By the time of the Facebook acquisition, WhatsApp was working on end-to-end encryption, a technology that makes it impossible for the company to read user messages, even if a judge asks it to. On the final day of November, Facebook Inc. announced it had bought a customer service software startup most people had never heard of, in a deal valuing the company at more than $1 billion. Although it was the third-largest acquisition in Facebook’s history, slightly more than it paid for Instagram in 2012, the deal drew very little notice. In Washington, where regulators are actively pursuing antitrust lawsuits against Facebook and politicians condemn almost every move the company makes, the purchase of Kustomer Inc. was met with crickets.
But the only way WhatsApp makes money today through charging businesses to send messages to customers in lieu of email or phone calls. “You gotta kinda pick, and pick the things that feel like they’re working as well as they can within the product already and build on them, ” Cathcart says. WhatsApp’s founders, Jan Koum and Brian Acton, launched it in 2009 as a free alternative to SMS text messages. Koum, who’d grown up in Soviet-controlled Ukraine before attending San Jose State University, was uniquely sensitive to concerns about privacy.
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Ironically, Facebook eventually came around to a plan resembling Koum and Acton’s. WhatsApp is now run by Will Cathcart, a top Zuckerberg product lieutenant, who says his focus is on commerce and business services rather than ads. Facebook’s other messaging app, Messenger, has sold ads since 2017, but it’s never grown into a big business. Facebook has said it may eventually sell ads in WhatsApp as well.
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Zuckerberg also plans to bring WhatsApp’s level of encryption to Instagram and Messenger, a part of his strategy to address concerns about Facebook’s previous privacy violations. A shift from social media to private messaging would allow Facebook to trade some of its thorniest problems for new ones. If the company eventually makes a significant amount of revenue from service fees related to e-commerce, it won’t rely so much on gathering personal data. If users are communicating privately via encrypted channels, it also reduces the burden on Facebook to moderate content, since it won’t even see what people are talking about. But encrypted messaging comes with its own set of controversies, since it makes it more complicated to police its service for criminal or other problematic activities. But that also means most of WhatsApp’s 2 billion users don’t yet do this, and Facebook is betting many will eventually adopt behaviors such as using the messaging app for payments.