Why Facebook Stock is Undervalued: Facebook Credits

First of all, I am not an analyst nor do I own any stock in any public company. The last time I did invest in a promising Internet company ended in a disaster, thanks to Deutsche Telekom. 


Nonetheless, I believe the Facebook stock is undervalued. Everyone who believes in the company will tell you that there is huge potential in its 900 million users, but most of them will talk about new forms of advertising or tailored experiences through the social graph. I think that’s all small change and not the true money maker. Advertising revenue is far too unstable to build a lasting company, even Google has been spreading out into other verticals for a while now which I believe is pretty telling. No, the true value of Facebook lies in its own currency: Facebook Credits. 

No one is talking about it as at the moment Facebook Credits are just a convenient way to get access to games on the social network, but I don’t believe that this is the real plan behind having your own currency. As I had a pretty successful online teaching career, I noticed early on how difficult it still is to send and receive online payments in the global market today. There are huge parts of the world’s population who have access to the Internet but cannot pay for goods and services, even if they want to. One could say, there is a large group of Internet window shoppers out there. 

I have been actively teaching between late 2008 and early 2010 but astonishingly not much seems to have changed in the meanwhile when I checked the different options lately. Some startups in the education space put in some really heavy work to offer as many payment methods as possible, for example italki was famous for adding one more payment provider every couple of months. Yet, it did not help them to reach a really big market.

The reason for this is probably convenience and a lack choice. Most of these payment methods involve several steps, it’s not comparable with simply recharging your PayPal account. If you take cashU as an example, a quite popular payment method in the Middle East and North Africa,  you need to find a shop that sells the cashU cards which can be a first hurdle to clear. And the percentage the provider takes for the amount you charge on the card is also pretty hefty. Last but not least, you have to calculate what amount you charge to use the card efficiently as you don’t want to have money left on the card that you cannot use. All in all, many steps to take that are contrary to the usual impulsive behavior of buying on the Internet. 

I also don’t think that people will go through all this in order to get access to one particular service. You would really, really want to learn something with a particular provider in order to invest all that time and hustle. If you don’t have at least ten different options to spend your money on you might as well do just fine without even this one option. 

Facebook Credits on the other hand are the perfect solution to all of this. Firstly, most of these potential clients are on Facebook and very familiar (probably more than I am) with the different games and services the social network is offering. If (as soon as) Facebook offered its prepaid cards in shops in the Middle East, India, China, Africa, South America etc advertising revenue would look like peanuts. 

Sure, there have been many storefronts closed on Facebook lately but then Facebook did not really push for its currency yet. Most payments were done by other providers what added an extra and unnecessary layer to the process. Facebook payments need to work like Amazon, e.g. one-click-payment and that would be the case with Credits. 

Facebook already did tests with those cards in the US and the results seemed to be promising. And as soon as you add Facebook’s mobile strategy to the picture, you’ll get another potential revenue stream: mobile banking & p2p payments. Facebook Credits on mobile phones could become a huge competitor for M-PESA as Facebook would be able to offer far more additional services like online shopping for instance. As recent as February, Facebook made a partnership with Orange to bring the social network via Unstructured Supplementary Service Data (USSD) to Africa. 

Of course, Facebook Credits would also spread into the real world. There is no reason why you should not be able to pay for your espresso with Facebook Credits. And that ties in check-ins, reward programs, personalized coupons & ads - you name it. 

All in all, Facebook Credits have the potential to become a kind of unofficial world currency and Facebook would earn on each single transaction. That’s the true power of 900 million users, forget the ads.

Picture lev radin / Shutterstock.com

LinkedIn meets Tinder in this mindful networking app

Swipe right to make the connections that could change your career.

Getty Images
Sponsored
Swipe right. Match. Meet over coffee or set up a call.

No, we aren't talking about Tinder. Introducing Shapr, a free app that helps people with synergistic professional goals and skill sets easily meet and collaborate.

Keep reading Show less

Think you’re bad at math? You may suffer from ‘math trauma’

Even some teachers suffer from anxiety about math.

Image credit: Getty Images
Mind & Brain

I teach people how to teach math, and I've been working in this field for 30 years. Across those decades, I've met many people who suffer from varying degrees of math trauma – a form of debilitating mental shutdown when it comes to doing mathematics.

Keep reading Show less

A world map of Virgin Mary apparitions

She met mere mortals with and without the Vatican's approval.

Strange Maps
  • For centuries, the Virgin Mary has appeared to the faithful, requesting devotion and promising comfort.
  • These maps show the geography of Marian apparitions – the handful approved by the Vatican, and many others.
  • Historically, Europe is where most apparitions have been reported, but the U.S. is pretty fertile ground too.
Keep reading Show less

How KGB founder Iron Felix justified terror and mass executions

The legacy of Felix Dzerzhinsky, who led Soviet secret police in the "Red Terror," still confounds Russia.

Getty Images
Politics & Current Affairs
  • Felix Dzerzhinsky led the Cheka, Soviet Union's first secret police.
  • The Cheka was infamous for executing thousands during the Red Terror of 1918.
  • The Cheka later became the KGB, the spy organization where Russia's President Putin served for years.
Keep reading Show less