OCTOBER, 2018 FORBES ASIA | 33could get his full allocation of stock.
Facebook’s legal team disagreed, focus-
ing on the word “implementing.” Zuck-
erberg, for his part, had a simple mes-
sage: “He was like, his is probably the
last time you’ll ever talk to me.”
Rather than lawyer up or try to meet
in the middle, Acton decided not to
ight. “At the end of the day, I sold my
company,” he says. “I am a sellout. I ac-
knowledge that.”
ACTON’S MORAL CODEor perhaps na-
ivete, given what he should have expect-
ed at a $22 billion sale price—traces back
to the matriarchs of his family. His grand-
mother started a golf club in Michigan;
his mother founded a freight-forwarding
business in 1985, teaching him to take the
responsibilities of a business owner ex-
tremely seriously. “She would lose sleep at
night [over] making payroll,” Acton told
Forbes right before the Facebook sale.
Acton graduated from Stanford with
a bachelor’s in computer science and
eventually became one of the irst em-
ployees at Yahoo in 1996, making mil-
lions in the process. His biggest asset
from that time at Yahoo: befriending
Koum, a Ukrainian immigrant he
clicked with over their similar no-non-
sense style. “We’re both nerdy, geeky
guys,” Acton recalled in that earlier in-
terview. “We went skiing together,
played Ultimate Frisbee together, played
soccer.” Acton let Yahoo in 2007 to trav-
el before returning to Silicon Valley and,
ironically, interviewing at Facebook. It
didn’t work out, so he joined Koum at
his ledgling startup, Whats App, per-
suading a handful of former Yahoo col-
leagues to fund a seed round while he
took on cofounder status and wound up
with a roughly 20% stake.
hey ran the business in the style that
suited them, on a cash basis, with obses-
sive attention to the integrity of their in-
frastructure. “A single message is like
your irst-born child,” Acton would say.
“We can never drop a message.”
Mark Zuckerberg irst reached out
to Koum over email in April 2012, lead-
ing to lunch at Esther’s German Bakery
in Los Altos. Koum showed the email to
Acton, who encouraged him to go. “We
weren’t shopping our company,” Acton
remembers today. “We had no exit
planned.”
But two things sparked Zuckerberg’s
mega-ofer in early 2014. One was hear-
ing that WhatsApp’s founders had been
invited to Google’s Mountain View
headquarters for talks, and he did not
want to lose them to a competitor. An-
other was a document analyzing What-
sApp’s valuation, written by Morgan
Stanley’s Michael Grimes, that someone
had shown to the deal teams at Facebook
and at Google.
he biggest internet deal in a decade
was rushed through over Valentine’s
weekend in the oices of WhatsApp’s
lawyers. here was little time to exam-ine details, like the clause about mone-
tization. “It was just me and Jan saying
we don’t want to put ads in the product,”
Acton says. He recalls Zuckerberg being
“supportive” of WhatsApp’s plans to roll
out end-to-end encryption, even though
it would block attempts to harvest user
data. If anything, he was “quick to re-
spond” during the discussions. Zucker-
berg “was not immediately evaluating
ramiications in the long term.”
Questioning Zuckerberg’s true inten-
tions wasn’t easy when he was ofering
what became $22 billion. “He came with
a large sum of money and made us an
ofer we couldn’t refuse,” Acton says. he
Facebook founder also promised Koum
a board seat, showered the founders with
admiration and, according to a source
who took part in discussions, told them
that they would have “zero pressure” on
monetization for the next ive years.
Facebook, it turned out, wanted to
move much faster.THE WA RNING SIGNS emerged before
the deal even closed that November. hedeal needed to get past Europe’s famous-
ly strict antitrust oicials, and Facebook
prepared Acton to meet with around a
dozen representatives of the Europe-
an Competition Commission in a tele-
conference. “I was coached to explain
that it would be really diicult to merge
or blend data between the two systems,”
Acton says. He told the regulators as
much, adding that he and Koum had no
desire to do so.
Later he learned that elsewhere in
Facebook, there were “plans and tech-
nologies to blend data.” Speciically,
Facebook could use the 128-bit string
of numbers assigned to each phone
as a kind of bridge between accounts.
he other method was phone-numbermatching, or pinpointing Facebook ac-
counts with phone numbers and match-
ing them to WhatsApp accounts with
the same phone number.
Within 18 months, a new WhatsApp
terms of service linked the accounts
and made Acton look like a liar. “I think
everyone was gambling because they
thought that the EU might have forgot-
ten because enough time had passed.”
No such luck: Facebook wound up pay-
ing a $122 million ine for giving “in-
correct or misleading information” to
the EU—a cost of doing business, as the
deal got done and such linking contin-
ues today (though not yet in Europe).
“he errors we made in our 2014 ilings
were not intentional,” says a Facebook
spokesman.
“It just makes me angry to even re-
live that,” Acton says.
Linking these overlapping accounts
was a crucial irst step toward monetiz-
ing WhatsApp. he terms-of-service up-
date would lay the groundwork for how
WhatsApp could make money. During
the discussions over these changes,WITHIN 18 MONTHS, A NEW
WHATSAPP TERMS OF SERVICE LINKEDTHE ACCOUNTS AND MADE ACTON
LOOK LIKE A LIAR.