.. By marking the charge as an infrastructure fee, the fund firms may be able to avoid disclosing it to investors... Fund companies that decline to pay the amount will “be subject to a very limited relationship” with the company, the document says. Funds can either pay the fee themselves or push the cost onto investors in the mutual fund. This can increase the overall fees of a fund, causing individual investors to pay more and dent returns... The fee is calculated as 0.15% of a mutual-fund company’s industrywide assets, not just on the dollar amount of assets held by Fidelity customers buying shares on the platform, the document says.
The infrastructure fee appears to be a way for Fidelity to make up for revenue the firm has lost as a result of investors flocking to reduced-cost mutual funds, a situation the firm refers to in the document as “unsustainable economics.” Fidelity also stated in the document that its traditional business model is “broken” and characterized the infrastructure fee as a solution to that problem.
.. The infrastructure fee is levied on lower-cost share classes such as those aimed at retirement accounts. The Labor Department has jurisdiction over retirement accounts that are subject to extra protections and disclosures under the Employee Retirement Income Security Act, or Erisa.
.. The document outlining the infrastructure fee, “Fidelity FundsNetwork Business & Services Guide,” is “not to be distributed to the public as sales material in oral or written form,” and “may not be shared with any third party.”
.. When a fund pays a fee that aims to result in the sale of fund shares, either directly or indirectly, securities laws require it to be part of what is known as a 12b-1 plan and to be disclosed to investors. Many lower-cost fund share classes don’t have 12b-1 plans—a reason why they are cheaper.
.. The Fidelity infrastructure fee is also the subject of a lawsuit filed last week in a Massachusetts federal court by a participant in a retirement plan offered by T-Mobile US, Inc. In that suit, the plaintiff contends that the infrastructure charge is prohibited under Erisa and that Fidelity incentivizes mutual funds on its platform to “conceal the true nature of fees associated with these funds.”
Now he’s talking publicly for the first time. Under pressure from Mark Zuckerberg and Sheryl Sandberg to monetize WhatsApp, he pushed back as Facebook questioned the encryption he’d helped build and laid the groundwork to show targeted ads and facilitate commercial messaging.
Acton also walked away from Facebook a year before his final tranche of stock grants vested. “It was like, okay, well, you want to do these things I don’t want to do,” Acton says. “It’s better if I get out of your way. And I did.” It was perhaps the most expensive moral stand in history. Acton took a screenshot of the stock price on his way out the door—the decision cost him $850 million.
.. “As part of a proposed settlement at the end, [Facebook management] tried to put a nondisclosure agreement in place,” Acton says. “That was part of the reason that I got sort of cold feet in terms of trying to settle with these guys.”
.. That kind of answer masks the kind of issues that just prompted Instagram’s founders to abruptly quit. Kevin Systrom and Mike Krieger reportedly chafed at Facebook and Zuckerberg’s heavy hand. Acton’s account of what happened at WhatsApp—and Facebook’s plans for it—provides a rare founder’s-level window into a company that’s at once the global arbiter of privacy standards and the gatekeeper of facts, while also increasingly straying from its entrepreneurial roots.
.. Despite a transfer of several billion dollars, Acton says he never developed a rapport with Zuckerberg. “I couldn’t tell you much about the guy,” he says. In one of their dozen or so meetings, Zuck told Acton unromantically that WhatsApp, which had a stipulated degree of autonomy within the Facebook universe and continued to operate for a while out of its original offices, was “a product group to him, like Instagram.”
.. So Acton didn’t know what to expect when Zuck beckoned him to his office last September, around the time Acton told Facebook brass that he planned to leave. Acton and Koum had a clause in their contract that allowed them to get all their stock, which was being doled out over four years, if Facebook began “implementing monetization initiatives” without their consent.
.. The Facebook-WhatsApp pairing had been a head-scratcher from the start. Facebook has one of the world’s biggest advertising networks; Koum and Acton hated ads. Facebook’s added value for advertisers is how much it knows about its users; WhatsApp’s founders were pro-privacy zealots who felt their vaunted encryption had been integral to their nearly unprecedented global growth.
.. This dissonance frustrated Zuckerberg. Facebook, Acton says, had decided to pursue two ways of making money from WhatsApp. First, by showing targeted ads in WhatsApp’s new Status feature, which Acton felt broke a social compact with its users. “Targeted advertising is what makes me unhappy,” he says. His motto at WhatsApp had been “No ads, no games, no gimmicks”—a direct contrast with a parent company that derived 98% of its revenue from advertising. Another motto had been “Take the time to get it right,” a stark contrast to “Move fast and break things.”
.. Facebook also wanted to sell businesses tools to chat with WhatsApp users. Once businesses were on board, Facebook hoped to sell them analytics tools, too. The challenge was WhatsApp’s watertight end-to-end encryption, which stopped both WhatsApp and Facebook from reading messages.
.. For his part, Acton had proposed monetizing WhatsApp through a metered-user model, charging, say, a tenth of a penny after a certain large number of free messages were used up. “You build it once, it runs everywhere in every country,” Acton says. “You don’t need a sophisticated sales force. It’s a very simple business.”
.. Acton’s plan was shot down by Sandberg. “Her words were ‘It won’t scale.’ ”
.. “I called her out one time,” says Acton, who sensed there might be greed at play. “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.”
.. When Acton reached Zuckerberg’s office, a Facebook lawyer was present. Acton made clear that the disagreement—Facebook wanted to make money through ads, and he wanted to make it from high-volume users—meant he could get his full allocation of stock. Facebook’s legal team disagreed, saying that WhatsApp had only been exploring monetization initiatives, not “implementing” them.
.. Zuckerberg, for his part, had a simple message: “He was like, This is probably the last time you’ll ever talk to me.”
.. Acton graduated from Stanford with a bachelor’s in computer science and eventually became one of the first employees at Yahoo in 1996, making millions in the process. His biggest asset from that time at Yahoo: befriending Koum, a Ukrainian immigrant he clicked with over their similar no-nonsense style.
.. WhatsApp, persuading a handful of former Yahoo colleagues to fund a seed round while he took on cofounder status and wound up with a roughly 20% stake.
.. two things sparked Zuckerberg’s mega-offer in early 2014. One was hearing that WhatsApp’s founders had been invited to Google’s Mountain View headquarters for talks, and he did not want to lose them to a competitor.
.. He recalls Zuckerberg being “supportive” of WhatsApp’s plans to roll out end-to-end encryption, even though it would block attempts to harvest user data. If anything, he was “quick to respond” during the discussions. Zuckerberg “was not immediately evaluating ramifications in the long term.”
.. told them that they would have “zero pressure” on monetization for the next five years.
.. Facebook prepared Acton to meet with around a dozen representatives of the European Competition Commission in a teleconference. “I was coached to explain that it would be really difficult to merge or blend data between the two systems,”
.. Later he learned that elsewhere in Facebook, there were “plans and technologies to blend data.” Specifically, Facebook could use the 128-bit string of numbers assigned to each phone as a kind of bridge between accounts. The other method was phone-number matching, or pinpointing Facebook accounts with phone numbers and matching them to WhatsApp accounts with the same phone number.
.. Within 18 months, a new WhatsApp terms of service linked the accounts and made Acton look like a liar. “I think everyone was gambling because they thought that the EU might have forgotten because enough time had passed.” No such luck: Facebook wound up paying a $122 million fine for giving “incorrect or misleading information” to the EU—a cost of doing business
.. Linking these overlapping accounts was a crucial first step toward monetizing WhatsApp. The terms-of-service update would lay the groundwork for how WhatsApp could make money. During the discussions over these changes, Facebook sought “broader rights” to WhatsApp user data, Acton says, but WhatsApp’s founders pushed back, reaching a compromise with Facebook management. A clause about no ads would remain, but Facebook would still link the accounts to present friend suggestions on Facebook and offer its advertising partners better targets for ads on Facebook.
.. By then, three years since the deal, Zuckerberg was growing impatient, Acton says, and he expressed his frustrations at an all-hands meeting for WhatsApp staffers. “The CFO projections, the ten-year outlook—they wanted and needed the WhatsApp revenues to continue to show the growth to Wall Street,”
.. Internally, Facebook had targeted a $10 billion revenue run rate within five years of monetization, but such numbers sounded too high to Acton—and reliant on advertising.
.. Acton had left a management position on Yahoo’s ad division over a decade earlier with frustrations at the Web portal’s so-called “Nascar approach” of putting ad banners all over a Web page. The drive for revenue at the expense of a good product experience “gave me a bad taste in my mouth,” Acton remembers. He was now seeing history repeat.
.. He has supercharged a small messaging app, Signal, run by a security researcher named Moxie Marlinspike with a mission to put users before profit, giving it $50 million and turning it into a foundation. Now he’s working with the same people who built the opensource encryption protocol that is part of Signal and protects WhatsApp’s 1.5 billion users and that also sits as an option on Facebook Messenger, Microsoft’s Skype and Google’s Allo messenger. Essentially, he’s re-creating WhatsApp in the pure, idealized form it started: free messages and calls, with end-to-end encryption and no obligations to ad platforms.
But they also include a typical conservative cluelessness about black grievances, a performative and commercialized Americanism that parodies healthy civic life, and the toxic identity politics that Donald Trump is constantly encouraging. And then, of course, the N.F.L. is particularly vulnerable to Trump’s demagogy because its business model depends on gladiatorial combat whose medical risks it has been desperate to hush up.
.. So the N.F.L. owners have a multilayered problem, cultural and financial and political and medical, to which a simple why-don’t-they-respect-free-speech solution seems woefully insufficient.
.. Everything about the intersection of sports and race relations and the Trump presidency is simply toxic, and expecting free speech to flourish where those rivers meet is like suggesting that a Superfund site cleanup begin by planting daffodils in the most polluted stretch.
.. There’s a similar problem with debates about free speech on liberal college campuses. Yes, it’s obviously bad when speakers are denied a platform, threatened and shouted down. But if every protester suddenly fell silent, the atmosphere in elite academia would still be kind of awful — and not only from a conservative perspective... Meritocracy, materialism and smartphones would still induce mental breakdowns among bright young climbers. The humanities would still be in existential crisis and possibly terminal decline. A “hedge fund with a library attached” model of administration would still prevail. An incoherent mix of ambitious scientism and post-Protestant moralism and simple greed would still be the ruling spirit.
Much of recent left-wing campus activism has to be understood in this depressing context — as a response to a pre-existing crisis, an attempt to infuse morality and purpose into institutions that employ many brilliant minds but mostly promote incurious ambition and secular conformity.
Which suggests that the dissident, “dark web” intellectuals who have gained a following by warring with those activists ultimately need (as some of them seem to intuit) a competing moral and metaphysical vision of their own, not just the procedural freedom to say some stuff that is politically incorrect.
A classical liberalism that only wants to defend its own right to argue — because that’s what John Stuart Mill would want or something — will end up talking only to itself. If you want a healthy culture of debate, it’s not enough to complain that Marxists and postmodernists are out to silence you; you need your own idea of what education and human life itself are for.
Understand why SaaS businesses work and how to grow them.
Software-as-a-service (SaaS) is a billing and delivery model for software which is so superior to the traditional method for selling software licenses that it restructures businesses around itself. This has led SaaS businesses to have a distinct body of practice. Unfortunately, many entrepreneurs discover this body of practice the hard way, by making mistakes that have been made before, rather than by spending their mistake budget on newer, better mistakes.