After a long dispute over how to produce more revenue with ads and data, the messaging app’s creators are walking away leaving about $1.3 billion on the table
How ugly was the breakup between Facebook Inc. FB -0.18% and the two founders of WhatsApp, its biggest acquisition? The creators of the popular messaging service are walking away leaving about $1.3 billion on the table.
The expensive exit caps a long-simmering dispute about how to wring more revenue out of WhatsApp, according to people familiar with the matter. Facebook has remained committed to its ad-based business model amid criticism, even as Facebook Chief Executive Mark Zuckerberg has had to defend the company before American and European lawmakers.
The WhatsApp duo of Jan Koum and Brian Acton had persistent disagreements in recent years with Mr. Zuckerberg and Chief Operating Officer Sheryl Sandberg, who grew impatient for a greater return on the company’s 2014 blockbuster $22 billion purchase of the messaging app, according to the people.
.. Many of the disputes with Facebook involved how to manage data privacy while also making money from WhatsApp’s large user base, including through the targeted ads that WhatsApp’s founders had long opposed.
.. Messrs. Acton and Koum are true believers on privacy issues and have shown disdain for the potential commercial applications of the service.
.. Mr. Zuckerberg and Ms. Sandberg have touted how an advertising-supported product makes it free for consumers and helps bridge the digital divide.
.. When Facebook bought WhatsApp, it never publicly addressed how the divergent philosophies would coexist. But Mr. Zuckerberg told stock analysts that he and Mr. Koum agreed that advertising wasn’t the right way to make money from messaging apps. Mr. Zuckerberg also said he promised the co-founders the autonomy to build their own products. The sale to Facebook made the app founders both multibillionaires.
.. Small cultural disagreements between the two staffs also popped up, involving issues such as noise around the office and the size of WhatsApp’s desks and bathrooms, that took on greater significance as the split between the parent company and its acquisition persisted.
.. During the height of the Cambridge Analytica controversy, in which the research firm was accused of misusing Facebook user data to aid the Trump campaign, Mr. Acton posted that he planned to delete his Facebook account.
.. David Marcus, an executive who ran Facebook’s other chat app, Messenger, confronted his former colleague. “That was low class,” Mr. Marcus said
.. When Mr. Acton departed Facebook, he forfeited about $900 million in potential stock awards
.. Mr. Koum is expected to officially depart in mid-August, in which case he would leave behind more than two million unvested shares worth about $400 million at Facebook’s current stock price. Both men would have received all their remaining shares had they stayed until this November, when their contracts end.
.. It is also the antithesis of what WhatsApp professed to stand for. Mr. Koum, a San Jose State University dropout, grew up in Soviet-era Ukraine, where the government could track communication, and talked frequently about his commitment to privacy.
.. Mr. Koum, 42, and Mr. Acton, 46, became friends while working as engineers at Yahoo Inc
.. WhatsApp, which launched in 2009, was designed to be simple and secure. Messages were immediately deleted from its servers once sent. It charged some users 99 cents annually after one free year and carried no ads.
.. Mr. Zuckerberg assured Messrs. Koum and Acton at the time that he wouldn’t place advertising in the messaging service, according to a person familiar with the matter. Messrs. Koum and Acton also negotiated an unusual clause in their contracts that said if Facebook insisted on making any “additional monetization initiatives” such as advertising in the app, it could give the executives “good reason” to leave and cause an acceleration of stock awards that hadn’t vested
.. Mr. Acton initiated the clause in his contract allowing for early vesting of his shares. But Facebook’s legal team threatened a fight, so Mr. Acton, already worth more than $3 billion, left it alone
.. said the WhatsApp founders are “pretty naive” for believing that Facebook wouldn’t ultimately find some way to make money from the deal, such as with advertising. “Facebook is a business, not a charity,”
.. At the time of the sale, WhatsApp was profitable with fee revenue, although it is unclear by how much.
.. Facebook told investors it would stop increasing the number of ads in Facebook’s news feed, resulting in slower advertising-revenue growth. This put pressure on Facebook’s other properties—including WhatsApp—to make money.
.. That August, WhatsApp announced it would start sharing phone numbers and other user data with Facebook, straying from its earlier promise to be built “around the goal of knowing as little about you as possible.”
.. Some of the employees were turned off by Facebook’s campus, a bustling collection of restaurants, ice cream shops and services built to mirror Disneyland.
.. After WhatsApp employees hung up posters over the walls instructing hallway passersby to “please keep noise to a minimum,” some Facebook employees mocked them with chants of “Welcome to WhatsApp—Shut up!”
.. “These little ticky-tacky things add up in a company that prides itself on egalitarianism,” said one Facebook employee.
.. Messrs. Koum and Acton proposed several ideas to bring in more revenue. One, known as “re-engagement messaging,” would let advertisers contact only users who had already been their customers.
.. None of the proposals were as lucrative as Facebook’s ad-based model. “Well, that doesn’t scale,” Ms. Sandberg told the WhatsApp executives of their proposals
.. Ms. Sandberg wanted the WhatsApp leadership to pursue advertising alongside other revenue models, another person familiar with her thinking said.
.. Ms. Sandberg, 48, and Mr. Zuckerberg, 34, frequently brought up their purchase of the photo-streaming app Instagram as a way to persuade Messrs. Koum and Acton to allow advertising into WhatsApp.
.. “It worked for Instagram,” Ms. Sandberg told the WhatsApp executives on at least one occasion
.. Mr. Zuckerberg wanted WhatsApp executives to add more “special features” to the app, whereas Messrs. Koum and Acton liked its original simplicity.
.. Mr. Zuckerberg and Ms. Sandberg also wanted Messrs. Koum and Acton to loosen their stance on encryption to allow more “business flexibility,”
.. Mr. Acton—described by one former WhatsApp employee as the “moral compass” of the team—decided to leave as the discussions to place ads in Status picked up.
Steinem, Sandberg and Judd on How to End Sex Harassment
“Fathers have a big chance to do this just by listening to their daughters, and showing them that they’re worth listening to. Co-workers can do this by not commenting on a woman’s appearance when they wouldn’t say the same of a man.
“This is not rocket science,” Steinem added. “It’s empathy.”
.. We need not just sensitivity training, but also accountability. That means firing not only the men who sexually harass but also the men and women who are complicit.
.. “People need to be afraid not just of doing these things, but also of not doing anything when someone around them does it,” Sandberg said.
.. One dismissal sends a stronger message throughout an organization than 10,000 hours of sensitivity training.
.. Men have sometimes been prone to disbelieve victims’ stories, and one of the most distasteful aspects of the Harvey Weinstein scandal was a rush to refocus blame by questioning why female victims didn’t speak up earlier or go to the police. That tendency to victim-shame is precisely why survivors are reluctant to speak up
.. a new ABC News/Washington Post poll found that 54 percent of American women report having received unwanted and inappropriate sexual advances.. Civil rights weren’t just a “black problem,” the Holocaust wasn’t just a “Jewish problem” and sexual harassment and discrimination are more than just a “women’s problem.”.. “Put peer pressure on each other to treat women better.”
Sheryl Sandberg: How to Build Resilient Kids, Even After a Loss
After my husband’s death, I set out to learn everything
I could about how kids persevere through adversity.
Ivan Trump’s Terrible Book Helps Explain the Trump-Family Ethos
till, she insists, she and her brothers didn’t attain their positions in their father’s company “by any kind of birthright or foregone conclusion.”
.. To answer this question, Ivanka employs an audacious strategy: all of her advantages have actually been handicaps, she says. When she was appointed to the board of directors at Trump Entertainment Resorts, at age twenty-five, the situation was “stacked all the way against me.” Her last name, her looks, her youth, her privilege have all colluded to make people underestimate her. And when she is overestimated—when people believe that she has an “inherent understanding of all things related to real estate and finance,” because her father is Donald Trump—this, too, “can be a big disadvantage.”
.. Ivanka compares herself to a runner positioned on the outside track, whose head start at the beginning is just an illusion.
.. “Did I have an edge, getting started in business?” she asks. “No question. But get over it. And read on.”
.. she has marketed herself as a cross between Gwyneth Paltrow and Sheryl Sandberg.
.. her jewelry company sent out a press release about the bracelet Ivanka wore on “60 Minutes” after her father’s election; she was photographed meeting with the Japanese Prime Minister the week after the election; and she sat in on a call with the Argentinian President. She will have, and presumably use, every opportunity to enrich the family company, of which she remains an executive vice-president. This is the definition of corruption, but as laundered through Ivanka—who’s been tweeting about banana bread and posting photos of her children—it won’t look so bad.
.. She offers a story about being forced, by her mother, to fly coach to the south of France as the moment she realized she needed to make her own money.
.. “My friend Andrew Cuomo, New York’s great attorney general, tells me that e-mail is the key to prosecuting just about everyone these days.”