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Inside Facebook’s quadruple play: How the company is finally melding its apps

Sep 30, 2020

If anything, WhatsApp remained even more of a principality unto itself. In 2014, after Facebook’s $19 billion acquisition bid had been announced but before it had cleared its final regulatory hurdles, CEO Jan Koum told me that his company had “no plans to change anything about how we execute” once the deal was done. It didn’t. In startup days, Koum and partner Brian Acton had been ardently opposed to collecting unnecessary data about users and larding their app with ads. “Remember, when advertising is involved, you the user are the product,” they warned in a 2012 blog post , not needing to mention Facebook by name to make their point. Post-acquisition, as WhatsApp grew to a billion users by early 2016, it continued to spurn ads and champion privacy. In April of that year, it switched on end-to-end encryption that prevented even Whats­App from deciphering messages as they traveled between users. advertisement The freedom that Instagram’s and WhatsApp’s founders enjoyed within Facebook was remarkable for its longevity. But as recounted this year in Steven Levy’s Facebook: The Inside Story and Sarah Frier’s No Filter: The Inside Story of Instagram, it wouldn’t last forever. Systrom and Instagram cofounder Mike Krieger came to feel that Zuckerberg was willfully starving them of resources. Koum and Acton found themselves under pressure from Sandberg to incorporate the targeted ads they despised. Acton resigned in September 2017 , later tweeting a defiant “It is time. #deletefacebook.” Koum quit the following April . Systrom and Krieger left five months later . After the founder exodus, veteran Facebook executives Adam Mosseri and Will Cathcart took over Instagram and WhatsApp, respectively. Both were trusted Zuckerberg lieutenants and had previously overseen Facebook’s News Feed—setting the stage for the unification plan to come. For years, surveys have shown that most peo­ple don’t know that Facebook owns Instagram and Whats­App . That often seemed to redound to the company’s favor. Folks who fled Facebook—­teenagers who deem it insufficiently cool or older users concerned about privacy—often ended up spending more time in something else owned by Facebook Inc. However, such ignorance became tougher to maintain in August 2019, when Instagram’s and WhatsApp’s startup screens began declaring that the apps were “From Facebook.” Tying beloved products to the embattled Facebook brand was a gutsy act of transparency, says Ivan Kayser, CEO of strategy and design consultancy Redscout, who calls Facebook’s willingness to do so “weirdly positive.” I tell people, ‘If you’re here because you miss the old days … maybe this isn’t the right place for you now.” Vishal Shah, Instagram VP of product Confusion about the relationship between Facebook and the other services under its umbrella was “long-term, not a good thing for us,” says Instagram VP of product Vishal Shah. He points out that the company’s apps have always benefited from certain logical integrations and consolidations. For example, Instagram users have been able to cross-post photos to Facebook with one click. Businesses also have unified tools, such as a single dashboard for wrangling communications with customers on both Facebook and Instagram. But in many cases, Facebook had been willing to double up on its efforts, if not triple or quadruple. After Instagram Stories had become a blockbuster, in 2017, Facebook, Messenger, and Whats­App rolled out their own takes on the idea—pretty darn similar, but not identical. That’s an inefficient way to build new functionality. “Right now, every time we innovate on something in Facebook Stories, Instagram takes three months to implement that same feature inside Instagram Stories, and vice versa,” sighs Fidji Simo, who, as VP of the Facebook app, is responsible for the company’s flagship product. advertisement Contrast that with last spring’s rollout of Rooms, a Zoom-esque videoconferencing service that the company pushed out months ahead of schedule when the COVID-19 pandemic hit. Though officially part of Messenger, Rooms can also be launched from Facebook, Instagram, and WhatsApp. Other recent launches, such as Facebook Pay and Facebook Shops, follow a similar one-service-everywhere strategy. (In August, the company folded all of its payments-related initiatives into a new group called Facebook Financial, led by former Messenger chief David Marcus—who was once president of PayPal.) Fidji Simo, VP of the Facebook app: “I feel like the motivations of the company are often misunderstood. The way in which we make decisions is really grounded in what people want … and private communication is a great example of that.” [Photo: courtesy Facebook] New functionality, such as Accounts Center’s aggregation of Facebook and Instagram settings in one place, may sound mundane. But given an app like Instagram’s historic independence and cultural quirks, even seemingly straightforward tweaks face an array of challenges. On Facebook, for example, people are limited—at least in theory—to a single, real-identity account. On Instagram, having a pseudonym is fine, and some young people maintain a “fake Instagram,” or “finsta”: a second, secret account meant only for close friends. The last thing anyone would want is their finsta posts popping up on Facebook. “Users need to decide that [Facebook and Insta­gram accounts] can be interrelated,  and that that control should be on their side, from our perspective,” says George Lee, a Facebook director of product and former Instagram head of growth. The braiding together of sites has required adjustment on everyone’s part. Shah joined Instagram in 2015, when it was a more self-contained operation. Today, he says, “I tell people, ‘If you’re here because you miss the old days of how we used to build and experiment in a vacuum, maybe this isn’t the right place for you now.’ ” (That didn’t stop Instagram from recently unveiling Reels , a TikTok doppelgänger that’s only available inside Insta­gram; Facebook says it has no current plans to spread it to other apps.) The trickiest part of Zuckerberg’s plan is the intensified emphasis on private messaging. Without setting a deadline, he said in his 2019 post that users of Messenger, Whats­App, and Instagram’s messaging feature—each historically a walled garden—would be able to communicate securely across all three services in a project referred to within the company as “interop.” The first tangible result is the new version of Messenger. It remains a standalone app—but the same features appear within Instagram to replace its existing messaging capabilities, which  have been known as Instagram Direct since their 2013 debut. The update is going live in a few countries now, with a global rollout (including in the U.S.) planned for later in 2020. In part, turning Instagram’s messaging features into an in-app version of Messenger is about efficiency. Chief product officer Cox says that it will allow the company to “do the research, figure out the best product, build the best product, and then bring it.” Instagram users get to choose whether to switch or keep Instagram Direct in its existing form; there’s a lot to tempt them to make the move, including new selfie stickers, animated text effects, custom emoji reactions, Snapchat-like vanishing messages, and features for shared video watching—plus the ability to message friends on Messenger. advertisement Accounts Center, which Facebook is currently testing, is a single destination for settings that span Facebook, Messenger, and Instagram. [Photo: Facebook] Facebook says it has no plans to force every Instagram user to embrace the new experience. It seems unlikely, however, that the company will maintain two flavors of messaging in the app indefinitely. Those who cherish Instagram as a refuge from Facebook could see the Messenger-derived features as an encroachment rather than an upgrade. But Cox says that he’s been encouraged by tests: “It’s not interrupting any habit or pattern or something that people really love. We’re feeling pretty good about what we’ve seen in the folks who’ve used it so far.” The new Instagram messaging capabilities also include signs that Facebook thought about the privacy implications of knocking down walls between services. For instance, Instagram users can turn off the ability to receive messages from Messenger. Alternatively, they can automatically route particular types of incoming missives—say, ones from friends of Facebook friends—to Message Requests, where they’re quarantined rather than displayed. There’s even a feature that suggests accounts you might want to block based on who you’ve blocked on Facebook. “Everyone at Facebook now understands that if we don’t do [privacy and security] well, we won’t contribute to Facebook’s mission,” says product manager Mitu Singh, who now works on cross-app experiences. “It’s super ingrained in everyone’s heads. And I think in addition to that, they also realize that if we don’t do this well, they won’t get to ship the product experiences that they want to ship and that they’re excited about having people use.” For now, WhatsApp isn’t part of this mix, and given the app’s more stripped-down feel, any move to unify it with Messenger might leave users particularly skittish. The end-to-end encryption  that Zuckerberg promised for Messenger and Instagram is also still to come. Messenger VP Chudnovsky won’t say when the interop project will be completed other than that it won’t be this year. “I assumed it was going to be very complicated,” he says. “I think it’s somewhat more complicated than we originally thought.” The challenges aren’t merely technical. Facebook’s history is pockmarked with examples of its playing fast and loose with its users’ data in service of its behemoth advertising business. The likelihood that Zuckerberg would face widespread cynicism about his vision of a more private future was so high that even he had to acknowledge it. “I understand that many people don’t think Facebook can or would even want to build this kind of privacy-focused platform—­because frankly we don’t currently have a strong reputation for building privacy protective services, and we’ve historically focused on tools for more open sharing,” he wrote. [Facebook] is not going to do too much that doesn’t let them spy on you, because their business model depends on it.” Bruce Schneier, technologist and author At least Zuckerberg could point to Whats­App as a model. Long after its disaffected founders quit, the service’s end-to-end encryption and general reputation for privacy remain intact. “They haven’t screwed it up, which is kind of neat,” says technologist and author Bruce Schneier, though he quickly adds that Facebook “is not going to do too much that doesn’t let them spy on you, because their business model depends on it.” advertisement If Facebook follows through with its promise to bring WhatsApp-level privacy to the rest of its services, a long-simmering tension over the tech industry’s relationship with the law is likely to boil over. Governments hate end-to-end encryption, because it makes messages impervious to standard monitoring techniques, even with the assistance of the tech company. Last October, U.S. Attorney General William Barr and officials from the U.K. and Australia signed an open letter to Zuckerberg opposing his plans to spread end-to-end encryption throughout Facebook’s services, calling it a calamitous hindrance to investigations of “child sexual exploitation and abuse, terrorism, and foreign adversaries’ attempts to undermine democratic values and institutions.” Law enforcement officials often propose adding a “back door” to encryption schemes that would allow them access to data in appropriate circumstances. But that idea is fiercely rejected by privacy advocates, who say that any sort of bypass would be an irresistibly juicy target for hackers and others who would abuse it. “The moment you provide a back door to an end-to-end encrypted product, it’s no longer an end-to-end encrypted product,” Jan Koum told me in 2017 , when he was still CEO of WhatsApp. “Anybody can find that back door.” In a response to Barr’s letter , Chudnovsky and WhatsApp’s Cathcart wrote that Facebook wouldn’t implement a back door, calling it a “gift to criminals, hackers, and repressive regimes.” The debate is likely to continue regardless of the results of November’s election. Facebook watchers also wonder what pervasive encryption would mean for the company’s ad business, which still delivers 98% of company revenue. How can Facebook target ads toward users if it can’t scan the contents of those users’ messages? Yuval Ben-Itzhak, CEO of marketing platform Socialbakers, thinks that Facebook’s scale alone makes it essential to marketers. Encryption wouldn’t stop the company from acquiring other information about users that makes them valuable, such as who they communicate with and for how long. advertisement “Messaging can be a very good channel for monetization—it’s just that the experience is going to be different,” he says. Besides, Facebook may finally be on the cusp of succeeding at tapping into a source of revenue that doesn’t involve ads—and messaging is at the heart of it. Last April, Facebook invested $5.7 billion in India’s Jio Platforms , a wireless carrier launched by industrial giant Reliance Industries in 2016. Thanks to radically low pricing—as little as 7 cents a day for voice and data—Jio reached consumers who’d never had a cellphone and rapidly became the country’s largest wireless carrier. Facebook’s investment gives it the opportunity to participate in Jio’s ambitious plans to further unlock the Indian market through new services. For instance, the company intends to help millions of kirana—­neighborhood mom-and-pop stores—­finally shift from cash to digital payments. Already, many such shops accept grocery orders via Whats­App, making them prospects for something like Facebook Pay (not yet available in India) or even Novi (Facebook’s still-under-development cryptocurrency, formerly known as Calibra). Over time, in India and elsewhere, Whats­App could evolve into something resembling Tencent’s WeChat. In China, that app leveraged its preeminence in messaging to become an all-encompassing platform that lets hundreds of millions of people do everything from hail a ride to schedule a dentist appointment or buy insurance—often facilitated by Tencent’s WePay. A bonus for Facebook: India implemented a ban on Chinese apps in July, eliminating local competition from WeChat itself as well as ByteDance’s TikTok. And even better, the future of Facebook in India isn’t just about one market, enormous as it is. “If you can scale up something in India, then the chances are higher that you will end up scaling really fast in other parts of the world,” says Tarun Pathak, an analyst at Counterpart Research. (Facebook has been banned in mainland China—another market of potentially game-changing proportions—for more than a decade.) As Zuckerberg predicted in his 2019 post, skepticism about Facebook’s efforts to stitch together its properties is running high. Some critics see them as a preemptive gambit to make itself tougher to disentangle, should current spikes of antitrust fever on Capitol Hill turn into government action to break it up or impose new restrictions on its behavior. advertisement If you go from a completely public space to a completely private space … that’s not something that people understand well.” Fidji Simo, VP of Facebook app “The fact that they’re continuing to race to do that is really irresponsible,” says Sarah Miller, executive director of the American Economic Liberties Project, which has called for the breakup of both Facebook and Google on the grounds that their dominance of major internet services harms society and democracy and makes them too big to regulate in their current form. “It’s also disrespectful to policy makers and to our democratic institutions that have raised clear and obvious concerns with their acquisition strategy over the years.” Then again, if policy makers feel that they and democratic institutions are being disrespected, Facebook’s melding of its properties could devolve into a self-own. “When Facebook initially bought these companies, it said that it would keep them separate,” says Michael Carrier, a professor at Rutgers Law School who specializes in antitrust issues. “Why are they integrating them? If the only reason is to hurt competitors or to forestall an antitrust remedy like breakup, then that could present concerns.” (In response to the theory that the company is tying its services together in order to make them hard to break up, a Facebook spokesperson pointed out that deep integration—such as Instagram and WhatsApp moving to Facebook data centers and Instagram leveraging the Facebook ad platform—started immediately after the acquisitions.) In some form, at some point, “regulation is coming, and if [Facebook] doesn’t figure out a better approach to policy questions more generally, then it’s going to get subverted by governments,” says Dipayan Ghosh, codirector of the Digital Platforms and Democracy Project at the Harvard Kennedy School and a former member of Facebook’s policy team. But any endgame is likely to take years to play out. (AT&T’s forced breakup, in 1984, followed more than seven decades of controversy, three antitrust suits, and eight years of litigation.) Dipayan Ghosh, codirector of the Harvard Kennedy School’s Digital Platforms and Democracy Project: “We don’t really have a way for regulators to think about the currency that’s being extracted from consumers … which is a complex and novel combination of data and attention.” [Photo: courtesy Dipayan Ghosh] Even if Facebook remains intact and recognizable, the era of it taking out rivals by gobbling them up is over. Acquisitions on the scale of Instagram or WhatsApp are unlikely to pass regulatory muster in today’s climate; when TikTok’s U.S. operations hit the market as a result of geopolitical drama, pundits didn’t even pause to take Facebook seriously as a potential buyer. Its $400 million acquisition of meme search engine Giphy , in May—not a seismic transaction by historical standards—is under scrutiny from both the Federal Trade Commission and U.K. antitrust regulators. All of this only intensifies pressure on the company to ensure that its new vision works—especially since Facebook has been famously bad at generating new hits in-house . “There’s just this whole slew of really crappy apps that Facebook tried to develop on its own,” snarks one former Instagram business-­side executive. “The acquisitions were much more successful.” Another possible hurdle: The tighter integration on which so much of the plan rests might simply not excite the masses. “I literally cannot imagine somebody who’s using WhatsApp thinking, ‘Hey, I really wish I could message this person on Facebook, too,’ ” says one Silicon Valley veteran, whose résumé includes time at Facebook. “I would love to hear a more compelling value proposition.” (For the record, Facebook’s Cox says the company’s research has indicated that users like the idea of being able to reach friends without juggling multiple messaging apps.) advertisement Facebook acknowledges that it doesn’t yet have all the answers. “I think the main thing is really figuring out all of the experiences along the spectrum,” says Facebook app chief Simo. “If you go from a completely public space to a completely private space like Messenger, that’s not something that people understand well.” It’s critical that new and upcoming changes be both comprehensible and enticing. Writing a manifesto, after all, is easy. Figuring out how to go through fundamental change—when your company is being challenged from every direction—is hard. As so much of Facebook’s history has shown, what happens next could be as unpredictable as it is profound. advertisement

Fidji Simo Investments

13 Investments

Fidji Simo has made 13 investments. Their latest investment was in Archy as part of their Seed VC on November 11, 2022.

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Fidji Simo Investments Activity

investments chart

Date

Round

Company

Amount

New?

Co-Investors

Sources

11/7/2022

Seed VC

Archy

$10M

Yes

1

10/5/2022

Series A

Gourmey

$48M

Yes

24

9/21/2022

Series A

Gigs

$20M

Yes

6

9/15/2022

Series B

Subscribe to see more

$99M

Subscribe to see more

10

7/13/2022

Seed VC

Subscribe to see more

$99M

Subscribe to see more

10

Date

11/7/2022

10/5/2022

9/21/2022

9/15/2022

7/13/2022

Round

Seed VC

Series A

Series A

Series B

Seed VC

Company

Archy

Gourmey

Gigs

Subscribe to see more

Subscribe to see more

Amount

$10M

$48M

$20M

$99M

$99M

New?

Yes

Yes

Yes

Subscribe to see more

Subscribe to see more

Co-Investors

Sources

1

24

6

10

10

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