WhatsApp

What’s up with WhatsApp: the messaging app meltdown

In recent years a growing number of people have been turning their backs on Facebook. Whether due to an alleged lack of action on hate speech or over privacy concerns, over the past 12 months the exodus from Facebook’s core platform seems to have gained ground. However, while people are leaving Facebook – the app – many were still using other Facebook services, notably messaging app WhatsApp and photo-sharing platform, Instagram. Now, that seems to be changing too.

A recent change to Facebook’s privacy policy, which sent notifications to millions of users around the world has sparked a fresh exodus from WhatsApp, with users flocking to competitors such as Telegram and Signal, who have built and marketed their services around privacy and security.

In India, the app’s largest market, a petition has been filed before Delhi High Court, claiming the rule change violates citizens’ right to privacy and poses a threat to national security. Italy’s data protection agency has also voiced concerns.

Over the course of the weekend, the company delayed the implementation of this update by three months, clarifying that the sharing of information in the update largely concerned the messages people shared with businesses on the platform. In a blog post, it said: “We’ve heard from so many people how much confusion there is around our recent update. There’s been a lot of misinformation causing concern and we want to help everyone understand our principles and the facts.”

So how did one of the most successful messaging companies get something that was relatively simple to communicate (the update was neatly unpicked by Margi Murphy on Twitter) so wrong, and what will happen now? As a team of expert technology communicators, Babel has been following this closely, and will continue to do so as this plays out.

So, what’s really going on? The privacy policy update stated that “WhatsApp receives information from, and shares information with, the other Facebook companies. We may use the information we receive from them, and they may use the information we share with them, to help operate” and market services. What that means is that WhatsApp is now reserving the right to share data it collects about you with the broader Facebook network, regardless of whether you have accounts or profiles there. They claim this will be limited to interactions with businesses who use Facebook’s cloud storage service – meaning customer data collected from those interactions would be stored in that cloud. However, with the language used not that precise, it has been interpreted by many to have wider implications.

From 15 May (originally slated for 8 February) this year users will have to agree to the new terms to continue using WhatsApp.

Why the change?

At its core, this change is about monetising the service. WhatsApp cost some $19 billion to acquire back in 2014, and while it may have billions of users, it makes very little money for Facebook. If you look at some global competitors, notably those in Asia where hundreds of additional services are integrated with the central messaging platform, there’s a huge amount of money to be made from a messaging app’s user base – if you can keep them on the platform.

The majority of the revenue Facebook brings in is from advertising – over $21 billion in Q3 2020 – but there are no ads in WhatsApp. That’s unlikely to change in the short term. What Facebook does want to do is understand people’s WhatsApp usage habits and use them to provide more value to its paying business customers (allowing them to charge them more) and serve more targeted ads on other Facebook platforms.

Poorly communicated

One of the core reasons why the update has been so badly received is the way it was communicated. The policy update notification came with no prior warning and, being too vague and written in ‘legalese’, was open to misinterpretation by users. Many took the update to mean that Facebook would be able to see the content of WhatsApp messages and be able to share that information with third-parties – be they advertisers or law enforcement. Of course, like many messaging services, WhatsApp uses end-to-end encryption, meaning that contrary to that popular belief, Facebook cannot do this.

So poor was Facebook’s communication around this change, that the company scrambled to clarify what the change actually means for users, and convince them that there is no reason for them to leave the platform, but even its communications to clarify the situation were remarkably unclear. Now, the company has delayed by three months to allow users to “gradually review the policy at their own pace before new business options are available on May 15.”

For many, this clarification is too little, too late and having long been dissatisfied with the company, is the final straw that will see them leave the platform for good.

Where do WhatsApp users go?

In the days and weeks since the policy change came to light, social media has been filled with posts from users announcing their departure from WhatsApp and notifying people of their chosen alternative. Google searches for Telegram and Signal have seen significant increases in volume in the first two weeks of the year, peaking on 10 January, as people sought alternatives outside of the Facebook stable. Existing users of alternative services can be found commenting about the number of new contacts surfacing in their address books as a result of this exodus.

The sheer number of users involved is huge. Data from Sensor Tower shows that Telegram reached 11.9m downloads during the week of January 4th, up from 6.5m the week before. Rival, Signal saw an even larger increase, with 8.8m downloads versus 246,000 times the previous week. The influx of users to the latter was so great that it caused significant services issues.

However, with the three-month delay and Facebook saying they are going to use this time to actively tackle the misinformation around the change, whether these alternatives are able to hold on to their new users remains to be seen. Still, there are many that are sceptical about whether the shift to rival services can be maintained – myself included.

I speak from some experience, having worked closely with one of the world’s most popular messaging services – and one that was able to monetise its user base – for a number of years.

In that time, I saw it grow that user base, expand in to new markets, roll out new services, and go public – listing on two exchanges in the biggest technology IPO of that year. However, what I also saw is just how difficult it was to acquire and keep active users on the platform – the key to operating a sustainable and profitable business in this space.

So great was this issue for my client, that they eventually changed their strategy, pulling out of Europe and South America to refocus their business on their core domestic markets in Asia. Here they commanded much greater market share, and they didn’t need to spend resources acquiring users that were already using competitors’ services.

This is what Telegram, Signal, and others will have to grapple with over the coming weeks and months.

A quick survey of the Babel team indicates the scale of the task at hand. Some have moved away from Facebook services, but struggled to bring friends and family with them to new platforms. Some have only just managed to convince family members, notably those in older generations, to use WhatsApp, and the hassle of migrating to another service or using multiple apps for different groups is just not worth the effort.

The network effect

An individual making the decision to leave WhatsApp for messaging pastures new, may not be the end of the story. That’s because of the way messaging services currently work – they require other participants to be on the same service. Like cans on a string, or the early days of the telephone – if there’s nobody on the other end, there’s not much value in having that technology, or in this case, app installed.

While the idea of interoperability of messaging services has been discussed by some, and could gain ground with the EU Digital Markets Act, at present these services operate as ‘walled gardens’.

This means that if one person moves from WhatsApp to Signal, but nobody they want to speak to is a Signal user, then that migration is pretty pointless. If say, 20 percent of that users contact book moves over but the rest remain on WhatsApp, is that enough to justify remaining on the platform? This will differ from user-to-user.

To put it simply, the more people that join a messaging app, the more valuable a service it becomes for all users, and the more likely it is to acquire new users and keep them on the platform.

This is the network effect at work. Investopedia defines this as “a phenomenon whereby increased numbers of people or participants improve the value of a good or service”.

In practice what this means is that there is significant inertia to overcome to switch platforms – it requires a significant proportion of people to leave to make other platforms viable alternatives, and a significant number of people to be active users of the alternative to pull in their contacts and trigger this network effect.

As an interested – but now neutral – observer I’m looking forward to seeing how this battle plays out, and know that as advisors on risk and demand generation in the digital economy, several of my colleagues are too. We’ve seen the trigger point for change, and now are seeing the tension grow between those early movers on the alternative platforms and those who are (for at least the time being) content to continue using WhatsApp.

This is now a question of reputation. It will be communications that will influence the flow of users and the almost gravitational pull of that network effect. How these relative David and Goliaths of the tech world engage with the public will determine the eventual victor, and at this stage I think it’s too early to call a winner.

All that remains to say, in the words of John Anderson, is “Gladiators…ready!”

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From the Babel team

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