Please ensure Javascript is enabled for purposes of website accessibility

Facebook's Integrated Messaging Plan Claims Its First Casualties

By Evan Niu, CFA - Updated Apr 13, 2019 at 1:36PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's the real reason these two executives called it quits.

Social networking giant Facebook (FB 1.18%) dropped a bombshell disclosure last night. Two major executives, Chief Product Officer Chris Cox and WhatsApp chief Chris Daniels, are leaving the company. Losing Cox is a particularly hard blow, as the executive has been with Facebook since 2005. However, Daniels' exit is also notable, as he had only been in charge of WhatsApp for less than a year, after co-founders Jan Koum and Brian Acton left over disagreements about data privacy practices.

Zuckerberg's public note announcing the departures evidently didn't tell the whole story. It now seems that Facebook's plan to integrate all of its messaging services is at the heart of both departures.

Illustration of chat bubbles and a lock

Image source: Facebook.

Both executives disagreed with Zuck's plan

Cox has shared his farewell post on Facebook, suggesting that he's not the right man to lead Facebook's new "product direction" and indirectly implying that he would not be "excited" for the undertaking.

"As Mark has outlined, we are turning a new page in our product direction, focused on an encrypted, interoperable, messaging network," Cox wrote. "It's a product vision attuned to the subject matter of today: a modern communications platform that balances expression, safety, security, and privacy. This will be a big project and we will need leaders who are excited to see the new direction through."

BuzzFeed News reports that Cox didn't agree with Zuck's vision of interoperability across all messaging services. Many executives did not agree with the idea of adding end-to-end encryption (which has long been available on WhatsApp) by default to all of Facebook's messaging services, in part due to potential implications for Facebook's business model, according to the report.

While a less high-profile executive, Daniels has been with Facebook for over eight years, serving in a number of roles culminating in his promotion to lead WhatsApp last year. Like Cox, Daniels opposed the move to integrate messaging services, according to Cheddar. Employees respected Daniels as a strong leader, but that led to clashes with His Zuckness, who rules Facebook with an iron fist given his approximately 60% voting power.

Zuck named another lieutenant, Will Cathcart, as the new head of WhatsApp, while praising Daniels for helping "define the business model for our messaging services going forward."

Check out the latest earnings call transcript for Facebook.

That business model includes a lot of ads

A lot of questions remain regarding Facebook's fundamental pivot to emphasize privacy above all else, particularly around how it will affect Facebook's revenue model, which relies heavily on collecting as much data as possible on users and then using said data for ad targeting.

Messaging services are infamously difficult to monetize directly, and Facebook has been ramping up its efforts to insert ads in both Messenger and WhatsApp, despite Zuckerberg in 2014 famously saying, "I don't personally think ads are the right way to monetize messaging." Yet Facebook now touts its ability to allow advertisers to retarget users with sponsored messages and insert ads directly into Messenger inboxes. Daniels had announced last year that WhatsApp is preparing to put ads next to Status, the service's take on the increasingly popular Stories format that has now dominates social media platforms.

Generally speaking, end-to-end encryption is a very effective privacy tool for users. Generally speaking, giving users more privacy tools is a very bad thing for Facebook's business. Zuck will argue that he always prioritizes Facebook's community over corporate profits, but investors have little insight into how the massive shift will affect the user experience, as well as the tech giant's financial results.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
FB
$193.54 (1.18%) $2.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/22/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.