisance of cross-border transactions. Similarly, M-Pesa – a mobile-phone base money transfer service – has achieved an unprecedented success in Kenya. It allows workers abroad to send earnings to their relatives in remote villages via a simple SMS.
Many have raised eyebrows when Facebook bought WhatsApp – a simple messaging service built on a “no ads” business model – for a stupendous $19bn. It was not immediately apparent how could Facebook recover its investment. With the news that Facebook has applied for an e-money license in Ireland, the price tag forked out for WhatsApp seems much more reasonable. WhatsApp is already an established network between people in West and the developing world. Adding a money transfer mechanism to the platform seems like a logical next step. Facebook would become the one-stop shop for electronic payments for millions of its users, not least the migrant workers in the developed countries. According to Financial Times, another aspect of Facebook’s financial services ambition may be to issue units of stored monetary value that represent a claim against the company – a form of e-money like Bitcoin, but without the volatility and insecurity that has caused the virtual currency’s debacle.
Mr. Zuckerberg is a clever capitalist, not a humanitarian. His calls for internet liberation are not pleas for the betterment of mankind, but a desire to extend the power of Facebook. Banking is a logical next step for Facebook, which has an unmatched net of connections. It would also improve the lives of millions by lowering cost of money transfer and enabling liquidity to flow where it is needed the most. Sometimes, a clever capitalist can cause more good than a spirited humanitarian.