POSTED BY Kayla Morency
On February 19, 2014, Facebook publicly announced that it was acquiring one of the world’s most popular and fastest growing mobile phone messaging applications, WhatsApp, for an astounding $19 billion in cash and stock. In particular, the app is widely known around the globe due in part to its easy accessibility and user-friendly capabilities but also in part to its consumer base of 450 million that is gaining about one million users every day. As a result, Facebook formed the partnership with the fairly new startup in order to boost its popularity among the younger crowd.
The application’s unique capabilities help explain why the company is attractive to a younger audience, thus contributing to its enormous success. In particular, WhatsApp serves as a cross-platform mobile messaging app, so that its customers can send and receive free SMS and MMS text messages from several different types of phones, including the iPhone, Android, Blackberry, Windows Phone, and Nokia. These messages are sent using the phone’s existing data plan for web browsing and email, so there is no additional cost to the user, aside from the nominal membership fee. Furthermore, the app also enables users to create groups, so that multiple friends can communicate at once while sending unlimited pictures, audio, and video messages. These features motivated Facebook to enter into a partnership with the startup in order to become the leader in the market for messaging and to attract younger users of social media.
However, in the immediate aftermath of Facebook’s press release, WhatsApp’s users expressed serious concerns that their personal data would be shared with advertisers. As a result, WhatsApp stated on its blog that it had no intention of changing any of its business practices in light of Facebook’s acquisition. Moreover, WhatsApp insisted that the company would remain autonomous and operate independently, so that users could still enjoy their services for its nominal 99-cent yearly fee. However, even after CEO Jan Koum’s promises, users remain skeptical and believe that after a while advertisements will interrupt their mobile messaging.
Aside from this is the concern of many federal and governmental institutions, which are considering the merger in light of worldwide data regulation and restrictions. For example, Schleswig-Holstein’s data protector commissioner, Thilo Weichert, acknowledged that German data protection laws strictly regulate the possibility of merging WhatsApp user data with Facebook user data. In particular, the Telemedia Act and the Federal Data Protection Act both purport that data stored for one purpose cannot be used for another; however, no similar restrictions exist in the United States. Weichert also expressed fear that the merger of personal information would be exploited for advertising purposes, which is the same concern for consumers. Weichert’s expert opinion suggested that these users are rightfully concerned seeing as though many of them moved away from Facebook in favor of a more privacy-friendly alternative, such as WhatsApp.
Despite CEO Jan Koum’s and Facebook’s repeated assurances that WhatsApp would operate independently and honor its current privacy and security policies, it is still too early to gauge the implications of this deal. Since a significant amount of WhatsApp users are located in Europe, there is likely going to be more detailed investigations by the European authorities, including Germany. However, CEO Jan Koum was quick to remind the public that WhatsApp’s respect for privacy is considered tantamount to the company and that the company was predicated on the idea that users need to share very little personal data. For example, information such as the user’s name, email address, birthday, place of employment, etc. is not collected or stored by WhatsApp, and the company adamantly stated that it has no plans to change their mode of operations in the future. Furthermore, in support of Koum’s assurances, the company recently added a new privacy option that allows users to limit the visibility of their information from being seen by the public.
Although many individuals and governmental officials have expressed their concerns about Facebook’s acquisition of WhatsApp, the strategy seems logical considering that WhatsApp’s popularity is driven by its unobtrusiveness in its users’ lives. As a result, consumers appreciate the minimal fee in exchange for the comforting reminder that the company is not earning its money by exploiting its users’ personal information. Even though there is no guarantee that WhatsApp will maintain its identity, Facebook’s Mark Zuckerberg acknowledged that it is the app’s unique features and attributes that Facebook hopes to capitalize on, rather than alter, in order to retain its position as a social media and messaging mogul.
