By Jeff Horwitz and Kirsten Grind
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 17, 2020).
Facebook Inc. is backing away from efforts to sell ads in
WhatsApp, in a retreat from a controversial plan that drove the
creators of the popular messaging service to resign more than 18
months ago, according to people familiar with the matter.
WhatsApp in recent months disbanded a team that had been
established to find the best ways to integrate ads into the
service, according to people familiar with the matter. The team's
work was then deleted from WhatsApp's code, the people said.
The shift marks a detour in the social-media giant's quest to
monetize WhatsApp, which it bought in a blockbuster $22 billion
acquisition in 2014 that has yet to pay financial dividends despite
the service being used by more than 1.5 billion people
globally.
Created in 2009, WhatsApp made money initially from download
fees and then a $0.99 annual subscription, but Facebook made the
platform free after acquiring it. In 2018 Facebook unveiled plans
to generate more revenue from the app that included selling
ads.
A year ago, WhatsApp's then-chief executive, Chris Daniels,
called ads a "primary monetization mode" for the company. Facebook
formally unveiled prototypes last May for ads in its Status
feature, which allows ephemeral postings similar to Instagram's
Stories.
Those efforts are now on ice. The company plans at some point to
introduce ads to Status, but for now the focus is on building out
money-making features allowing businesses to communicate with
customers and better manage those interactions, said one person
familiar with the matter.
A WhatsApp spokesman declined to comment.
Facebook's push to sell ads in WhatsApp was a big factor in the
decisions by Jan Koum and Brian Acton, who created the messaging
service, to resign from the company, leaving on the table a
combined $1.3 billion in deferred compensation, The Wall Street
Journal previously reported.
In 2016, the two changed WhatsApp's terms of service to
explicitly forbid displaying ads in the app, and complicating any
future efforts to do so, according to people familiar with the
matter. The men saw their move as creating a potential
public-relations problem that Facebook would have to deal with if
it tried later to change users' terms of service, those people
said.
While Facebook and its platforms haven't shied away from
changing terms of service in the past, introducing ads on the
platform as planned would have required a thorough and formal
notification of users.
WhatsApp is among the quartet of popular Facebook services,
along with Instagram, Messenger and the core Facebook platform,
that attract a combined 2.8 billion monthly users. Though
Facebook's eponymous social network is its biggest moneymaker,
analysts believe that product is growing more slowly than Instagram
and WhatsApp.
The decision to focus WhatsApp on commercial interactions
reflects the way the service is used by most of its users around
the world. In the U.S. and many European countries, WhatsApp is
used largely for interpersonal communication. But many users in
developing nations -- who are the majority of WhatsApp's users --
have also adapted the platform to commerce and customer service,
and the company has sought to accommodate them.
In addition to helping businesses respond to simple
customer-service requests, WhatsApp's tools allow for sorting and
responding automatically to customer service queries. They also let
businesses display in-app product catalogs. Advertisers on Facebook
and Instagram can choose to shuttle users who click or tap on ads
in those platforms directly into chats in WhatsApp.
WhatsApp also has said it is testing projects related to
payments in India, where the service is hugely popular.
Facebook and WhatsApp were strange bedfellows from the
beginning. Messrs. Koum and Acton are known as privacy advocates
and showed open disdain for the commercial applications of the
service. In a 2012 blog post, they called ads "insults to your
intelligence."
Meanwhile, Facebook CEO Mark Zuckerberg became one of the
world's richest people largely by selling opportunities to
advertise to those who came to the social network to connect with
friends and family.
Advertising accounted for about 98% of Facebook's revenue in the
third quarter.
At the time of the WhatsApp deal, Mr. Zuckerberg said he agreed
with Mr. Koum that ads weren't a good fit for messaging services.
After Facebook changed its position on the matter, the WhatsApp
founders clashed with Mr. Zuckerberg and Chief Operating Officer
Sheryl Sandberg, leading them to resign.
Facebook's underlying business has remained healthy and a
favorite of investors even as it continues to face sharp criticism
for its handling of user privacy, misinformation and other matters.
Over the past 12 months, Facebook shares are up more than 50%,
almost doubling the gains of the S&P 500.
Write to Jeff Horwitz at Jeff.Horwitz@wsj.com and Kirsten Grind
at kirsten.grind@wsj.com
(END) Dow Jones Newswires
January 17, 2020 02:47 ET (07:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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