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It's the data

Sabina CasagrandeFebruary 20, 2014

Facebook's acquisition of smartphone messaging service WhatsApp widens the social network giant's portfolio and opens the door to further data. But analysts say that could go hand-in-hand with more data abuse.

Symbolbild Facebook kauft WhatsApp
Image: picture-alliance/dpa

Facebook's chief executive Mark Zuckerberg said the WhatsApp acquisition supported the two companies' shared mission to better connect the world. "WhatsApp is on a path to connect one billion people," Zuckerberg said in a statement announcing the deal. "The services that reach that milestone are all incredibly valuable."

It is true that WhatsApp has grown at a rapid pace in its five-year existence. 450 million active monthly users chat with their phone contacts, both one-on-one and in groups. The service allows people to send texts, photos, videos and voice recordings over the Internet. An estimated one million users are joining on a daily basis worldwide.

But this deal is not just about market access, said Janneke Slöetjes, advisor to Dutch digital rights group Bits of Freedom. "It's about missing part of the social graph that Facebook has had no insight into," she told DW.

The value of data

Though WhatsApp is not very popular in the United States, it is a key player in European countries, as well as in several major developing markets such as India and Brazil where the messaging service is extremely popular, especially among teenagers. The mobile-messaging service could help Facebook generate more growth from younger users that are no longer choosing the social network to communicate.

The demographics of WhatsApp's users were likely a draw for Facebook, said Rebecca Lieb, analyst at Altimeter Group. "This is clearly also a play at securing their base of younger users who are married to text messaging," she told the Wall Street Journal.

Teenagers with Smartphones on WhatsApp
Teenagers are particularly crazy about WhatsAppImage: picture-alliance/dpa

But the price tag of a cash-and-stock deal worth $19 billion (13.8 billion euros) has analysts questioning whether connecting to a younger market segment is the whole story. After all, WhatsApp does not sell advertising and has very little revenue. It charges users a flat fee of a mere $1 a year to use the service, and the first year is even free. No, this deal is about access to data.

"This acquisition will substantially increase the data pool for Facebook, which makes its money by mining and harvesting information," Raegan MacDonald, European policy manager at digital rights advocacy organization Access, told DW. "It shows just how much our data is worth if Facebook is willing to pay $19 billion for it."

Access to this data also improves insight into how people communicate, Slöetjes added.

What data reveals

Zuckerberg did not make any statements on what Facebook planned to do with WhatsApp in terms of security. However, WhatsApp's founder and ceo Jan Koum said the company will continue to operate independently as a separate app.

"But WhatsApp's servers will become Facebook's servers and there is nothing that prohibits them from combining and using this data," Slöetjes said.

Jan Koum
Koum moved to California from Ukraine as a teenagerImage: picture-alliance/dpa

WhatsApp has said in the past that it places a lot of value on privacy - reportedly particularly important to Koum, who grew up in Ukraine. WhatsApp has been criticized for storing the address books from people's smartphones, but supposedly does not collect personal information such as name, gender, or age. Messages are deleted from servers once delivered.

"While they may be stressing privacy, what they can do is analyze the feed of information, for example intensity, amount of pictures, emotionality and so on," said Slöetjes. "Maybe they're not storing messages, but on a meta-level, you can tell a lot about someone from communication patterns."

According to MacDonald, even a minimum amount of data can reveal a lot about a person. She said researchers at Cambridge University, for example, had determined with surprising accuracy that an analysis only of a person's Facebook "likes" could determine a users' race, age, IQ, sexuality, substance use and political leaning.

"There will be a situation where Facebook knows who you are, how you communicate, what you do and who you do it with," Slöetjes said. "This creates a big advantage for Facebook. They know things about you and you don't know what they know."

Better enforcement of privacy

Facebook appears to be following a strategy of acquiring or building a family of applications instead of simply strengthening its core social network with its purchase of WhatsApp, as well as its $1 billion acquisition of Instagram in 2012. It faces a smaller yet also significant counterpart with Google, Google+ and Picasa. Slöetjes said she viewed the development of these enormous data-controlling groups with concern.

"Like" button
A simple "like" says a lot about a Facebook userImage: picture-alliance/dpa

"These two parties hold a large share of total social graph control of people's private, semi-private and public lives," she said.

However, in this day and age, it is impossible to avoid social networks. "The point is: if we are to be engaged in society, there are social networks which weave their way into the fabric of our lives," MacDonald said.

But in order for consumers to avoid becoming the product that companies like Facebook are selling, individuals have to be more aware of what they are doing online. In addition, there needed to be sufficient privacy laws in place, which are strictly enforced.

"There need to be generous fines imposed for violation of privacy laws," MacDonald said. "We're hoping to thereby see movement of privacy and data protection into the boardrooms."

The EU is currently reviewing and updating its privacy standards to put a collective framework for data protection in place. This could serve as a benchmark for similar regulation in other parts of the world.