Mark Zuckerberg reveals how Facebook will profit from Libra

In Facebook’s annual shareholder meeting held yesterday Facebook CEO, Mark Zuckerberg revealed how Facebook can profit from Libra. Prompted by a question asking how Libra benefits Facebook financially, Zuckerberg suggested that Libra and all of Facebook’s commerce initiatives should be viewed through the lens of its ad business.

“if we can make commerce be more effective for businesses if when they run an ad, somebody who clicks on that ad is now going to be more likely to buy something because they actually have a form of payment that works that's on file, then it basically becomes worth it more for the businesses to bid higher in the ads than what we see are higher prices for the ads overall. So that's broadly the strategy around going deeper on commerce and payments.”

Facebook’s ad business is auction based where advertisers bid on ads. If ads are more effective due integrated payment solutions, advertisers could be willing to bid more on ads, providing a boost to facebook’s ad revenue.

Why it matters:

• Yesterday Facebook announced its Libra digital wallet subsidiary Calibra is rebanding as Novi, and that it will be integrated into it’s Whatsapp and Messenger applications, which reach more than 2 billion users.
• Although there was no discussion of Facebook’s Novi subsidiary on the call, Zuckerberg's remarks suggest Novi’s strategic role may be that of a loss leader.