Facebook owner plans virtual currency to re-engage users

Meta, the parent company of Facebook, has drawn up plans to adopt virtual currencies, tokens and lending services in its apps as it pursues its financial ambitions despite the collapse of a project to launch a cryptocurrency.

The company, led by chief executive Mark Zuckerberg, is looking for alternative sources of revenue and new features that can attract and retain users as the popularity of its core social media products such as Facebook and Instagram wanes — a trend that threatens its ad-based business model of US$ 118 billion per year (R$ 560 billion).

Facebook’s financial arm, Meta Financial Technologies, has been exploring creating a virtual currency for the metaverse, which employees internally dubbed “Zuck Bucks,” according to several people familiar with the initiative.

It is unlikely to be a blockchain-based cryptocurrency, some of these people said. Instead, Meta is leaning towards introducing in-app tokens that would be centrally controlled by the company, similar to those used in gaming apps, such as the robux currency in the popular children’s game Roblox.

According to memos from the company and people close to the plans, Meta is also looking at creating “social tokens” or “reputation tokens”, which could be issued as rewards for significant contributions to Facebook groups, for example. Another effort is to generate “creator coins” that can be associated with specific influencers in your Instagram photo-sharing app.

Meta has also been exploring more traditional financial services, with a focus on providing small business loans at attractive interest rates, according to several people familiar with the initiative. While nothing is planned right away, the company has already spoken to potential credit partners, one of the people said.

Most efforts are in the early stages of discussion and may change or be abandoned, although their plans to integrate NFTs (non-fungible tokens) into their applications are more advanced. Zuckerberg confirmed an earlier Financial Times report that Instagram would soon begin supporting NFTs.

According to a memo shared internally last week, Meta plans to launch a pilot to post and share NFTs on Facebook in mid-May. This will be “quickly followed” by testing a feature that will allow membership in Facebook groups based on NFT ownership and another for minting NFTs.

NFTs may be monetized through “fees and/or advertisements” in the future, according to another internal document.

Facebook declined to comment.

Meta lost more than $220 billion of its market cap in February, the day it revealed that users were increasingly spending time with newer rivals such as short-video app TikTok.

The company has recently sought to find other sources of revenue and support e-commerce on the platform by investigating cryptocurrencies and blockchain technology. Its big tech rivals such as Google and Apple have been more cautious about plunging into the nascent space.

But the initiative has been hampered by setbacks and regulatory scrutiny. Earlier this year, the global cryptocurrency project she spearheaded, called “diem”, was canceled, and its assets were sold to Californian bank Silvergate, after U.S. regulators refused to green-light the pilot over concerns about monetary stability and competition.

Amid internal frustrations, Meta’s finance division has suffered what a former employee described as a “mass exodus” of employees over the past six months. Its director David Marcus left at the end of last year, along with the main engineers, the compliance team and almost the entire legal team.

Those who remain are looking at how to create or support digital currencies in its metaverse — a virtual world full of avatars that Zuckerberg hopes will eventually generate billions of dollars in commerce in digital goods and services.

The new plans represent something far removed from diem and the dream of creating a cryptocurrency. Officials are now trying to find the least regulated way to offer a digital currency, two people said, with a non-blockchain-based digital token looking like the more attractive option.

It wouldn’t be the first time Facebook has introduced such a currency into its ecosystem. It launched Facebook Credits in 2009, a virtual currency that allowed users to make in-app purchases, typically in games like Farmville. This accounted for 16% of revenues at the time of its initial public offering in 2012, according to Barclays bank, but closed in 2013 because it was too expensive to maintain.

In a late-January memo, Meta’s new head of finance, Stephane Kasriel, wrote: “We are making changes to our product strategy and roadmap…so we can prioritize building the metaverse and what payments and financial services in this digital world”.

Kasriel, who replaced Marcus, said the company would “accelerate” investments to offer payments on WhatsApp and Messenger and “help creators monetize their activity”, for example through NFTs.

He also signaled plans to merge his wallet for Facebook Pay — its current peer-to-peer payments system, which does not use blockchain technology — with Novi, a digital currency wallet that was initially supposed to contain diem currency.

“The wallet will offer payments, identity and digital asset management within the [família de aplicativos e Reality Labs, seu braço de realidade virtual e aumentada] and, over time, to other apps/websites,” he said.

While some efforts by Meta are focused on digital payments, other initiatives are part of broader plans to use blockchain technology to embrace greater “decentralization” on its platforms, amid growing buzz in Silicon Valley around the so-called Web movement. 3.0.

Web 3.0 advocates often seek to use distributed ledger technology to allow users greater control and ownership over their data and to disintermediate the large tech groups that often monetize that data as part of their ad-based business models.

But Meta appears to be embracing some Web 3.0 ideals. It is exploring whether to store data on a blockchain, how it can give users more control of their digital identity, and whether their identity or accounts can be transferred or used on platforms other than Meta’s apps, according to a planning document. .

Meanwhile, its plans to reward users for trusted content with social tokens could allow Meta to step back as central content moderator and give Facebook communities greater power to self-moderate, according to the document.