◼ TECHNOLOGY Bloomberg Businessweek August 19, 201920
THE BOTTOM LINE Facebook is under the spotlight of another
FTC investigation, but based on the results of the last one, it
doesn’t seem to have much to worry about.from outside sources, tracking people as they
browse the open web and offline through their
credit card purchases and phone GPS signals, then
uses that data to precisely target ads for Facebook
and its other apps: Instagram, Messenger, and
WhatsApp. This unimaginable mountain of infor-
mation is the bedrock of Facebook’s $70 billion-a-
year ad business.
The FTC settlement put no restrictions on how
much data Facebook can collect or analyze, as
long as users consent. Anytime the personal infor-
mation of more than 500 users is shared with a
third party without those users explicitly choosing
to move it, Facebook and Zuckerberg can be held
liable for the violation. The company is likely to
interpret that law in the most beneficial way pos-
sible, arguing that it’s legally required to keep its
valuable data to itself.
“I can’t believe Facebook didn’t pay more
for this,” Alex Stamos, a former Facebook exec-
utive, said on Twitter after the settlement was
announced. He imagined the FTC demanding that
Amazon.com Inc. always offer Amazon-branded
products at lower prices than other merchants on
its marketplace: CEO Jeff Bezos “would leap across
the table with a $10B check and a massive grin,”
he wrote. Facebook declined to comment for
this story. FTC Chairman Joseph Simons says he
doesn’t believe Facebook will put undue require-
ments on developers that also compete with it, but
that if it does, “a huge red flag would go up and
potentially start another antitrust investigation.”
Facebook used to want to share its data. A few
years ago the company relied on outside developers
to build apps (FarmVille, Spotify) that would weave
into its service and give users more reasons to log
in. Those developers, meanwhile, could use the
social network’s data fire hose to learn and grow
faster. Facebook mostly shut down those partner-
ships in 2015, but it has little control over the vast
troves of user information it had handed over.
That came back to bite it with last year’s
Cambridge Analytica scandal, which prompted
the FTC investigation. A developer of a Facebook
personality quiz sold the data he collected to
Cambridge, a political consultant working to help
right-wing politicians analyze and sway voters.
Facebook has since moved on to new growth
strategies that rely more on its own network than
third parties. It’s erased the once-vaunted inde-
pendence of its other properties and chased off
those companies’ founders. Now it plans on link-
ing its core app and other services so that, say,
Instagram users can message WhatsApp users in
a new mega-network.As the FTC punishes Facebook for doing things
it no longer does, the agency is also helping ensure
no other company can get as big. Facebook’s data
collection creates a “barrier to entry for other
businesses,” said Margrethe Vestager, European
Commissioner for Competition, in an October
interview with the Privacy Advisor. She proposed a
way to share big data sets with smaller businesses.
The FTC’s antitrust investigation, which it noti-
fied the company about in June, is focusing so far
on whether Facebook acquired competitors like
Instagram and WhatsApp just to remove them
from the market. Several presidential candidates
and other politicians have called for the company
to be broken up into smaller pieces. While the gov-
ernment weighs its options, Facebook is steadily
making a potential breakup much tougher.
For example, Zuckerberg has decided to com-
bine all the messaging networks so people can
communicate securely among them. He’s said
the move is going to help the company provide
users with encryption—particularly with the
impregnable WhatsApp system—that not even it
can crack. He also wants to change the branding
of WhatsApp and Instagram to “WhatsApp from
Facebook” and “Instagram from Facebook,” sup-
posedly to boost transparency, according to his
public-relations team.
Zuckerberg has said publicly that these moves
must be made to protect privacy. Within the com-
pany, however, that isn’t the main reason he’s giv-
ing for the changes, say people familiar with the
matter. He’s combining the messaging apps in the
hopes that the move will improve people’s view of
Facebook more than it taints the other brands by
association. Another move in this vein, the people
say: Instagram and WhatsApp employees will soon
have to use @fb.com email addresses.
Integrating the products may prove a disincen-
tive for strong action on antitrust. “For any anti-
competitive behavior they want to get away with,
they’re going to say, ‘The FTC made us,’ ” says
Matt Stoller, a fellow at the Open Markets Institute.
“That’s what they bought for $5 billion.”
The tests keep coming. On Aug. 13, Facebook
confirmed a Bloomberg News report that it’s been
paying hundreds of outside contractors to tran-
scribe clips of audio from users of its services.
(The company said it had stopped a week ear-
lier.) Ireland’s Data Protection Commission said
on Aug. 14 that it’s “seeking detailed information
from Facebook.” �Sarah Frier● Facebook net income
● FTC fine2017
20162018
$22.1b2015