A few months ago, many people were riled up over the proposed updates to WhatsApp terms and conditions.
The popular messaging service which was acquired by Facebook in 2014 for $16bn, was apparently updating its Ts and Cs which users had to either accept or choose to leave.
While the whole thing seems to have fizzled out and people have forgotten everything, and Facebook smoothed things over by assuring everyone that their comms will remain encrypted. It’s worth examining what the fuss was all about.
Most of the outrage seemed to stem from the fact that Zuckerberg wanted to share WhatsApp information with the broader Facebook family of products (Facebook, Messenger, and Instagram). As a result, privacy-conscious people have switched to alternative platforms like Signal and have been trying to convince their family and friends to do the same. However, leaving one platform for another in the name of privacy is simply treating the symptom and not the cause. But before we delve into the root cause, it’s important to take a step back and examine a few things.
The WhatsApp Changes
WhatsApp has said the data it shares with its parent company does not include messages, groups or call logs. Its plans are to share phone numbers and other information provided on registration (such as name). They also plan to share information about the user’s phone, including make, model, and mobile company internet protocol (IP) addresses, which indicate the location of a user’s internet connections, along with any payments and financial transactions made over WhatsApp.
Bear in mind that if anyone is already using Facebook, Messenger, or Instagram (the Facebook Family of products), then most of this information is already available to them. In fact, if you perform an audit of the apps on most mobile devices, there will be many apps which already capture the same information (or more) and share it with the highest bidder.
To reiterate, I’m not saying that this is a good thing. I’d rather no data is collected by anyone, least of all Facebook, but given the current status of the internet, as the Mandalorian would say, “this is the way”.
Facebook didn’t just acquire Instagram and WhatsApp for the love of it. Like any organisation making an acquisition, there is always a business objective in mind to bring together the capabilities and customers of the acquisition to support its business model.
What is Facebook’s business model, I hear you ask? Well, why don’t we take a look at the company accounts to give us a clue.
Facebook basically has two revenue streams. Advertising and “other”. In case you’re struggling to read the bar chart, the “other” is the tiny little cap on the top. So, in Q4 of 2020, Facebook generated $27,187 million from advertising and $885 million from other sources of revenue.
In other words, 97% (96.74% for you pedants) of the revenue Facebook generates is from advertising.
Why Do Advertisers Pay Facebook?
Now you must be thinking that it sounds like an awful lot of money organisations are throwing at Facebook to simply act as a digital billboard. But it’s so much more than that! Facebook isn’t like a billboard selling digital real estate. It is selling its users’ information for more targeted advertising.
Say you’re a garden landscaper and you want to advertise your services. You don’t want to advertise globally, you want to limit your adverts to a particular area that you can service. Maybe you’re a top-end landscape gardener, so you want to only target people with an average household income of over 75k a year. Maybe you want to target people of a certain age, marital status, or those who have iPhones. It’s this targeted knowledge that Facebook gathers from its users which it monetises by selling. When Facebook starts collecting more data on its users (like through WhatsApp), then that is kind of like the equivalent of Netflix raising their monthly subscription rates. As a customer, you’re free to leave, but most of us will just put up with it for convenience.
Of course, advertisers aren’t the only ones who can benefit from the data. Organisations like Facebook will sell or share data with certain government departments, researchers, or anyone willing to pay the right amount. The point is that once they have collected the data, it can be (mis)used in any number of ways.
What’s WhatsApp Got To Do With This?
Many people were caught unaware of these *shocking* changes to WhatsApp’s terms and conditions. But it wasn’t something that came from out of the blue. Indeed, it’s something that has been in the works for quite some time.
In the third quarter 2020 earnings call, Zuckerberg spoke about interop, their messaging integration project that would allow people to message each other between their various messaging products. A key part of this was to bring WhatsApp into the fold. (transcript from call below)
The company has also been open about how it plans to integrate the Facebook family of products.
The numbers for our key metrics are calculated using internal company data based on the activity of user accounts. We have historically reported the numbers of our daily active users (DAUs), monthly active users (MAUs), and average revenue per user (ARPU) (collectively, our “Facebook metrics”) based on user activity only on Facebook and Messenger and not on our other products. Beginning with our fourth quarter 2019 earnings presentation, we also report our estimates of the numbers of our daily active people (DAP), monthly active people (MAP), and average revenue per person (ARPP) (collectively, our “Family metrics”) based on the activity of users who visited at least one of Facebook, Instagram, Messenger, and WhatsApp (collectively, our “Family” of products) during the applicable period of measurement. We believe our Family metrics better reflect the size of our community and the fact that many people are using more than one of our products. As a result, over time we intend to report our Family metrics as our key metrics in place of DAUs, MAUs, and ARPU.Source: https://s21.q4cdn.com/399680738/files/doc_financials/2020/q3/FB-Q3-2020-Earnings-Presentation.pdf
Ultimately, as soon as the ink dried on the papers when WhatsApp was acquired, the process of integration was set in motion – it was inevitable.
It’s Not Just Facebook
This model of providing a free service to harvest user data to sell to advertisers or Bond villains isn’t unique to Facebook, they’re just one of the best at it. A large chunk of Google’s revenue comes from advertising.
In fact, when you look at the majority of apps and online services, advertising (or selling personal data to advertisers) is where the money flows.
Other Revenue Models
That’s not to say that selling user data is the only way organisations can make money online. Revenue from subscription access to content has always been around. Many online newspapers have adopted a subscription model, and platforms like Medium and Substack offer tools that allow writers to generate money through the content they create.
Sponsorship, affiliate revenue, and such all exist, but advertising, or more specifically, targeted advertising seems to be the digital way everyone is adopting. It’s profitable for the providers, and the users aren’t paying with cash, only their information. If you don’t believe me, take a look at the permissions the apps on your phone need to run.
Signal is a great example of a provider which has put privacy first and doesn’t compromise on it. But it’s not a replicable model for most. It’s not profitable, and had a $50m injection of funds from director and ex-WhatsApp founder Brian Acton. This is not something everyone has access to.
The Root Cause
So, going back to the original question. Is WhatsApp integrating with Facebook really taking away your privacy, and will moving to another platform be the answer?
WhatsApp’s integration and sharing of extra information with Facebook isn’t really the problem here. The problem is that we (collectively providers and users, all of us) have built and accepted an internet whereby consumers don’t really want to pay for a service with cash, and are happy to sell their information at a much lower price than the provider will sell it on for. So, what’s the solution to this? If we ask for regulation to step in and prevent the gathering and selling of user information, we effectively cut off the livelihood of most of the internet as we know it today.
We could move to a subscription-based model for all services, but that in itself becomes a barrier – and it may impact those who need it the most.
The move away from WhatsApp can signal to organisations that they need to be careful with how much personal information they can take and use from their user base. But unless there is a mass exodus, it is unlikely to significantly change policy. Or it will force other, smaller providers to simply hide from its users what data it collects and for which purposes behind legal jargon.
A combination of users leaving, the adoption of different business models, and some regulation could have the desired effect. But it’s a process that will take time and patience.
In the meantime, if you’re looking for an excuse to leave WhatsApp or any of the Facebook family of products, there are probably a dozen far better reasons to do so than whatever WhatsApp announces as their updated Ts and Cs.