WhatsApp and Facebook Execs Split Over Business Strategy

The long slow-boil dispute between Facebook and WhatsApp’s two founders over how to create more revenue out of the acquired app has led to an ugly breakup. WhatsApp founders Jan Koum and Brian Acton reportedly had constant disagreements with Facebook chief executive Mark Zuckerberg and chief operating officer Sheryl Sandberg, who were both eager for a greater return on the company they purchased for $22 billion in 2014. Facebook remained committed to its advertising model, and Koum and Acton were opposed to targeted ads.

The Wall Street Journal reports that other disputes between Facebook and WhatsApp executives “involved how to manage data privacy while also making money from WhatsApp’s large user base.”

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WSJ opines that, “WhatsApp was an incongruous fit within Facebook from the beginning” since “Acton and Koum are true believers on privacy issues and have shown disdain for the potential commercial applications of the service.” Advertising is central to Facebook, and Zuckerberg and Sandberg “have touted how an advertising-supported product makes it free for consumers and helps bridge the digital divide.”

After Facebook bought WhatsApp, Zuckerberg “told stock analysts that he and Koum agreed that advertising wasn’t the right way to make money from messaging apps,” and that “he promised the co-founders the autonomy to build their own products.”

On April 30, Koum announced his imminent departure, and Acton had already resigned last September, after both of them “concluded they were fighting a losing battle and wanted to preserve their relationship with the Facebook executive [Zuckerberg],” said sources. Another described the environment as “very passive-aggressive.” One public indication was when, during the Cambridge Analytica problem, Acton tweeted he was going to delete his Facebook account, a public rebuke that surprised and dismayed Facebook executives.

When Acton left Facebook, he “forfeited about $900 million in potential stock awards,” say sources, and when Koum leaves in mid-August, he will “leave behind more than two million unvested shares worth about $400 million at Facebook’s current stock price.” Both would have been fully vested if they stayed until November when their contracts end.

Facebook executive Chris Daniels, who will run WhatsApp, “is tasked with finding a business model that brings in revenue at a level to justify the app’s purchase price, without damaging the features that make it so popular.” A competing service is Signal, an encrypted messaging app run by the non-profit Signal Foundation, “with strict privacy controls and without advertising.” Acton serves as its executive chair and donated $50 million to fund it.