May 1, 2018 / 4:22 PM / 7 months ago

Breakingviews - Squeezed Facebook is set to squeeze others

The WhatsApp messaging application is seen on a phone screen August 3, 2017. REUTERS/Thomas White

NEW YORK (Reuters Breakingviews) - Facebook’s developers are worried the newly responsible approach to data confidentiality touted by Chief Executive Mark Zuckerberg will dent their business. Meanwhile WhatsApp co-founder and boss Jan Koum has quit and is leaving Facebook’s board. Users of the encrypted-messaging service may need reassurance they aren’t the $500 billion social network’s next product.

Some creators of third-party apps are on edge as they gather for the annual Facebook developers’ conference in San Jose. The company has been under fire in recent months over the now notorious episode involving Cambridge Analytica, which was effectively able to misuse data collected a few years ago on millions of Facebook members, exploiting the company’s loose privacy policies at the time.

Zuckerberg has promised to take better care of private information. A first line of defense, though, is to limit its use by outside apps which make a living on Facebook’s platform – hence the developers’ worries that they will suffer. Zuckerberg is due to speak at the conference on Tuesday.

Then there’s WhatsApp. Koum has been a boardroom advocate for user privacy. Attempts by Facebook to use personal data and weaken encryption were sources of conflict with the parent company, according to news reports. Yet Zuckerberg paid some $19 billion, mostly in now far more valuable stock, for the business in 2014, and needs to make a return. Advertising helps make Facebook’s Instagram worth $80 billion, Breakingviews recently estimated. WhatsApp’s more than 1 billion daily users – so far barely exploited financially – have at least as much potential.

Koum’s exit could signal changes. That’s less likely in Europe, where new privacy protections make it relatively difficult for Facebook to combine data from WhatsApp users with other information it already has. But a year ago, European antitrust regulators fined Zuckerberg’s company 110 million euros for saying at the time it bought WhatsApp that it couldn’t automatically match accounts with those on Facebook, when technically it could.

That means WhatsApp users outside Europe need to stay alert. Any fallout from the Cambridge Analytica mess was essentially invisible in Facebook’s strong first-quarter financial performance, revealed last week. If Zuckerberg is squeezed in the future, though, he can squeeze others – including both app developers and WhatsApp users.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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