The real reason why Facebook bought WhatsApp

Since many of us are already on vacation mode, I thought I’d write something light and entertaining. This is the story of WhatsApp and why Facebook paid an arm and a leg to acquire it. You’ll be surprised at how the story takes a sinister twist.

Back in 2014, Mark Zuckerberg shocked the world when he offered a whopping $14 billion to acquire WhatsApp. The offer was outrageously high, considering WhatsApp’s  revenues were no more than $1.2 million and it never booked a profit since its inception.

But to understand Zuckerberg’s ominous reasons, we must start from the beginning of WhatsApp’s story.

The year was 2009 and the world was introduced to smartphone apps. Brian Acton and Jan Koum were former Yahoo employees who resigned from Yahoo as they thought the company was polluting the internet with too many ads.

Acton and Koum sought to build “the ideal app” – one that was free of charge and without the disturbances of advertising. In 2010, they started WhatsApp, a free messaging service meant to compete with cellular text messaging.

For those unaware, an app makes money in three ways. It either sells ads, sells the privilege of app use or sells the data of its users. Acton and Koum refused to do any of the three. Not only were they committed to create a pure on-line experience sans advertising, they are also staunch activists of data privacy.

During the early years of WhatsApp, the duo survived by consuming their seed fund. But as the app grew in popularity and more features were introduced, more funds were needed to expand the workforce and purchase servers.

With no other option, the duo charged a $1 a year user fee. But the fee was not strictly enforced. If users failed to pay, they would still be allowed to use the app. In effect, it became a voluntary contribution.

WhatsApp users grew by the millions. Investors came knocking at the door, offering money to scale up and monetize. Acton and Koum denied them all, since they refused monetization. But Sequoia Capital was different. They were willing to invest even without a profitability plan. Sequoia vowed not to interfere in management. Sequoia became WhatsApp’s strategic partner.

WhatsApp introduced more features with Sequoia’s capital infusion. This attracted hundreds of millions of new users. As its popularity grew, more investors came, throwing money at Acton and Koum. They only accepted those that agreed to an absence of a profitability plan. By the end of 2013, WhatsApp had more than a billion users.

But no company can survive by simply burning through investor’s money. At some point, there must be a profitability plan on the horizon. Since Acton and Koum refused to sell ads, the only other option was to sell the company to provide the investors with their returns.

Facebook was so desperate to beat the competition (Google) to acquire WhatsApp that it offered the founders $14 billion, a price they could not refuse. Zuckerberg even agreed not to interfere in WhatsApp’s operations

Zuckerberg attested before American and European trade commissions that the acquisition of WhatsApp would not constitute a monopoly since it was technically impossible to interface Facebook’s platform with that of WhatsApp.

Still, the burning question remained. Why did Zuckerberg pay so much for an app that was not profitable, whose users were only a fraction of Facebook’s and whose services duplicated Facebook’s very own Messenger?

The answer? Zuckerberg was buying the users and their data.

See, Facebook’s entire business model is hinged on collecting users’ data and selling it to political parties, commercial conglomerates, governments and basically anyone willing to buy it.

Zuckerberg has an atrocious data privacy violation record. Remember the Cambridge Analytica scandal? But sadly, Zuckerberg got away with the crime each time. He has a pattern. Whenever he is questioned by regulators, his modus operandi would be to admit his mistake, apologize, pay the fines and proceed to do it all over again. Even today, it is business as usual for Zuckerberg despite several inquiries by the US Senate and the EU trade commission.

WhatsApp is the missing link of Facebook. It provides behavioral data, personal information and, most importantly, phone numbers. The off-line data derived from WhatsApp in combination with the on-line data derived from Facebook allows Zuckerberg to form a clear, holistic profile of everyone on social media. This is used to influence their decisions, biases and actions.

Acton resigned in 2017 after discovering that Facebook has been mining WhatsApp of its data, blatantly defying its non-interference clause.

Evidently, Zuckerberg lied to the European and American trade commissions. It was in fact possible to interface Facebook and WhatsApp platforms to mine data.   Facebook has been doing it since day one of its acquisition. As always, Zuckerberg admitted to the misdeed, apologized and paid the fine. He got away scot-free.

Months later, co-founder Jan Koum discovered that Facebook’s management weakened WhatsApp encryption system to make it easier for them to mine data. Koum resigned too.

Fast forward to today and Zuckerberg continues to mine our data through Facebook, WhatsApp and Instagram (which he acquired in 2012). Facebook has become a surveillance behemoth – arguably the biggest surveillance organization in the world.

Remember, in social media parlance, when you are not made to pay for a product (like Facebook, WhatsApp and Instagram), YOU are the product!

So why do people keep using Facebook, WhatsApp and Instagram even if they know their data is being mined? Sadly, these apps are so imbedded in social behavior that people are willing to give up their privacy just to stay in touch with friends and family.

We Filipinos often dismiss data privacy as something that will only cost us disturbances through ads. But in truth, our data has been used to manipulate our democracy, our leadership and our future. It hits home harder than you think.

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Email: [email protected]. Follow him on Twitter @aj_masigan