Why the WhatsApp acquisition ended with everyone mad at each other
On September 17th of last year, WhatsApp cofounder Brian Acton quit the company to start a nonprofit foundation. Six months later, after several former Facebook executives had come forward to criticize the company, Acton tweeted “It is time. #deletefacebook.” Ever since, we’ve wondered what exactly led him to tweet.
Now we know. In his first interview since leaving Facebook, Acton told Forbes’ Parmy Olson that he felt betrayed by the company in two ways. One, Acton believes Facebook misled European Union regulators about its plans to commingle WhatsApp and Facebook data so as to improve its ad targeting capabilities. Two, Facebook began to “explore” advertising-based revenue models for WhatsApp without the founders’ consent. In both cases, Acton felt that Facebook had made him look like a liar. And so he quit, leaving behind $850 million in unvested stock.
”At the end of the day, I sold my company,” Acton told Forbes. “I am a sellout. I acknowledge that.”
On Twitter, pundits mostly rolled their eyes at Acton’s change of heart. Kara Swisher, quoting an unnamed source, offered the funniest parody of Acton’s mea culpa: “I live with this guilt every day on this beachfront property here in Fiji. I can barely see my brand new 200 ft yacht out there in the harbor through the tears I’m shedding for my users’ privacy.”
But not everyone thought it was funny.
David Marcus, who used to lead Facebook Messenger and now runs the company’s experimental blockchain division, was galled by Acton’s chutzpah. In a remarkable post, Marcus filled in what he called “the other side of the story” — which is that the WhatsApp founders had very few workable ideas for repaying the $22 billion that Mark Zuckerberg spent to acquire the company, and in any case they didn’t seem to be working very hard on any of them. Marcus writes:
Marcus went on:
The value of Acton and Marcus having this discussion in public is that both can be right — and that each sheds light, in his own way, on Facebook’s most expensive (and maybe worst-performing, from a return-on-investment perspective) acquisition.
Acton describes how eager Zuckerberg was to acquire the company’s fast-growing network of users, which was about to eclipse the global SMS user base, and to keep it away from Google. Zuckerberg wanted it to much that he made several expensive concessions, including a five-year (!) window in which he promised not to put any pressure on the founders to monetize their app. And he promised that the app would remain end-to-end encrypted, making WhatsApp much more difficult to monetize in the long run.
Marcus fills in some of the other concessions that Facebook made, some of which were first reported in a June piece by Kirsten Grind and Deepa Seetharaman. WhatsApp demanded different offices, larger desks, and a policy against speaking out loud in their workspace — which, according to Marcus, Zuckerberg personally defended. (The founders also demanded toilets with doors that reach the floor, for privacy purposes, a feature that the Guardian’s Olivia Solon memorably described today as “end-to-end encraption.”)
On the other hand, Acton’s account reveals Zuckerberg’s patience for what it was: a time-limited promise to wait out the founders’ principles. In a Twitter thread, Facebook’s just-departed chief security officer, Alex Stamos, defended Zuckerberg’s interest in monetizing WhatsApp. (And at the risk of repeating myself, he did pay $22 billion for it!)
”It is foolish to expect that FB shareholders are going to subsidize a free text/voice/video global communications network forever,” Stamos tweeted. “Eventually, WhatsApp is going to need to generate revenue.” If Acton and his cofounder Jan Koum cared about generating revenue, they presumably would have tried to do so before they left Facebook with their billions.
In short, the WhatsApp founders presented an extremely expensive pain in the ass for a company that, at least before this week, prided itself on low drama among the senior leadership. But Acton wasn’t wrong, really: Facebook wound up having to pay a $122 million fine for commingling that user data. And the fact that WhatsApp ultimately will monetize through advertising does indeed make him look like a liar.
If there’s a happy ending to all this, it’s that Acton eventually got to put his money where his considerable mouth is. He donated $50 million to the folks behind Signal, a nonprofit, end-to-end encrypted app, and is committed to finding non-advertising-based solutions to ensuring its future prosperity. Living your principles can be very expensive — but thanks to Facebook, Brian Acton can now afford it.
Zack Whittaker reports on Wednesday’s Senate Commerce Committee hearing, at which Apple, Amazon, Google and Twitter, along with AT&T and Charter, met to discuss privacy. Two big takeaways: they all want a national privacy law to supercede (and weaken) the one recently passed in California; and also Google took a beating over China:
Former Google scientist Jack Poulson asked senators to push the company on its controversial Chinese search engine plans. (And Ted Cruz did!)
Canadian firm AggregateIQ, linked to the Facebook & Cambridge Analytica data scandal, violated the new General Data Protection Regulation and could face a fine.
British people want Facebook and Google to fund their newspapers:
Kevin Roose explores USAReally, an RT-style propaganda outlet masquerading as a news agency. The founder denies he’s doing anything untoward, but it was just banned by Reddit this week:
Some people will do anything to get back on Reddit after they’re banned. Particularly Russian hackers, reports Ben Collins:
America’s electronic voting systems are more vulnerable than ever, Kim Zetter argues in a big new feature. So why isn’t anyone trying to fix them?
Kashmir Hill has a great investigation into what Facebook does with your phone number once you give it to the company for the purposes of two-factor authentication. Advertisers can target you at that number within a couple weeks.
Sarah Frier smartly frames the Instagram founders’ departure as the final step in Mark Zuckerberg’s risky consolidation of power:
Meaningless but funny stat: Snap stock jumped 5 percent when Kevin Systrom and Mike Krieger quit Instagram.
Josh Constine reports on Facebook’s little-loved Stories product, which just hit 300 million daily users (out of 2.2 billion monthly) after 18 months in the marketplace, despite being the first thing that users see when they open the app. Still, that’s apparently enough to start selling ads in stories, so Facebook is doing that. (The most interesting nugget here is in the lede, which reveals the existence of a Facebook sandbox app called Blink where employees test new features. I’d love to see it sometime!)
Alexis Madrigal says WhatsApp gets too much of the blame for communal violence in India. (Counterpoint: it doesn’t seem like it’s helping much, either!)
Lizza Dwoskin investigates Instagram’s drug problem. (Her findings were substantial enough to trigger this response blog post from Facebook’s Monika Bickert.)
Tech giants are buying giant amounts of equipment, Shira Ovide reports:
Adi Robertson, who attended Facebook’s VR conference today, reports that Oculus’ next headset is the Quest: a $399 standalone virtual reality headset that’s launching in the spring of 2019:
Oculus’ new avatars will be more lifelike, using “simulated eye and mouth movement and micro-expressions,” Nick Statt reports.
Ben Thompson is excellent today on what the Instagram founders’ departure means for the company:
And finally ...
Gabriel Gundacker amassed 800,000 followers on Vine before Twitter killed it. Now he’s back with what writer Jonah Engel Bromwich calls “the post-Vine Vine”: a slightly extended riff on a thing that still falls a bit short of a traditional YouTube video. Gundacker’s viral post-Vine Vine — a dadaist tribute to a movie poster featuring the actress Zendaya as a character named Meechee — offers a fittingly absurd end to the day.
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September 27, 2018 at 05:09AM