Chercher la User Data

The initial popular opinion is that Facebook paid too much for WhatsApp — $19B in combined cash, stock, and eventually vesting stock.

People have pointed out that the acquisition is worth $500 million per Whatsapp employee, and that if every human on earth paid to use WhatsApp, it would take nearly 3 years for Facebook to get their money back.

What people don’t seem to understand is that Facebook didn’t buy WhatsApp for their existing revenue stream, they bought them for their existing (and future) user data stream.

As has been pointed out by Facebook and WhatsApp, the app has 450 million active users and 320 million users daily users. Mark Zuckerberg crowed that WhatsApp is on their way to a billion users. That’s not more than Facebook, but Facebook is notoriously light in developing countries, and what’s important here is the user data that Facebook gathers from this.

Facebook has tried everything they could so far to gather mobile user data. On the desktop, Facebook can capture most things that users do on the world wide web through cookies and cross-website integration. Mobile has been Facebook’s Achilles heel for a while. The success of iOS and its robust security, which silos apps and web behavior, has made data tough to gather for Facebook outside the FB apps and Instagram. Despite Facebook Home going over like a lead balloon, they can usually get comparatively more data from Android users’ photos, text messages, etc, as long as those users don’t disable them.

WhatsApp can give Facebook the keys to the kingdom, since according to WhatApp’s privacy policy, users can often provide personal info like names and phone numbers, text, photo, and video information, location information, and payment information — you can bet WhatsApp payment accounts will soon be tightly integrated with Facebook — and social graphing, or who people talk to and why. All of this information can be used to extend Facebook’s behavioral models for selling advertisements, and since WhatsApp is truly cross platform, it can be a full replacement for email, text messaging, and other services that Facebook cannot gather data from.

What I found particularly interesting, and a little distressing, is this blurb from WhatsApp’s privacy policy from the link above:

In the event that WhatsApp is acquired by or merged with a third party entity, we reserve the right to transfer or assign the information we have collected from our users as part of such merger, acquisition, sale, or other change of control. (emphasis mine)

This blurb is like a matador waving a red flag in front of the Facebook bull. I joked earlier that the blurb was placed there for the express purpose of attracting this sort of acquisition. So Facebook now has the potential personal information described above on 450 million users, with many more users to come.

I think as a matter of government policy the least FTC could require is allow users to opt out of this sort of user data transfer. Unfortunately any such requirement, though pleasing to privacy advocates, would be unduly burdensome and would almost certainly cause a collapse in the fortunes of other tech startups lining up for their payout for trading in user data. We’ve gone way too far down the path of profiting off personal data.