Behind the Messy, Expensive Split Between Facebook and WhatsApp’s Founders - WSJ: Behind the Messy, Expensive Split Between Facebook and WhatsApp’s Founders
After a long dispute over how to produce more revenue with ads and data, the messaging app’s creators are walking away leaving about $1.3 billion on the table
By Kirsten Grind and Deepa Seetharaman
June 5, 2018 10:24 a.m. ET
85 COMMENTS
How ugly was the breakup between Facebook Inc. FB -0.18% and the two founders of WhatsApp, its biggest acquisition? The creators of the popular messaging service are walking away leaving about $1.3 billion on the table.
The expensive exit caps a long-simmering dispute about how to wring more revenue out of WhatsApp, according to people familiar with the matter. Facebook has remained committed to its ad-based business model amid criticism, even as Facebook Chief Executive Mark Zuckerberg has had to defend the company before American and European lawmakers.
The WhatsApp duo of Jan Koum and Brian Acton had persistent disagreements in recent years with Mr. Zuckerberg and Chief Operating Officer Sheryl Sandberg, who grew impatient for a greater return on the company’s 2014 blockbuster $22 billion purchase of the messaging app, according to the people.
Many of the disputes with Facebook involved how to manage data privacy while also making money from WhatsApp’s large user base, including through the targeted ads that WhatsApp’s founders had long opposed. In the past couple of years especially, Mr. Zuckerberg and Ms. Sandberg pushed the WhatsApp founders to be more flexible on those issues and move faster on other plans to generate revenue, the people say.
Once, after Mr. Koum said he “didn’t have enough people” to implement a project, Mr. Zuckerberg dismissed him with, “I have all the people you need,” according to one person familiar with the conversation.
Facebook CEO Mark Zuckerberg testified about privacy issues and the use of user data before a Senate committee in April. PHOTO: ALEX BRANDON/PRESS POOL
WhatsApp was an incongruous fit within Facebook from the beginning. Messrs. Acton and Koum are true believers on privacy issues and have shown disdain for the potential commercial applications of the service.
Facebook, on the other hand, has built a sprawling, lucrative advertising business that shows ads to users based on data gathered about their activities. Mr. Zuckerberg and Ms. Sandberg have touted how an advertising-supported product makes it free for consumers and helps bridge the digital divide.
When Facebook bought WhatsApp, it never publicly addressed how the divergent philosophies would coexist. But Mr. Zuckerberg told stock analysts that he and Mr. Koum agreed that advertising wasn’t the right way to make money from messaging apps. Mr. Zuckerberg also said he promised the co-founders the autonomy to build their own products. The sale to Facebook made the app founders both multibillionaires.
Over time, each side grew frustrated with the other, according to people in both camps. Mr. Koum announced April 30 he would leave, and Mr. Acton resigned last September.
Big Bet
Facebook paid substantially more for WhatsApp than any other deal.
Facebook's five largest deals*
WhatsApp (2014)
$21.94 billion
Oculus VR (2014)
$2.30 billion
Instagram (2012)
$736 million
Microsoft† (2012)
$550 million
Onavo (2013)
$120 million
*price at close of deal���†approximately 615 AOL patents and patent applications
Source: Dealogic
The WhatsApp co-founders didn’t confront Mr. Zuckerberg at their departures about their disagreements over where to take the business, but had concluded they were fighting a losing battle and wanted to preserve their relationship with the Facebook executive, people familiar with the matter said. One person familiar with the relationships described the environment as “very passive-aggressive.”
After a long dispute over how to produce more revenue with ads and data, the messaging app’s creators are walking away leaving about $1.3 billion on the table
By Kirsten Grind and Deepa Seetharaman
June 5, 2018 10:24 a.m. ET
85 COMMENTS
How ugly was the breakup between Facebook Inc. FB -0.18% and the two founders of WhatsApp, its biggest acquisition? The creators of the popular messaging service are walking away leaving about $1.3 billion on the table.
The expensive exit caps a long-simmering dispute about how to wring more revenue out of WhatsApp, according to people familiar with the matter. Facebook has remained committed to its ad-based business model amid criticism, even as Facebook Chief Executive Mark Zuckerberg has had to defend the company before American and European lawmakers.
The WhatsApp duo of Jan Koum and Brian Acton had persistent disagreements in recent years with Mr. Zuckerberg and Chief Operating Officer Sheryl Sandberg, who grew impatient for a greater return on the company’s 2014 blockbuster $22 billion purchase of the messaging app, according to the people.
Many of the disputes with Facebook involved how to manage data privacy while also making money from WhatsApp’s large user base, including through the targeted ads that WhatsApp’s founders had long opposed. In the past couple of years especially, Mr. Zuckerberg and Ms. Sandberg pushed the WhatsApp founders to be more flexible on those issues and move faster on other plans to generate revenue, the people say.
Once, after Mr. Koum said he “didn’t have enough people” to implement a project, Mr. Zuckerberg dismissed him with, “I have all the people you need,” according to one person familiar with the conversation.
Facebook CEO Mark Zuckerberg testified about privacy issues and the use of user data before a Senate committee in April. PHOTO: ALEX BRANDON/PRESS POOL
WhatsApp was an incongruous fit within Facebook from the beginning. Messrs. Acton and Koum are true believers on privacy issues and have shown disdain for the potential commercial applications of the service.
Facebook, on the other hand, has built a sprawling, lucrative advertising business that shows ads to users based on data gathered about their activities. Mr. Zuckerberg and Ms. Sandberg have touted how an advertising-supported product makes it free for consumers and helps bridge the digital divide.
When Facebook bought WhatsApp, it never publicly addressed how the divergent philosophies would coexist. But Mr. Zuckerberg told stock analysts that he and Mr. Koum agreed that advertising wasn’t the right way to make money from messaging apps. Mr. Zuckerberg also said he promised the co-founders the autonomy to build their own products. The sale to Facebook made the app founders both multibillionaires.
Over time, each side grew frustrated with the other, according to people in both camps. Mr. Koum announced April 30 he would leave, and Mr. Acton resigned last September.
Big Bet
Facebook paid substantially more for WhatsApp than any other deal.
Facebook's five largest deals*
WhatsApp (2014)
$21.94 billion
Oculus VR (2014)
$2.30 billion
Instagram (2012)
$736 million
Microsoft† (2012)
$550 million
Onavo (2013)
$120 million
*price at close of deal���†approximately 615 AOL patents and patent applications
Source: Dealogic
The WhatsApp co-founders didn’t confront Mr. Zuckerberg at their departures about their disagreements over where to take the business, but had concluded they were fighting a losing battle and wanted to preserve their relationship with the Facebook executive, people familiar with the matter said. One person familiar with the relationships described the environment as “very passive-aggressive.”