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What's Zuckerberg's Priority for WhatsApp: User Security or Revenue?

By Rich Duprey – Feb 27, 2020 at 9:30AM

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There may be a way the social-network platform can realize a profit from its $2 billion investment.

WhatsApp recently crossed the 2-billion-user threshold. That's certainly an important milestone, but Facebook (META 1.32%) CEO Mark Zuckerberg shows a decided lack of urgency in having the messaging app contribute to the business monetarily.

He disbanded the team creating an ad-supported ecosystem for the service and deleted the code it created; the WhatsApp blog subsequently affirmed that user security was of paramount concern. However, the two developments are not necessarily linked. You can have a secure site and run ads to generate revenue, though ads that follow you around the internet after using certain search terms can be unsettling. And Facebook is seemingly viewing them as not mutually exclusive.

Still, can the social networking giant continue operating WhatsApp at a loss for the purpose of maintaining user privacy?

Man and woman looking at a smartphone and a tablet, while one holds a credit card

Image source: Getty Images.

Better late than never

Facebook's reputation for playing fast and loose with the privacy of its flagship platform's 2.5 billion users has often been a subject of derision. Opaque language, hidden tools, and snafus exposing personal information have cost the social networking site monetarily in defending itself against lawsuits, and in having users abandon the platform altogether.

For many, Zuckerberg's newfound commitment to security and protecting privacy rings hollow. Yet at some point privacy issues can't be ignored, and as competitors take up the mantle, it's incumbent upon Facebook to act decisively across all of its services.

Getting outflanked by the competition

On one hand, it's a matter of self-preservation. Globally, governments are scrutinizing big tech much more intently with an eye toward regulation, something Zuckerberg increasingly endorses.

But other tech giants have been enhancing their security, making it a point of competitive advantage. Apple, for example, unveiled new tools last year to enhance user privacy, such as an anonymous login system and ways to prevent location tracking by third-party apps.

That was a pointed notice to Facebook and to Alphabet's Google; both receive significant and valuable data when users of their services sign into third-party accounts with their login information.

More recently, Apple just completed a massive upgrade to Apple Maps that also has privacy as a central tenet: Use is not tied to an Apple ID, and data related to the maps is either randomized so as not to be identifiable, or is not retained. There's also no mention of advertising associated with the maps.

Generating money on its own terms

That same sort of commitment seems to be permeating WhatsApp, as it detailed in the blog post: "Strong encryption is a necessity in modern life. We will not compromise on security because that would make people less safe."

So can Facebook do both -- keep users safe and also make money? After all, Facebook paid $22 billion for the service, and has grown its user base four times over from when it acquired it. WhatsApp needs to start making money for Facebook.

The answer, in a word, is yes.

In its annual 10-K report filed last month, Facebook says it intends "to launch certain payments functionality on WhatsApp" and has announced plans to make available digital payments products and services.

A nickel-and-dime business

The Wall Street Journal recently noted that while WhatsApp is used in the U.S. and Europe primarily for personal chats, elsewhere in the world it's used commercially between companies and customers, and developing countries are where most WhatsApp users reside.

Facebook admits it has only monetized messaging in a limited fashion, and though it's investing significant resources in growing WhatsApp, it acknowledges that "we may not be successful in our efforts to generate meaningful revenue or profits from messaging over the long term."

Turning the chat service into a payments tool, while reinforcing the security of its service, will allow Facebook to meet both of its objectives. As ads have always been anathema to WhatsApp, allowing businesses to invoice customers and introducing cross-platform payments could finally transform it into the revenue-generating platform Facebook needs.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Facebook. The Motley Fool has a disclosure policy.

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