Privacy Groups Bring WhatsApp Worries to FTC's Door
Facebook has no intention of scooping up WhatsApp user data and selling it to the highest bidder, both companies have promised -- but privacy advocates are viewing those good intentions with jaundiced eyes. If the $19 billion dollar deal ends up going through, Facebook is pretty much going to have to compromise WhatsApp user data if it ever wants to see a return on that hefty investment.
03/07/14 1:18 PM PT
The consumer privacy backlash stirred up by Facebook's recent deal to purchase WhatsApp for US$19 billion is now in full swing.
Following the announcement of the agreement, both companies offered reassurances that WhatsApp user data would be safe from Facebook. However, those promises may not mean anything, given Facebook's history of privacy violations and its vacuuming up of user data from firms it has bought, the groups argue in their complaint.
"During the course of an FTC investigation, we would like to see Facebook or WhatsApp or both institute some form of binding mechanism that insulates WhatsApp users' data from Facebook," Julia Horwitz, consumer protection counsel at EPIC, told the E-Commerce Times.
However, that might be a problem, because "even if all the 450 million WhatsApp users pay 99 (US) cents a year for the service, when you factor in the time value of money, there's no way in hell you're going to make a return on that investment over 10 years," remarked Mukul Krishna, digital media senior global director at Frost & Sullivan.
The Gist of the Complaint
In essence, these are the facts presented in the complaint: WhatsApp has a strong commitment to privacy, which it reiterated after the deal was announced; it impacts 450 million people; the Dutch and Canadian authorities in January raised concerns about WhatsApp's data and privacy policies; Facebook collects and stores virtually all user data with or without users' consent, and routinely incorporates data from companies it acquires; and many WhatsApp users object to the purchase.
That could be why WhatsApp cofounder Jan Koum last month wrote in a blog post that users would not be served up ads, and "there would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product."
Still, it "seems highly likely" that Facebook will grab WhatsApp users' data and use it willy-nilly because it "has a history of treating users' data as its own proprietary property to be commercially leveraged in any way the company sees fit," Charles King, principal analyst at Pund-IT, told the E-Commerce Times.
Facebook Messaging Service collects and stores all available user data and pulls data from the company's social graph to prioritize messages from certain users without user consent, the CDD said. Further, the company continues to store messages on its servers even when users delete them.
The CDD also pointed out that WhatsApp's terms of service include a provision that if the company is acquired, user information may be among the items sold and transferred -- just like Instagram's ToS had. Facebook accessed Instagram users' data after it bought that company.
Looking at the Whys and Wherefores
The privacy concerns raised by EPIC and the CDD "are valid, but there will be shareholder pressure on Facebook to explain the payout," Frost's Krishna told the E-Commerce Times.
Eventually "There is going to be some expectation of Facebook integrating WhatsApp somehow within the Facebook platform," he continued. "Maybe it will become the Facebook default messenger, and then they can use that data -- and the WhatsApp founders might leave because they didn't want any of that."
Facebook might explore other avenues, such as possibly raising the 99-cent annual subscription fee for WhatsApp, or add more features for an increased fee, Krishna suggested.
However, most of WhatsApp's users are in emerging markets, and "when you look at users in Latin America, India and China and you expect them to pay more, you'll have even more people drop off," Krishna pointed out. "WhatsApp faces strong competitors like Viber, and you might see a significant number of people migrating to competing platforms."