◼ TECHNOLOGY Bloomberg Businessweek August 19, 201920
THEBOTTOMLINE Facebookis underthespotlightofanother
FTCinvestigation,butbasedontheresultsofthelastone,it
doesn’tseemtohavemuchtoworryabout.fromoutsidesources,trackingpeopleasthey
browsetheopenwebandofflinethroughtheir
creditcardpurchasesandphoneGPSsignals,then
usesthatdatatopreciselytargetadsforFacebook
anditsotherapps:Instagram,Messenger,and
WhatsApp.Thisunimaginablemountainofinfor-
mationis thebedrockofFacebook’s$70billion-a-
yearadbusiness.
TheFTCsettlementputnorestrictionsonhow
muchdataFacebookcancollectoranalyze,as
longasusersconsent.Anytimethepersonalinfor-
mationofmorethan 500 usersissharedwitha
thirdpartywithoutthoseusersexplicitlychoosing
tomoveit,FacebookandZuckerbergcanbeheld
liablefortheviolation.Thecompanyis likelyto
interpretthatlawinthemostbeneficialwaypos-
sible,arguingthatit’slegallyrequiredtokeepits
valuabledatatoitself.
“I can’tbelieveFacebookdidn’tpaymore
forthis,”AlexStamos,a formerFacebookexec-
utive,saidonTwitterafterthesettlementwas
announced.HeimaginedtheFTCdemandingthat
Amazon.comInc.alwaysofferAmazon-branded
productsatlowerpricesthanothermerchantson
itsmarketplace:CEOJeffBezos“wouldleapacross
thetablewitha $10Bcheckanda massivegrin,”
hewrote.Facebookdeclinedtocommentfor
thisstory.FTCChairmanJosephSimonssayshe
doesn’tbelieveFacebookwillputunduerequire-
mentsondevelopersthatalsocompetewithit,but
thatif it does,“ahugeredflagwouldgoupand
potentiallystartanotherantitrustinvestigation.”
Facebookusedtowanttoshareitsdata.A few
yearsagothecompanyreliedonoutsidedevelopers
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,thatisn’tthemainreasonhe’sgiv-
ingforthechanges,saypeoplefamiliarwiththe
matter.He’scombiningthemessagingappsinthe
hopesthatthemovewillimprovepeople’sviewof
Facebookmorethanit taintstheotherbrandsby
association.Anothermoveinthisvein,thepeople
say:InstagramandWhatsAppemployeeswillsoon
[email protected].
Integratingtheproductsmayprovea disincen-
tiveforstrongactiononantitrust.“Foranyanti-
competitivebehaviortheywanttogetawaywith,
they’regoingtosay,‘TheFTCmadeus,’” says
MattStoller,a fellowattheOpenMarketsInstitute.
“That’swhattheyboughtfor$5billion.”
Thetestskeepcoming.OnAug.13,Facebook
confirmeda BloombergNewsreportthatit’sbeen
payinghundredsofoutsidecontractorstotran-
scribeclipsofaudiofromusersofitsservices.
(Thecompanysaidit hadstoppeda weekear-
lier.)Ireland’sDataProtectionCommissionsaid
onAug. 14 that it’s “seeking detailed information
from Facebook.” �Sarah Frier● Facebooknet income
● FTCfine2017
20162018
$22.1b2015