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
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.
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.
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.
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.
If you read the comment you replied to, he states they are vulnerable to one of the big 5 competing against them and wiping out their business model. This isn't hard to classify at all, it's a matter of fact.
> Hard to classify them as "vulnerable" given how successful they've been
Coinbase’s volumes have consistently fallen every month since December. January was less than December, February less than January, March less than February, et cetera. That, and their valuation, puts them at risk of having to (a) lay off lots of people or (b) do a down round.
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.
> 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.
Fully agree and as I said, when mentioning legal reach, I think this is one area where the big 5 can compete better than even coinbase.
Yes, but they have absolutely no experience in this marketspace. It's fundamentally very tricky from a fraud perspective -- you have customers using various kinds of reversible payment systems (credit cards, ACH / SEPA bank transfers) to purchase assets that can be irreversibly sent elsewhere. It's also very customer-support heavy, and as another commenter mentioned, these companies may be loath to onboard the large numbers of support staff required.
Facebook accounts don't have anywhere near the level of KYC as a bank (or a fiat bridge masquerading as a bank). Think social security numbers, DOB, verified residential address, and copies of government-issued ID. Heck, Facebook accounts don't even really have legal names, just maybe a legit phone number.
The solution to that is pretty straightforward - do not allow outbound cryptocurrency transactions. Any financial institution already compliant with KYC and AML laws could add in a "deposit cryptocurrency" button and a cryptocurrency exchange and be in business relatively straightforwardly.
Or at least have the bar for outbound cryptocurrency transactions be very inconveniently high. Like, "bring your passport into a local branch and wait a week".
You're not going to have many customers for long if you have a "roach motel" model for depositing funds. Customers get very worried and very angry, very quickly, if they cannot reliably withdraw their funds.
You could have "WE DON'T DO CRYPTO WITHDRAWALS, ONLY DEPOSITS" in giant 30pt bright red letters on the account signup flow in three different places, and people would still think they could, and then threaten suits and class actions when they find out they can't.
Why would they still think they could, despite all warnings to the contrary? Because withdrawals are a fundamental action in banking, and they think cryptocurrency is another form of money. (Don't get me started on the alien concept of an irreversible transaction...)
When you target the cryptocurrency-newbie customer as your market, results like this are unfortunately predictable.
> 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.
Arguably because it gives Facebook a global commerce platform for its global forum. If Facebook is the culmination of Web 2.0 (UGC) and crypto is Web 3.0, then it makes perfect sense.
Although, I'd have to imagine that given government concern on both Facebook and cryptocurrency, extensive regulation would be a certainty.
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.
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).
and if they don't sell, the Zuck will just create a project with 1000 of his engineers to duplicate CoinBase and offer everything at free commish's for a year or whatever it takes to bring CoinBase to it's knees.
Well, there isn't such thing as 100B in cryptocurrency, so definitely not in crypto. (It would be very hard/impossible to acquire that amount right now).
This brings us to an interesting thought. Cryptocurrency transaction values have been steady growing, starting from pizzas to alpaca socks and now it's even possible to settle multi million dollar transactions. In the the future we'll probably see larger, billion dollar plus aquisitions settled in cryptocurrency, why not? For that to happen though, their marketcaps will need to rise significantly from what they are now, at least to multi trillion dollar levels.
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.
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.
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.
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."
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.
That is such snark for HN but I couldn't help but laugh.
Back in the day FB had a full on "roll out the red carpet" event for notable affiliate marketers, led by "Shoemoney" to figure out how they could better engage that market to bring the diet pill, cell phone ringtone subscription scams, and "advertorial" formats to the FB ad marketplace.
And it worked brilliantly for years - affiliates figured out how to napalm international countries with that scammy bullshit and in countries like Brazil the top ad categories for years were uintentional diet pills scam subscriptions fulfilled by makeshift international fullfillment centers.
FB let those gorillas into the house, looked the other way as much as they could, and slapped meaningless "bans" on accounts that were too hot to handle.
Then when they were all grown up and had "legit" ads to swap in they buried those relationships.
I respect FB as the money printing machine that it is, but their foundation was built on "deceptive promotional practices" and it's undeniably in their DNA.
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.
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.
> coinbase already has horrendous customer support.
Yeah, I'm aware of that. To fix it, Facebook would have to hire a bunch of people well-trained people to take customer calls, but that will be expensive and violate their user-as-product traditions. The "Facebook Coinbase support" group might also get tons of regular Facebook support calls, because the number may be the only way to reach a real human at Facebook when there's a problem. IIRC, the Menlo Park Police get a fair number of FB support calls (e.g. "my account was stolen"), because there's no way to reach a human at Facebook.
The alternative is the leave things as terrible as they are, but that will just be another avenue for anti-Facebook scandal stories.
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 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.)
That seems very unlikely, and would have a high opportunity cost. Seems like some sort of payments platform is what they would be thinking with this hypothetical acquisition.
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.
If nothing else, I think 2017 has clearly delineated how a company looking to offer crypto can ensure that they are in the utility bucket. Because let's be real, very few players want to be in the security bucket.
> what's stopping Facebook from introducing FaceCoin tommorrow
The same thing that's stopping them from building a rocket ship or a Facebook-branded pocket knife. Why would they do it?
Either this theoretical coin gives Facebook some advantage -- i.e. the ability to mint new coins at a whim, or an ICO that gives them a bunch of capital -- in which case that will make it unappealing to large swathes of users compared to fiat or existing cryptocurrencies, or exposes them to possible regulatory risk in exchange for capital, which they can easily raise through normal capital markets. Or it gives them no advantage, so ... why do it?
Purchasing a company like Coinbase doesn't seem to make sense to me in terms of aligned business goals, but my experience with M&A people is that it doesn't really matter -- they get rewarded based on perceived dollar value and execution, rather than whether their actions benefit the company. In the end nothing would surprise me here, but a priori acquiring a growing company at a perceived discount to its discounted future value is a good use of cash, even if only seen as an investment.
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.
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.
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
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[ 3.0 ms ] story [ 155 ms ] threadRoll your own crypto is playing the game.
Running an exchange is being the house.
The house always wins.
Because in the times of gold-rush, you don't look for a gold. You setup your online store to sell axes :)
(I do not smoke, but I do drink.)
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.
But ban ICOs, half of which are scam coins, and everyone loses their minds, there's moral outrage, etc.
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.
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.
Coinbase’s volumes have consistently fallen every month since December. January was less than December, February less than January, March less than February, et cetera. That, and their valuation, puts them at risk of having to (a) lay off lots of people or (b) do a down round.
[1] https://www.google.com/amp/s/www.wsj.com/amp/articles/can-th...
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.
Fully agree and as I said, when mentioning legal reach, I think this is one area where the big 5 can compete better than even coinbase.
They will all
- obviously follow the US KYC laws
- already have huge legal teams
- experience working with government regulators
Or at least have the bar for outbound cryptocurrency transactions be very inconveniently high. Like, "bring your passport into a local branch and wait a week".
You could have "WE DON'T DO CRYPTO WITHDRAWALS, ONLY DEPOSITS" in giant 30pt bright red letters on the account signup flow in three different places, and people would still think they could, and then threaten suits and class actions when they find out they can't.
Why would they still think they could, despite all warnings to the contrary? Because withdrawals are a fundamental action in banking, and they think cryptocurrency is another form of money. (Don't get me started on the alien concept of an irreversible transaction...)
When you target the cryptocurrency-newbie customer as your market, results like this are unfortunately predictable.
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.
Although, I'd have to imagine that given government concern on both Facebook and cryptocurrency, extensive regulation would be a certainty.
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.
Coinbase won't sell. They've built an all time level team and are absolutely raking in $$$.
This is dumb.
FB has a history of expensive acquisitions.
This brings us to an interesting thought. Cryptocurrency transaction values have been steady growing, starting from pizzas to alpaca socks and now it's even possible to settle multi million dollar transactions. In the the future we'll probably see larger, billion dollar plus aquisitions settled in cryptocurrency, why not? For that to happen though, their marketcaps will need to rise significantly from what they are now, at least to multi trillion dollar levels.
So yeah, they're terrible at that too - or they don't care, your choice.
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.
"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/
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.
Back in the day FB had a full on "roll out the red carpet" event for notable affiliate marketers, led by "Shoemoney" to figure out how they could better engage that market to bring the diet pill, cell phone ringtone subscription scams, and "advertorial" formats to the FB ad marketplace.
And it worked brilliantly for years - affiliates figured out how to napalm international countries with that scammy bullshit and in countries like Brazil the top ad categories for years were uintentional diet pills scam subscriptions fulfilled by makeshift international fullfillment centers.
FB let those gorillas into the house, looked the other way as much as they could, and slapped meaningless "bans" on accounts that were too hot to handle.
Then when they were all grown up and had "legit" ads to swap in they buried those relationships.
I respect FB as the money printing machine that it is, but their foundation was built on "deceptive promotional practices" and it's undeniably in their DNA.
https://www.zerohedge.com/news/2017-12-21/why-charlie-lee-so...
Charlie Lee is a Managing Director of the Litecoin Foundation.
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.
Yeah, I'm aware of that. To fix it, Facebook would have to hire a bunch of people well-trained people to take customer calls, but that will be expensive and violate their user-as-product traditions. The "Facebook Coinbase support" group might also get tons of regular Facebook support calls, because the number may be the only way to reach a real human at Facebook when there's a problem. IIRC, the Menlo Park Police get a fair number of FB support calls (e.g. "my account was stolen"), because there's no way to reach a human at Facebook.
The alternative is the leave things as terrible as they are, but that will just be another avenue for anti-Facebook scandal stories.
(Just to be clear, this isn't specifically about or against crypto, this is about them promoting any asset to unqualified investors.)
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.
The same thing that's stopping them from building a rocket ship or a Facebook-branded pocket knife. Why would they do it?
Either this theoretical coin gives Facebook some advantage -- i.e. the ability to mint new coins at a whim, or an ICO that gives them a bunch of capital -- in which case that will make it unappealing to large swathes of users compared to fiat or existing cryptocurrencies, or exposes them to possible regulatory risk in exchange for capital, which they can easily raise through normal capital markets. Or it gives them no advantage, so ... why do it?
Purchasing a company like Coinbase doesn't seem to make sense to me in terms of aligned business goals, but my experience with M&A people is that it doesn't really matter -- they get rewarded based on perceived dollar value and execution, rather than whether their actions benefit the company. In the end nothing would surprise me here, but a priori acquiring a growing company at a perceived discount to its discounted future value is a good use of cash, even if only seen as an investment.
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.
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