Despite hogging headlines everyday the cryptocurrency market is yet to make much progress towards becoming a mainstream currency. However, the foray of social networks/messaging providers may give some legitimacy to this market, says leading data and analytics company GlobalData.
With subscriber growth and active users continuing to be a cornerstone of monetization, social networks/messaging providers are finding that the traditional road to growth and revenue is bumpy due to geographical preferences and lack of scale compared to a behemoth like Facebook.
As a result, social networks/messaging providers are embarking on some very non-traditional strategies including cryptocurrencies for revenue and product enhancements. They hope that cryptocurrencies will create self-sustaining economies that might even one day exceed the value of advertising or value-add services.
In September 2017, Kik Messenger became the first mainstream company to announce plans to raise money by issuing a cryptocurrency–KIN–in an initial coin offering (ICO). It raised nearly US$100m from accredited investors and the public.
Cloud-based instant messaging service Telegram has even more ambitious aspirations than Kik. It wants to use a payment platform that uses multi-blockchain architecture to compete with Mastercard and Visa. It is reportedly gearing up for its own cryptocurrency and could raise as much as US$500m in the pre-ICO sale.
Not to be left behind, Facebook’s Mark Zuckerberg has also indicated that the company will research the feasibility of incorporating cryptocurrency into its services. With more than 2billion monthly active users, the company could drive mass adoption of a cryptocurrency in a big way.
Lynnette Luna, Telecom Analyst at GlobalData, comments, “The blockchain, which cryptocurrencies operate on, lends itself well to this type of strategy because the technology does not require a third party, such as a bank or even a social network, to settle the transaction. The blockchain-steered social network model allows users to wield more commercial ownership of their data and also get paid directly for their user-generated contributions.
“It’s a good time for a strategy re-think – the Social Network is trying to go back to its roots of connecting friends and family by de-prioritizing public content and content from publishers. The key for both Kik and Telegram are to find ways to encourage their respective ecosystems to freely spend their currencies rather than hoarding them for speculative purposes, concludes luna.”
