I think this makes alot of sense. No real 800lb gorilla in the space yet.
Coinbase is big but they have nowhere near the money, legal reach, engineer head count, or infrastructure of a Microsoft, Facebook, google or Amazon.
if the rumors of Coinbase making loads of money are true then they make a great and vulnerable target. I mean Coinbase is the US leader in crypto but they don't really have any moat around them to prevent one of the big 5 from coming in and competing with them by slashing trading cost to almost zero.
Where would Coinbase be if trading commissions were gone.
That's got to be a "Netscape loosing all its Navigator revenue due to a free Internet explorer" type scary for Coinbase.
Even if Coinbase is making money like crazy, you'd think they still have to seriously consider selling.
Facebook has the muscle to turn Coinbase into an acquisition success on the scale of Instagram. They already have their VP of FB Messaging, David Marcus, on the Coinbase board as well.
If I were a Coinbase investor, such as Andreessen Horowitz, I'd take a long hard look at a potential acquisition. It could increase the value of their cryptocurrency holdings and speed up market adoption.
Simply cutting trading commissions is not enough to compete with Coinbase; I believe they already have competitors that offer lower rates.
The main reason they remain one of the largest players in the marketspace is because they are one of the only "fiat bridges" -- a place where you can actually buy and sell crypto for government-backed dollars.
There's a reason why there are a dozen crypto exchanges but not many more (any more?) fiat bridges -- it requires setting up banking relationships, complying with KYC regulations, etc.
Imagine becoming a major hub for crypto trading - and charging commissions/fees for nothing more than an accounting entry, with the only real costs being the fees for transfer of incoming and outgoing crypto, which the customer also pays for.
If (a big If) the crypto market gets very huge, that strategy alone could easily make a few million dollars per day, or billions of dollars per year.
> they don't really have any moat around them to prevent one of the big 5 from coming in and competing with them
With that in mind why does an acquisition make sense for Facebook?
It seems like a similar price war was unleashed among brokerage houses (driven mainly hy Schwab, but also Robinhood), but brokerages are not buying one another. Instead the competition has shifted into fee-based products (like ETFs and mutual funds) as well as portfolio management.
Hard to classify them as "vulnerable" given how successful they've been independently and they're privately held. I'd be "vulnerable" to the right eye-popping offer too, so don't bet on anything right now.
So did they change their mind regarding cryptocurrency being ‘frequently associated with misleading or deceptive promotional practices’ or did they just decide they wanted to profit off of it again?
They realized their own business model is frequently associated with misleading or deceptive promotional practices, so there would be synergy in allowing cryptocurrency ads.
Man, this would be wild. What products would come out of this acquisition?
Maybe they'd fully support crypto as a method of payment transfer to replace their Messenger Payments product. It's not clear if crypto would make their payments platform so much better that they'd get strong penetration, but in countries with underdeveloped payments platforms, I can imagine they'd get some good growth. It'd be very much in line with their vision of connecting everyone - enable payments between anyone in the world.
FB has been very obviously investing in crypto currency stuff. David Marcus has been put in charge of this as it says in the article, and I take it he is an important person. Their recruiters were bugging the hell out of me for a while, which indicates they're more interested in using ledger tech in advertising (something I'm working on) than in exchanges, which in fact is along the lines of their core business needs.
I mean, when was the last time the Economist or Independent broke a Silicon Valley merger story? Pretty much never, AFAIK. The substance of the story is Marcus has coinbase connections, and that's about it.
I suppose there is the eternal Winkelvoss/Zuck rivalry, but if that's really at play here, well, lol.
Hold on. How has Facebook had a ban on cryptocurrency adverts since January? Every day I see another false advert, with a fake Dragon's Den investment scenario, linking to a site mocked up to look like BBC news.
Yes, they had a ban alongside with Google. However, it doesn't appear that it was "enforced". I was seeing crypto ads all the time. (and most of them shady or outright scammish)
I've seen ads for GoogleTrader (not the defunct Google Trader) on Facebook less than a year ago, which is an obvious scam operation if you spend some time to Google it - heh.
So yeah, they're terrible at that too - or they don't care, your choice.
Ok, now this would be kind of wild. Is there any real substance to this acquisition rumor? It's one thing for Facebook to want that easy money from the adverts, but it's a whole different ball game to want to get into the crypto space like this. Why wouldn't they just roll out their own crypto?
Difficult to imagine Facebook shilling crypto (as opposed to its advertisers shilling crypto, which it can profit from without taking responsibility for) ending up in anything other than tears and class action lawsuits...
Coinbase is basically the entry point into a lot of cryptocurrencies as it has easy fiat to crypto exchange. When you have this information you can deanonymise most activity on most blockchains. This might go into tinfoil hat territory but it might be a reason Coinbase is of interest to Facebook
I'm not into cryptocurrencies at all, but it doesn't seem like a good idea to couple Google/Facebook (e.g. nonexistent) levels of customer service with a banking/investing like product.
Though, it's not like the current crytocurrency exchanges are doing well on this front (the other day there was a post about how Coinbase support is terrible), but they're small and have niche brands.
I don't see why a company like Facebook would want to expose themselves to the costs of employing hundreds of customer service reps and/or the negative PR of people loosing lots of money or access to their accounts with no recourse.
From Chris Dixon's of a16z post [1] (Coinbase's largest investor) at the launch of a16z crypto:
"We are long-term, patient investors. We’ve been investing in crypto assets for 5+ years. We’ve never sold any of those investments, and don’t plan to any time soon. We structured the a16z crypto fund to be able to hold investments for 10+ years."
I realize that with Coinbase's rumored financial success, this might be a sound investment... but I really do hope that their intention is not to use the Facebook platform to push crypto. Hawking their user's data is taking it far enough.
(Just to be clear, this isn't specifically about or against crypto, this is about them promoting any asset to unqualified investors.)
Coinbase selling out to Facebook would be in my opinion the same as Coinbase not believing in the future of cryptocurrencies. Why would the founder sell when this company could be worth much more if cryptocurrencies become mainstream? The founder could become the equivalent of a modern J.P Morgan.
I mean, what's stopping Facebook from introducing FaceCoin tommorrow as a virtual currency like any of the other in-game currencies only offer to buy real things with it. None of the market-dominating things need Coinbase or anything crypto related. If they buy, it's purely tapping a hot market.
Keep in mind, once the dust settles, cryptocurrency is probably going to settle into two buckets: utility and security. Facebook definitively does not want to be involved in the latter.
1) FB only turned back on ads so that they could get better data on how people market crypto projects (for their own blockchain team)
2) Added revenue
3) The article is very, very speculative; one could argue it's about as speculative as one of these vaporware token sales claiming they have a partnership with some major brand, and 20%+ of the copy is dedicated to building the hypothetical value of such a partnership.
Maybe someone made up the rumor as some last-ditch effort to make the price not go down
Just spitballing here, but I could imagine that each of the twos weak spots (Facebook: declining user growth, fake profiles, need of income via engagement etc vs. <insert-coin-here>: bad usability, trustworthiness, small-scale markets, no vendor acceptance etc), could be ripe for great synergies with such a merger.
I seem to recall that a prominent litecoin developer was working for Facebook and he sold all his coins to avoid the appearance of a conflict of interest. There was a lot of speculation about what this meant when it happened.
The main "rumours" are an analyst in the article suggesting that they should buy it as their initial footprint in cryptocurrency. Clickbait until there is serious reason to believe that Facebook is going there.
Depends on how repellent the ads are really. Technically they could probably get more money from x rated ads themselves but it would alienate a larger collection of customers and product.
Come to think of it that describes a lot of the woes of big media and why the next big genre comes from small scenes in addition to inherit creativity or lack of it. Introducing say punk or gangster rap to music producer big names too early on would see you thrown out quickly and not just on their prejudices but rational "would get them pilloried even if it was the next big thing eventually".
Youtube has had several adpocalypses over it and tension between content producers and what advertisers want to be seen on and of course what viewers want. "If I wanted stale advertiser friendly content I would turn om tv." reactions.
The ideal thing for them would be to ban ads for ICOs that do not comply with certain requirements like disclaimers, SEC registration, etc., but that would be really hard to implement so they just ban hammered the whole space.
In this space everyone has a price. And I can see the advantages of wanting an exit from a volatile space to nice safe $$$ before the next catastrophe (although cryptocurrency prices are surprisingly catastrophe-resistant).
[+] [-] chollida1|7 years ago|reply
Coinbase is big but they have nowhere near the money, legal reach, engineer head count, or infrastructure of a Microsoft, Facebook, google or Amazon.
if the rumors of Coinbase making loads of money are true then they make a great and vulnerable target. I mean Coinbase is the US leader in crypto but they don't really have any moat around them to prevent one of the big 5 from coming in and competing with them by slashing trading cost to almost zero.
Where would Coinbase be if trading commissions were gone.
That's got to be a "Netscape loosing all its Navigator revenue due to a free Internet explorer" type scary for Coinbase.
Even if Coinbase is making money like crazy, you'd think they still have to seriously consider selling.
[+] [-] dsco|7 years ago|reply
If I were a Coinbase investor, such as Andreessen Horowitz, I'd take a long hard look at a potential acquisition. It could increase the value of their cryptocurrency holdings and speed up market adoption.
[+] [-] Wingman4l7|7 years ago|reply
The main reason they remain one of the largest players in the marketspace is because they are one of the only "fiat bridges" -- a place where you can actually buy and sell crypto for government-backed dollars.
There's a reason why there are a dozen crypto exchanges but not many more (any more?) fiat bridges -- it requires setting up banking relationships, complying with KYC regulations, etc.
[+] [-] patrickg_zill|7 years ago|reply
If (a big If) the crypto market gets very huge, that strategy alone could easily make a few million dollars per day, or billions of dollars per year.
[+] [-] prostoalex|7 years ago|reply
With that in mind why does an acquisition make sense for Facebook?
It seems like a similar price war was unleashed among brokerage houses (driven mainly hy Schwab, but also Robinhood), but brokerages are not buying one another. Instead the competition has shifted into fee-based products (like ETFs and mutual funds) as well as portfolio management.
[+] [-] fishyofsea|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] SippinLean|7 years ago|reply
[+] [-] ucaetano|7 years ago|reply
[+] [-] downrightmike|7 years ago|reply
[+] [-] ehead|7 years ago|reply
Maybe they'd fully support crypto as a method of payment transfer to replace their Messenger Payments product. It's not clear if crypto would make their payments platform so much better that they'd get strong penetration, but in countries with underdeveloped payments platforms, I can imagine they'd get some good growth. It'd be very much in line with their vision of connecting everyone - enable payments between anyone in the world.
[+] [-] bitsweet|7 years ago|reply
[+] [-] scottlocklin|7 years ago|reply
I mean, when was the last time the Economist or Independent broke a Silicon Valley merger story? Pretty much never, AFAIK. The substance of the story is Marcus has coinbase connections, and that's about it.
I suppose there is the eternal Winkelvoss/Zuck rivalry, but if that's really at play here, well, lol.
[+] [-] ID1452319|7 years ago|reply
[+] [-] akerro|7 years ago|reply
[+] [-] csomar|7 years ago|reply
[+] [-] lapnitnelav|7 years ago|reply
So yeah, they're terrible at that too - or they don't care, your choice.
[+] [-] lathiat|7 years ago|reply
[+] [-] chadmeister|7 years ago|reply
[+] [-] notahacker|7 years ago|reply
[+] [-] lexs|7 years ago|reply
[+] [-] josephagoss|7 years ago|reply
Roll your own crypto is playing the game.
Running an exchange is being the house.
The house always wins.
[+] [-] handbanana|7 years ago|reply
[+] [-] 394549|7 years ago|reply
Though, it's not like the current crytocurrency exchanges are doing well on this front (the other day there was a post about how Coinbase support is terrible), but they're small and have niche brands.
I don't see why a company like Facebook would want to expose themselves to the costs of employing hundreds of customer service reps and/or the negative PR of people loosing lots of money or access to their accounts with no recourse.
[+] [-] chirau|7 years ago|reply
"We are long-term, patient investors. We’ve been investing in crypto assets for 5+ years. We’ve never sold any of those investments, and don’t plan to any time soon. We structured the a16z crypto fund to be able to hold investments for 10+ years."
Makes this all sound like speculation
[1] https://a16zcrypto.com/2018/06/introducing-a16z-crypto/
[+] [-] Gustomaximus|7 years ago|reply
As investors, everything is for sale. They aren't going to stick to the 10 year plan half way through if billions are put on the table.
[+] [-] ckastner|7 years ago|reply
(Just to be clear, this isn't specifically about or against crypto, this is about them promoting any asset to unqualified investors.)
[+] [-] fullshark|7 years ago|reply
[+] [-] guiomie|7 years ago|reply
[+] [-] mountainofdeath|7 years ago|reply
Keep in mind, once the dust settles, cryptocurrency is probably going to settle into two buckets: utility and security. Facebook definitively does not want to be involved in the latter.
[+] [-] Keeeeeeeks|7 years ago|reply
1) FB only turned back on ads so that they could get better data on how people market crypto projects (for their own blockchain team) 2) Added revenue 3) The article is very, very speculative; one could argue it's about as speculative as one of these vaporware token sales claiming they have a partnership with some major brand, and 20%+ of the copy is dedicated to building the hypothetical value of such a partnership.
Maybe someone made up the rumor as some last-ditch effort to make the price not go down
[+] [-] woodpanel|7 years ago|reply
[+] [-] patrickg_zill|7 years ago|reply
[+] [-] asasidh|7 years ago|reply
[+] [-] mapmeld|7 years ago|reply
[+] [-] kristofferR|7 years ago|reply
[+] [-] freeall|7 years ago|reply
[+] [-] phyzome|7 years ago|reply
[+] [-] r3bl|7 years ago|reply
[+] [-] 21|7 years ago|reply
[+] [-] Nasrudith|7 years ago|reply
Come to think of it that describes a lot of the woes of big media and why the next big genre comes from small scenes in addition to inherit creativity or lack of it. Introducing say punk or gangster rap to music producer big names too early on would see you thrown out quickly and not just on their prejudices but rational "would get them pilloried even if it was the next big thing eventually".
Youtube has had several adpocalypses over it and tension between content producers and what advertisers want to be seen on and of course what viewers want. "If I wanted stale advertiser friendly content I would turn om tv." reactions.
[+] [-] dublinben|7 years ago|reply
[+] [-] api|7 years ago|reply
[+] [-] vkou|7 years ago|reply
But ban ICOs, half of which are scam coins, and everyone loses their minds, there's moral outrage, etc.
[+] [-] koolba|7 years ago|reply
[+] [-] steampunkskull|7 years ago|reply
[deleted]
[+] [-] raleigh_user|7 years ago|reply
Coinbase won't sell. They've built an all time level team and are absolutely raking in $$$.
This is dumb.
[+] [-] pjc50|7 years ago|reply
[+] [-] skj|7 years ago|reply
FB has a history of expensive acquisitions.
[+] [-] 21|7 years ago|reply