META Meta Platforms Inc

By Sebastian Herrera 

WhatsApp is delaying a controversial update to its privacy policy following backlash from users over how it would share data with Facebook Inc., which owns the popular messaging service.

The app said its roughly two billion users would have until May 15 to review and accept the new policy, otherwise it will eventually stop working for them. The change was previously set to kick in on Feb. 8.

"We've heard from so many people how much confusion there is around our recent update," a WhatsApp spokesman said. "There's been a lot of misinformation causing concern, and we want to help everyone understand our principles and the facts."

WhatsApp said the new policy isn't geared to expanding its ability to share data with Facebook but rather to allowing businesses that interact with customers on the app to store those conversations on Facebook servers. The move is a key step in Facebook's plan to generate revenue with WhatsApp after years of struggling to do so. Businesses will also be able to store user shopping activity on the servers.

User confusion and resistance sowed by the new policy point to the difficulty the service faces in advancing on a profit-generating path. WhatsApp remains a market leader in messaging, but competition among encrypted messaging platforms is intensifying with privacy concerns growing as a major consideration for users.

"A lot of folks didn't make the connection that WhatsApp was owned by Facebook, so being more forthcoming in that relationship was really a strike against WhatsApp," said Ashkan Soltani, a former technologist for the Federal Trade Commission. "It has become important to Facebook that the current model of social media is risky with content moderation and privacy law. So they are pushing to find additional ways to monetize."

Some users expressed uncertainty last week about the new policy, questioning whether Facebook would gain access to messages or other information they believed to be private. Memes depicting WhatsApp as an open network spread quickly through social media. A tweet by Tesla Inc.'s Elon Musk urging his followers to use messaging app Signal generated more than 59,000 retweets.

WhatsApp has faced substantial backlash in Turkey, with the government telling its citizens to drop the service and use Turkish messaging apps such as BiP. WhatsApp said it is sending users in Turkey virtual cards outlining its privacy protections.

The company said it plans to remind all its users that their messages are guarded by end-to-end encryption and that neither WhatsApp nor Facebook can see the private messages, keep logs of whom users are calling or messaging, or see a shared location. WhatsApp also doesn't give Facebook access to users' contacts.

Some data is already shared between the two platforms. Facebook is able to see which phone numbers are being used in WhatsApp, how often the app is opened by users, and the name of their mobile carrier.

While WhatsApp this week sought to clarify the policy and offer assurances about privacy, users have begun to look elsewhere.

"It seems like Facebook is gradually bringing down the walls between you and your data," said Jeremiah Gassensmith, an associate professor of chemistry and biochemistry at the University of Texas at Dallas who decided to drop WhatsApp after the privacy overhaul. He is now using Signal.

WhatsApp downloads across Apple and Google's app stores decreased by about 17% in the week after its policy announcement compared with the week before, according to app analytics firm Sensor Tower Inc. During the same period, downloads of Signal increased more than 60 times and downloads of Telegram, another service, more than doubled, according to Sensor Tower.

A steady drift away from WhatsApp could hamper Facebook's plans to make money from the service's extensive user base, analysts say. High-profile data hacks at major companies and government agencies in recent years have heightened consumers' concerns about privacy, potentially giving an edge to messaging services that don't have monetization goals.

Like WhatsApp, Signal and Telegram offer so-called end-to-end encryption on messages, though Telegram's encryption isn't a default setting. WhatsApp gives an option to back up messages to iCloud, meaning messages could potentially be accessed by Apple. Apple Inc.'s iMessage doesn't generate revenue from the service, which is generally viewed as a way to bolster customer loyalty to the company's products. Signal, a nonprofit funded largely by WhatsApp co-founder and former Facebook executive Brian Acton, has no profit-generating model.

While sustained demand for rival messaging platforms threatens Facebook, increased demand could also test the reliability of those services -- which are dwarfed by WhatsApp. The surge to Signal caused the app to temporarily crash this month, highlighting its relatively small capabilities. Some Signal users reported the app crashing again on Friday.

"It is a balancing act for Facebook," said Rishi Jaluria, an analyst for D.A. Davidson & Co. "They have to figure out how to monetize [WhatsApp] without losing the whole thing. People recognize that privacy really matters, and there are worries about how much data these big tech companies are gathering from us."

Facebook has been exploring ways to make money from WhatsApp since its $22 billion purchase of the app in 2014. The company last year backed away from a controversial plan to push its core advertising business on WhatsApp users.

The messaging service is creating options for businesses to market their products through catalogs on the app and through Facebook's shops and checkout carts. WhatsApp, which charges businesses for certain types of customer interactions, would profit from merchants using those tools.

In the U.S., WhatsApp is largely used for interpersonal communication, whereas users in developing nations -- which make up the majority of its users -- have turned to the service for commerce and customer service. The company has said more than 175 million people message WhatsApp business accounts each day.

Write to Sebastian Herrera at Sebastian.Herrera@wsj.com

(END) Dow Jones Newswires

January 15, 2021 18:01 ET (23:01 GMT)

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