Mark Zuckerberg, CEO of social media giant Facebook appeared in Capitol Hill this Wednesday for defending his company and its aspiring dream ‘Libra’. Zuckerberg dealt with a series of skeptical questions from the lawmakers, over issues concerning organizing hate groups, elections, misleading political ads and primitively, the company’s cryptocurrency venture Libra.
In the response of Congressman David Kustoff questions the CEO answered that Libra will monetize Facebook by increasing the price of digital ads.
The congressman asked:
“When you came up with this idea and went to your board of directors, how did you tell them that Facebook could monetize or profit from the creation or use of Libra and Calibra?”
Well, Congressman, you may not believe this, but that’s actually not the first thing that we talk about at the company. We focus on building services that are going to create value in people’s lives, and we believe that if we do that, that we’re eventually able to get some of the value downstream.
He further explained;
The way that this will help Facebook over time is that basically in our ads system, it’s an auction. If you’re a small business, we don’t have a rate that you have to pay — you bid and tell us what the ads are worth to you if you can get customers into your store or if you can complete a transaction.
And what we basically see is when we eliminate friction for a customer buying something from a business, then the value for that business of advertising on our system goes up, so they bid more in the ad system. If we can make that now, in addition to finding businesses that people want to interact with, people can also transact with them directly. Zuckerberg expects that over time that will lead to higher prices for ads because it will be worth more to businesses so they will bid more on the ads system.
Zuckerberg remained silent on the subject of transaction fees with Libra, which is the key concern for the project. Also, from the response of CEO, if conversion of Libra currency to dollars become difficult, people might be forced to advertise their products on Facebook.
Within one year of the launch of Libra, it has had to face some terrible hindrances in the form of regulatory concerns, departure of financial partners and competition from China.
Zuckerberg finally closed stating;
But in order for that to happen, we have to build a system that passes all the regulatory approvals, it has to be useful for people, if all that plays out then we may see a positive business impact.