Facebook’s ex-CSO, Alex Stamos, defends its decision to inject ads in WhatsApp

Alex Stamos, Facebook’s former chief security officer, who left the company this summer to take up a role in academia, has made a contribution to what’s sometimes couched as a debate about how to monetize (and thus sustain) commercial end-to-end encrypted messaging platforms in order that the privacy benefits they otherwise offer can be as widely […]

Alex Stamos, Facebook’s former chief security officer, who left the company this summer to take up a role in academia, has made a contribution to what’s sometimes couched as a debate about how to monetize (and thus sustain) commercial end-to-end encrypted messaging platforms in order that the privacy benefits they otherwise offer can be as widely spread as possible.

Stamos made the comments via Twitter, where he said he was indirectly responding to the fallout from a Forbes interview with WhatsApp co-founder Brian Acton — in which Acton hit at out at his former employer for being greedy in its approach to generating revenue off of the famously anti-ads messaging platform.

Both WhatsApp founders’ exits from Facebook has been blamed on disagreements over monetization. (Jan Koum left some months after Acton.)

In the interview, Acton said he suggested Facebook management apply a simple business model atop WhatsApp, such as metered messaging for all users after a set number of free messages. But that management pushed back — with Facebook COO Sheryl Sandberg telling him they needed a monetization method that generates greater revenue “scale”.

And while Stamos has avoided making critical remarks about Acton (unlike some current Facebook staffers), he clearly wants to lend his weight to the notion that some kind of trade-off is necessary in order for end-to-end encryption to be commercially viable (and thus for the greater good (of messaging privacy) to prevail); and therefore his tacit support to Facebook and its approach to making money off of a robustly encrypted platform.

Stamos’ own departure from the fb mothership was hardly under such acrimonious terms as Acton, though he has had his own disagreements with the leadership team — as set out in a memo he sent earlier this year that was obtained by BuzzFeed. So his support for Facebook combining e2e and ads perhaps counts for something, though isn’t really surprising given the seat he occupied at the company for several years, and his always fierce defence of WhatsApp encryption.

(Another characteristic concern that also surfaces in Stamos’ Twitter thread is the need to keep the technology legal, in the face of government attempts to backdoor encryption, which he says will require “accepting the inevitable downsides of giving people unfettered communications”.)

This summer Facebook confirmed that, from next year, ads will be injected into WhatsApp statuses (aka the app’s Stories clone). So it is indeed bringing ads to the famously anti-ads messaging platform.

For several years the company has also been moving towards positioning WhatsApp as a business messaging platform to connect companies with potential customers — and it says it plans to meter those messages, also from next year.

So there are two strands to its revenue generating playbook atop WhatsApp’s e2e encrypted messaging platform. Both with knock-on impacts on privacy, given Facebook targets ads and marketing content by profiling users by harvesting their personal data.

This means that while WhatsApp’s e2e encryption means Facebook literally cannot read WhatsApp users’ messages, it is ‘circumventing’ the technology (for ad-targeting purposes) by linking accounts across different services it owns — using people’s digital identities across its product portfolio (and beyond) as a sort of ‘trojan horse’ to negate the messaging privacy it affords them on WhatsApp.

Facebook is using different technical methods (including the very low-tech method of phone number matching) to link WhatsApp user and Facebook accounts. Once it’s been able to match a Facebook user to a WhatsApp account it can then connect what’s very likely to be a well fleshed out Facebook profile with a WhatsApp account that nonetheless contains messages it can’t read. So it’s both respecting and eroding user privacy.

This approach means Facebook can carry out its ad targeting activities across both messaging platforms (as it will from next year). And do so without having to literally read messages being sent by WhatsApp users.

As trade offs go, it’s a clearly a big one — and one that’s got Facebook into regulatory trouble in Europe.

It is also, at least in Stamos’ view, a trade off that’s worth it for the ‘greater good’ of message content remaining strongly encrypted and therefore unreadable. Even if Facebook now knows pretty much everything about the sender, and can access any unencrypted messages they sent using its other social products.

In his Twitter thread Stamos argues that “if we want that right to be extended to people around the world, that means that E2E encryption needs to be deployed inside of multi-billion user platforms”, which he says means: “We need to find a sustainable business model for professionally-run E2E encrypted communication platforms.”

On the sustainable business model front he argues that two models “currently fit the bill” — either Apple’s iMessage or Facebook-owned WhatsApp. Though he doesn’t go into any detail on why he believes only those two are sustainable.

He does say he’s discounting the Acton-backed alternative, Signal, which now operates via a not-for-profit (the Signal Foundation) — suggesting that rival messaging app is “unlikely to hit 1B users”.

In passing he also throws it out there that Signal is “subsidized, indirectly, by FB ads” — i.e. because Facebook pays a licensing fee for use of the underlying Signal Protocol used to power WhatsApp’s e2e encryption. (So his slightly shade-throwing subtext is that privacy purists are still benefiting from a Facebook sugardaddy.)

Then he gets to the meat of his argument in defence of Facebook-owned (and monetized) WhatsApp — pointing out that Apple’s sustainable business model does not reach every mobile user, given its hardware is priced at a premium. Whereas WhatsApp running on a cheap Android handset ($50 or, perhaps even $30 in future) can.

Other encrypted messaging apps can also of course run on Android but presumably Stamos would argue they’re not professionally run.

“I think it is easy to underestimate how radical WhatsApp’s decision to deploy E2E was,” he writes. “Acton and Koum, with Zuck’s blessing, jumped off a bridge with the goal of building a monetization parachute on the way down. FB has a lot of money, so it was a very tall bridge, but it is foolish to expect that FB shareholders are going to subsidize a free text/voice/video global communications network forever. Eventually, WhatsApp is going to need to generate revenue.

“This could come from directly charging for the service, it could come from advertising, it could come from a WeChat-like services play. The first is very hard across countries, the latter two are complicated by E2E.”

“I can’t speak to the various options that have been floated around, or the arguments between WA and FB, but those of us who care about privacy shouldn’t see WhatsApp monetization as something evil,” he adds. “In fact, we should want WA to demonstrate that E2E and revenue are compatible. That’s the only way E2E will become a sustainable feature of massive, non-niche technology platforms.”

Stamos is certainly right that Apple’s iMessage cannot reach every mobile user, given the premium cost of Apple hardware.

Though he elides the important role that second hand Apple devices play in helping to reduce the barrier to entry to Apple’s pro-privacy technology — a role Apple is actively encouraging via support for older devices (and by its own services business expansion which extends its model so that support for older versions of iOS (and thus secondhand iPhones) is also commercially sustainable).

Robust encryption only being possible via multi-billion user platforms essentially boils down to a usability argument by Stamos — which is to suggest that mainstream app users will simply not seek encryption out unless it’s plated up for them in a way they don’t even notice it’s there.

The follow on conclusion is then that only a well-resourced giant like Facebook has the resources to maintain and serve this different tech up to the masses.

There’s certainly substance in that point. But the wider question is whether or not the privacy trade offs that Facebook’s monetization methods of WhatsApp entail, by linking Facebook and WhatsApp accounts and also, therefore, looping in various less than transparent data-harvest methods it uses to gather intelligence on web users generally, substantially erodes the value of the e2e encryption that is now being bundled with Facebook’s ad targeting people surveillance. And so used as a selling aid for otherwise privacy eroding practices.

Yes WhatsApp users’ messages will remain private, thanks to Facebook funding the necessary e2e encryption. But the price users are having to pay is very likely still their personal privacy.

And at that point the argument really becomes about how much profit a commercial entity should be able to extract off of a product that’s being marketed as securely encrypted and thus ‘pro-privacy’? How much revenue “scale” is reasonable or unreasonable in that scenario?

Other business models are possible, which was Acton’s point. But likely less profitable. And therein lies the rub where Facebook is concerned.

How much money should any company be required to leave on the table, as Acton did when he left Facebook without the rest of his unvested shares, in order to be able to monetize a technology that’s bound up so tightly with notions of privacy?

Acton wanted Facebook to agree to make as much money as it could without users having to pay it with their privacy. But Facebook’s management team said no. That’s why he’s calling them greedy.

Stamos doesn’t engage with that more nuanced point. He just writes: “It is foolish to expect that FB shareholders are going to subsidize a free text/voice/video global communications network forever. Eventually, WhatsApp is going to need to generate revenue” — thereby collapsing the revenue argument into an all or nothing binary without explaining why it has to be that way.

Facebook poisons the acquisition well

Who should you sell your startup to? Facebook and the founders of its former acquisitions are making a strong case against getting bought by Mark Zuckerberg and co. After a half-decade of being seen as one of the most respectful and desired acquirers, a series of scandals has destroyed the image of Facebook’s M&A division. That […]

Who should you sell your startup to? Facebook and the founders of its former acquisitions are making a strong case against getting bought by Mark Zuckerberg and co. After a half-decade of being seen as one of the most respectful and desired acquirers, a series of scandals has destroyed the image of Facebook’s M&A division. That could make it tougher to convince entrepreneurs to sell to Facebook, or force it to pay higher prices and put contractual guarantees of autononmy into the deals.

WhatsApp’s founders left amidst aggresive pushes to monetize. Instagram’s founders left as their independence was threatened. Oculus’ founders were demoted. And over the past few years Facebook has also shut down acquisitions including viral teen Q&A app TBH, fitness tracker Moves, video advertising system LiveRail, voice control developer toolkit Wit.ai, and still-popular mobile app developer platform Parse.

Facebook’s users might not know or care about much of this. But it could be a sticking point the next time Facebook tries to buy out a burgeoning competitor or complementary service.

Broken Promises With WhatsApp

The real trouble started with WhatsApp co-founder Brian Acton’s departure from Facebook a year ago before he was full vested from the $22 billion acquisition in 2014. He’d been adamant that Facebook not stick the targeted ads he hated inside WhatsApp, and Zuckerberg conceded not to. Acton even got a clause added to the deal that the co-founders’ remaining stock would vest instantly if Facebook implemented monetization schemes without their consent. Google was also interested in buying WhatsApp, but Facebook’s assurances of independence sealed the deal.

WhatsApp’s other co-founder Jan Koum left Facebook in April following tension about how Facebook would monetize his app and the impact of that on privacy. Acton’s departure saw him leave $850 million on the table. Captivity must have been pretty rough for freedom to be worth that much. Today in an interview with Forbes’s Parmy Olson, he detailed how Facebook got him to promise it wouldn’t integrate WhatsApp’s user data to get the deal approved by EU regulators. Facebook then broke that promise, paid the $122 million fine that amounted to a tiny speed bump for the money-printing corporation, and kept on hacking.

When Acton tried to enact the instant-vesting clause upon his departure, Facebook claimed it was still exploring, not “implementing”, monetization. Acton declined a legal fight and walked away, eventually tweeting “Delete Facebook”. Koum stayed to vest a little longer. But soon after they departed, WhatsApp started charging businesses for slow replies, and it will inject ads into the WhatsApp’s Stories product Status next year. With user growth slowing, users shifting to Stories, and News Feed out of ad space, Facebook’s revenue problem became WhatsApp’s monetization mandate.

The message was that Facebook would eventually break its agreements with acquired founders to prioritize its own needs.

Diminished Autonomy For Instagram

Instagram’s co-founders Kevin Systrom and Mike Krieger announced they were resigning this week, which sources tell Techcrunch was because of mounting tensions with Zuckerberg over product direction. Zuckerberg himself negotiated the 2012 acquisition for $1 billion ($715 million when the deal closed with Facebook’s share price down, but later $4 billion as it massively climbed). That price was stipulated on Instagram remaining independent in both brand and product roadmap.

Zuckerberg upheld his end of the bargain for five years, and the Instagram co-founders stayed on past their original vesting dates — uncommon in Silicon Valley. Facebook pointed to Instagram’s autonomy when it was trying to secure the WhatsApp acquisition. And with the help of Facebook’s engineering, sales, recruiting, internationalization, and anti-spam teams, Instagram grew into a 1 billion user juggernaut.

But again, Facebook’s growth and financial woes led to a change of heart for Zuckerberg. Facebook’s popularity amongst teens was plummeting while Instagram remained cool. Facebook pushed to show its alerts and links back to the parent company inside of Instagram’s notifications and settings tabs. Meanwhile, it stripped out the Instagram attribution from cross-posted photos and deleted a shortcut to Instagram from the Facebook bookmarks menu.

Zuckerberg then installed a loyalist, his close friend and former News Feed VP Adam Mosseri as Instagram’s new VP of Product mid-way through this year. The reorganization also saw Systrom start reporting to Facebook CPO Chris Cox. Previously the Instagram CEO had more direct contact with Zuckerberg despite technically reporting to CTO Mike Schroepfer, and the insertion of a layer of management between them frayed their connection. 6 years after being acquired, Facebook started breaking its promises, Instagram felt less autonomous, and the founders exited.

The message again was that Facebook expected to be able to exploit its acquisitions regardless of their previous agreements.

Reduced Visibility For Oculus

Zuckerberg declared Oculus was the next great computing platform when Facebook acquired the virtual reality company in 2014. Adoption ended up slower than many expected, forcing Oculus to fund VR content creators since it’s still an unsustainable business. Oculus has likely been a major cash sink for Facebook it will have to hope pays off later.

But in the meantime the co-founders of Oculus have faded into the background. Brendan Iribe and Nate Mitchell have gone from leading the company to focusing on the nerdiest part of its growing product lineup as VPs running the PC VR and Rift hardware teams respectively. Former Xiaomi hardware leader Hugo Barra was brought in as VP of VR to oversee Oculus, and he reports to former Facebook VP of Ads Andrew “Boz” Bosworth — a long-time Zuckerberg confidant who TA’d one of his classes at Harvard who now runs all of Facebook’s hardware efforts.

Oculus’ original visionary inventor Palmer Luckey left Facebook last year following a schism with the company over him funding anti-Hillary Clinton memes and “sh*tposters”. He was pressed to apologize, saying “I am deeply sorry that my actions are negatively impacting the perception of Oculus and its partners.”

Lesser-known co-founder Jack McCauley left Facebook just a year after the acquisition to start his own VR lab. Sadly, Oculus co-founder Andrew Reisse died in 2013 when he was struck by a vehicle in a police chase just two months after the acquisition was announced. The final co-founder Michael Antonov was the Chief Software Architect, but Facebook just confirmed to me he recently left the division to work on artificial intelligence infrastructure at Facebook.

Today for the first time, none of the Oculus co-founders appeared on stage at its annual Connect conference. Obviously the skills needed to scale and monetize a product are different from those needed to create. Still, going from running the company to being stuck in the audience doesn’t send a great signal about how Facebook treats acquired founders.

Course Correction

Facebook needs to take action if it wants to reassure prospective acquisitions that it can be a good home for their startups. I think Zuckerberg or Mosseri (likely to be named Instagram’s new leader) should issue a statement that they understand people’s fears about what will happen to Instagram and WhatsApp since they’re such important parts of users’ lives, and establishing core tenets of the product’s identity they don’t want to change. Again, 15-year-old Instagrammers and WhatsAppers probably won’t care, but potential acquisitions would.

So far, Facebook has only managed to further inflame the founders versus Facebook divide. Today former VP of Messenger and now head of Facebook’s blockchain team David Marcus wrote a scathing note criticizing Acton for his Forbes interview and claiming that Zuckerberg tried to protect WhatsApp’s autonomy. “Call me old fashioned. But I find attacking the people and company that made you a billionaire, and went to an unprecedented extent to shield and accommodate you for years, low-class. It’s actually a whole new standard of low-class” he wrote.

Posted by David Marcus on Wednesday, September 26, 2018

But this was a wasted opportunity for Facebook to discuss all the advantages it brings to its acquisitions. Marcus wrote “As far as I’m concerned, and as a former lifelong entrepreneur and founder, there’s no other large company I’d work at, and no other leader I’d work for”, and noted the opportunity for impact and the relatively long amount of time acquired founders have stayed in the past. Still, it would have been more productive to focus on why’s it’s where he wants to work, how founders actually get to touch the lives of billions, and how other acquirers like Twitter and Google frequently dissolve the companies they buy and often see their founders leave even sooner.

Acquisitions have protected Facebook from disruption. Now that strategy is in danger if it can’t change this narrative. Lots of zeros on a check might not be enough to convince the next great entrepreneur to sell Facebook their startup if they suspect they or their project will be steamrolled.

WhatsApp founder, Brian Acton, says Facebook used him to get its acquisition past EU regulators

WhatsApp founder, Brian Acton, who left Facebook a year ago — before going on to publicly bite the hand that fed him, by voicing support for the #DeleteFacebook movement (and donating $50M to alternative encrypted messaging app, Signal) — has delved into the ethics clash behind his acrimonious departure in an interview with Forbes. And for leaving a cool […]

WhatsApp founder, Brian Acton, who left Facebook a year ago — before going on to publicly bite the hand that fed him, by voicing support for the #DeleteFacebook movement (and donating $50M to alternative encrypted messaging app, Signal) — has delved into the ethics clash behind his acrimonious departure in an interview with Forbes.

And for leaving a cool ~$850M in unvested stock on the table by not sticking it out a few more months inside Zuckerberg’s mothership, as co-founder Jan Koum did. (Collecting air cooled Porsches must be an expensive hobby, though.)

Acton has also suggested he was used by Facebook to help get its 2014 acquisition of WhatsApp past EU regulators who had been concerned it might be able to link accounts — as it subsequently did.

“You mean it won’t make as much money”

The WhatsApp founders’ departure from Facebook boils down to a disagreement over how to monetize their famously ‘anti-ads’ messaging platform from Menlo Park.

Though how the pair ever imagined their platform would be safe from ads in the clutches of, er, an ad giant like Facebook remains one of the tech world’s greatest unexplained brain-fails. Or else they were mostly just thinking of the billions Facebook was paying them.

Acton said he tried to push Facebook towards an alternative, less privacy hostile business model for WhatsApp — suggesting a metered-user model such as by charging a tenth of a penny after a certain large number of free messages were used up.

But that “very simple business” idea was rejected outright by Facebook COO Sheryl Sandberg, who he said told him “it won’t scale”.

“I called her out one time,” Acton also told Forbes. “I was like, ‘No, you don’t mean that it won’t scale. You mean it won’t make as much money as…,’ and she kind of hemmed and hawed a little. And we moved on. I think I made my point… They are businesspeople, they are good businesspeople. They just represent a set of business practices, principles and ethics, and policies that I don’t necessarily agree with.”

CANNES, FRANCE – JUNE 22: Chief Operating Officer of Facebook Sheryl Sandberg attends the Cannes Lions Festival 2017 on June 22, 2017 in Cannes, France. (Photo by Antoine Antoniol/Getty Images for Cannes Lions)

Still, it seems Acton and Koum had a pretty major inkling of the looming clash of business “principles and ethics” with Facebook’s management, given they had a clause written into their contract to allow them to immediately get all their stock if the company began “implementing monetization initiatives” without their consent.

So with his ideas being actively rejected, and with Facebook ramping up the monetization pressure on the “product group” (which is how Acton says Zuckerberg viewed WhatsApp), he thought he saw a route to both cash out and get out — by calling in the contract clause.

Facebook had other ideas, though. Company lawyers told him the clause didn’t yet apply because it had only been “exploring”, not yet implementing monetization. At a meeting over the issue he said Zuckerberg also told him: “This is probably the last time you’ll ever talk to me.” So presumably things got pretty chilly.

The original $19BN deal for Facebook to buy WhatsApp had been rushed through over a weekend in 2014, and Acton said there had been little time to examine what would turn out to be crucial details like the monetization clause.

But not doing the due diligence on that clearly cost him a second very sizeable personal fortune.

Regardless, faced with more uncomfortably chilly meetings, and a legal fight to get the unvested stock, Acton said he decided to just take the winnings he already had and leave.

He even rejected an alternative proposed settlement (without fleshing out exactly what it was) — saying Facebook management had wanted to put a nondisclosure agreement in it, and “that was part of the reason that I got sort of cold feet in terms of trying to settle with these guys”.

“At the end of the day, I sold my company. I am a sellout. I acknowledge that,” he also told Forbes, indicating that he’s not unaware that the prospect of a guy who got really, really wealthy by selling out his principles and his users then trying to claw out even more cash from the ad tech giant he sold to probably wouldn’t look so good.

At least this way he can say he took an $850M haircut to show he ‘cared’.

In August Facebook confirmed that from next year it will indeed begin injecting ads into WhatsApp statuses — which is where the multimedia montage Stories format it cloned from Snapchat has been bolted onto the platform.

So WhatsApp’s ~1.5BN+ monthly users can look forward to unwelcome intrusions as they try to go about their daily business of sending messages to their friends and family.

How exactly Facebook will ‘encourage’ WhatsApp users to eyeball the marketing noise it intends to monetize remains to be seen. But tweaks to make statues more prominent/unavoidable look likely. Facebook is a master of the dark pattern design, after all.

The company is also set to charge businesses for messages they receive from potential customers via the WhatsApp platform — of between a half a penny and 9 cents, depending on the country.

So, in a way, it’s picking up on Acton’s suggestion of a ‘metered model’ — just in a way that will “scale” the bottom line in Sandberg’s sought for ‘loadsamoney’ fashion.

Though of course neither Acton nor Koum will be around to cash in on the stock uplift as Facebook imposes its ad model onto a whole new unwilling platform.

“I think everyone was gambling… because enough time had passed”

In perhaps the most telling tidbit of the interview, Acton reveals that even before the WhatsApp acquisition had been cleared he was carefully coached by Facebook to tell European regulators it would be “really difficult” for it to combine WhatsApp and Facebook user data.

“I was coached to explain that it would be really difficult to merge or blend data between the two systems,” Acton said.

An ‘impossible conjoining’ that Facebook subsequently, miraculously went on to achieve, just two years later, which later earned it a $122M fine from the European Commission for providing incorrect or misleading information on the original filing. (Facebook has maintained that unintentional “errors” were to blame.)

After the acquisition had been cleared Acton said he later learned that elsewhere in Facebook there were indeed “plans and technologies to blend data” between the two services — and that specifically it could use the 128-bit string of numbers assigned to each phone to connect WhatsApp and Facebook user accounts.

Phone-number matching is another method used to link accounts — and sharing WhatsApp users’ phone numbers with the parent group was a change pushed onto users via the 2016 update to WhatsApp’s terms and conditions.

(Though Facebook’s linking of WhatsApp and Facebook accounts for ad targeting purposes remains suspended in Europe, after regulatory push-back.)

“I think everyone was gambling because they thought that the EU might have forgotten because enough time had passed,” he also said in reference to Facebook pushing ahead with account matching, despite having told European regulators it couldn’t be done.

Regulators did not forget. But a $122M fine is hardly a proportionate disincentive for a company as revenue-heavy as Facebook (which earned a whopping $13.23BN in Q2). And which can therefore swallow the penalty as another standard business cost.

Acton said Facebook also sought “broader rights” to WhatsApp users data under the new terms of service — and claims he and Koum pushed back and reached a compromise with Facebook management.

The ‘compromise’ being that the clause about ‘no ads’ would remain — but Facebook would get to link accounts to power friend suggestions on Facebook and to offer its advertising partners better targets for ads on Facebook. So really they just bought themselves (and their users) a bit more time.

Now, of course, with both founders out of the company Facebook is free to scrub the no ads clause and use the already linked accounts for ad targeting in both directions (not just at Facebook users).

And if Acton and Koum ever really thought they could prevent that adtech endgame they were horribly naive. Again, most probably, they just balanced the billions they got paid against that outcome and thought 2x ¯_(ツ)_/¯

Facebook’s push to monetize WhatsApp faster than its founders were entirely comfortable with looks to be related to its own concerns about needing to please investors by being able to show continued growth.

Facebook’s most recent Q2 was not a stellar one, with its stock taking a hit on slowing user growth.

Three years after the WhatsApp acquisition, Acton said Zuckerberg was growing impatient — recounting how he told an all-hands meeting for WhatsApp staffers Facebook needed WhatsApp revenues to continue to show growth to Wall Street.

Internally, Acton said Facebook had targeted a $10 billion revenue run rate within five years of monetization of WhatsApp — numbers he thought sounded too high and which therefore must be reliant on ads.

And so within a year or so Acton was on his way out — not quite as personally mega-wealthy as he could have been. But definitely don’t cry for him. He’s doing fine.

At the Signal Foundation, where Acton now works, he says the goal is to make “private communication accessible and ubiquitous”.

Though the alternative e2e encrypted app has only unquantified “millions” of users to WhatsApp and Facebook’s multi billions. But at least it has $50M of Acton’s personal fortune behind it.

Facebook’s plan to let companies it buys live independently is over

Mark Zuckerberg was quick to realize that Facebook, the largest social network in the world, doesn’t have a monopoly on all users nor can it bank on holding its position as top dog forever. Thus he instituted a policy of buying up promising rivals and integrating them into the Facebook ‘group’ in a strategy designed […]

Mark Zuckerberg was quick to realize that Facebook, the largest social network in the world, doesn’t have a monopoly on all users nor can it bank on holding its position as top dog forever. Thus he instituted a policy of buying up promising rivals and integrating them into the Facebook ‘group’ in a strategy designed to be a win-win for all.

But by leaving Facebook in abrupt fashion this week, Kevin Systrom and Mike Krieger — the founders of Instagram — have shown that the social network’s vision of letting acquired businesses operate independently simply isn’t feasible.

Few large-scale acquisitions run smoothly, so it is to Facebook’s credit that Systrom and Krieger remained with the company for six years after Instagram was acquired for $1 billion in 2012.

That’s a long stretch by any tech acquisition standard, but it is still short of Facebook’s vision of entrepreneurs who continue their startup journeys inside its walls.

The Facebook Family

The original idea is a best-of-both-worlds approach: a company’s finances are infinitely secured and it can grow as needed inside the Facebook ‘family,’ with access to resources like engineering, marketing, admin, etc.

That was also the plan for WhatsApp, but founding pair Jan Koum and Brian Acton managed four and three and a half years, respectively, at Facebook following their $19 billion acquisition in 2014. VR firm Oculus, another billion-dollar purchase, lost co-founders Palmer Lucky (political scandal) and Brendan Iribe (reshuffled) three years after its deal. Ex-Xiaomi executive Hugo Barra now runs the unit as “Facebook VP of VR.”

In the normal state of tech acquisitions, getting six years — or even just three — from a founder post-acquisition is impressive. It requires a strong vision and autonomy for the incoming business.

Many founders become serial founders, even after an exit has set them up financially for life. There’s a thrill in building something new, taking sole charge and growing it. But post-acquisition, the basic dynamics change. As a founder, you call the shots — you are the boss — rather than part of the company hierarchy post-deal. Going from employee to founder requires adjustment, but back the other direction is often trickier — particularly when your business is part of a strategy for a larger one that’s rife with politics.

Facebook tried to mitigate that by promising autonomy for its founders.

Instagram’s duo retained a lot of control — Systrom was the face of the company and he reportedly approved all ads personally — while the same was true of WhatsApp, with Koum made a member of the Facebook board. Indeed, the WhatsApp founders dubbed the acquisition a “partnership” such was their insistence that things wouldn’t change under Facebook’s ownership.

Jan Koum, once a member of Facebook’s board, is said to have clashed with the social network’s management over its intentions for his WhatsApp service

Independence Vs Facebook’s Interests

But it didn’t work.

All four founders of WhatsApp and Instagram have left as Facebook inevitably sought further control of their companies in order to advance its wider goals as a business

WhatsApp, for example, has embraced business-consumer communication, is working on payments and has an advertising tie-in with Facebook. These are all features that would have troubled founders Koum and Acton, whose previous public manifesto railed against anything that takes away from a simple user experience, and particularly advertising.

After reported friction with Facebook management, Koum left in April 2018 to “do things I enjoy outside of technology, such as collecting rare air-cooled Porsches, working on my cars and playing ultimate frisbee.” Acton, meanwhile, quietly exited the year before but then tellingly wrote a $50 million check for Signal, an encrypted chat app that rivals WhatsApp, and publicly backed the #deletefacebook campaign over privacy concerns.

Over at Instagram, a similar situation seems to have happened with Systrom and Krieger. As TechCrunch’s Josh Constine reports, sources suggested that the leadership’s “weakening independence” from Facebook was a source of frustration for them that ultimately led to their untimely exit.

Reading the short farewell note from Systrom seems to hammer that home. There’s no thank you for Mark Zuckerberg, Sheryl Sandberg or any other Facebook executive. Systrom instead stated that Krieger and he are keen to explore their “curiosity and creativity again” by building new products.

Instagram CEO Kevin Systrom continued to be the service’s public face even after its acquisition by Facebook in 2012

Facebook had a good run with its independence policy, but ultimately these four exits illustrate that founders can’t be caged and tamed. While, on the other side, a buyer is always going to want to get their pound of flesh from billion-dollar acquisitions. Facebook can bend the rules and get a lengthier service from founders than most, but you can’t defy gravity forever.

While it has lost the original founders, Facebook has also seen wild success from its purchases. Instagram went from 30 million users pre-acquisition to over one billion today, while WhatsApp has more than 1.5 billion active users up from 450 million at the time of its deal.

The important question now is whether Facebook’s in-house team managing these services can continue to scale them without the inventors in place. Beyond talent, losing that original culture is a blow. These acquired services need to remain differentiated from Facebook from a consumer perspective, otherwise the entire point of owning them — the bet that the future of social networks may not be Facebook — is moot.

WhatsApp now allows group voice and video calls between up to 4 people

WhatsApp has added a much-requested new feature after it began to allow users to make group voice and video calls. It’s been just over three years since the company, which is owned by Facebook, introduced voice calls and later a video option one year later. Today, WhatsApp counts over 1.5 billion monthly users and it says […]

WhatsApp has added a much-requested new feature after it began to allow users to make group voice and video calls.

It’s been just over three years since the company, which is owned by Facebook, introduced voice calls and later a video option one year later. Today, WhatsApp counts over 1.5 billion monthly users and it says they make over two billion minutes of calls via its service each day.

Starting this week, callers can now add friends by hitting the “add participant” button which appears in the top right corner of their screen. The maximum number of participants is four and, impressively, WhatsApp said the calls are end-to-end encrypted.

That’s not an easy thing to do. Telegram, a self-professed secure messaging app, hasn’t even gotten around to encrypting its group messaging chats, let alone group calls.

On the encryption side, WhatsApp has long worked with WhisperSystems to cover all messages and calls on its platform from prying eyes and ears. That said, the relationship between the two become a little more complicated this year when WhatsApp co-founder Brian Acton donated $50 million of his wealth — accumulated from Facebook’s acquisition of his company in 2014 — to the Signal Foundation, which is associated with WhisperSystems.

Acton quit Facebook last year — this year he encouraged people to delete the social network for its data and privacy screw-ups — while his fellow WhatsApp co-founder Jan Koum joined him in departing in May of this year.

Like Acton, Koum was apparently irked by scandals such as Cambridge Analytica, although his on record explanation for quitting was to “do things I enjoy outside of technology, such as collecting rare air-cooled Porsches, working on my cars and playing ultimate frisbee.” Each to their own…