By Sourajit Aiyer
Several users deleted their Facebook accounts in the wake of the Cambridge Analytica data privacy controversy, wherein it was revealed that the social media giant compromised the private data of over 50 million users. Unlike deletion, deactivation alone may not be a solution since it still leaves personal data on Facebooks servers. The original idea behind social media was to connect people with least inconvenience. So the various apps/platforms built features like uploading phone contacts to find new recommendations, etc. While users were given the option to opt for them (in most cases though not all, like say the WhatsApp Facebook data sharing initially), many opted to do so. After all, how many of us really sit and read the fine-print (assuming the fine-print was there in the first place)? On top of the concern of Facebook selling their data, many are realising now the extent of data held (logs of incoming and outgoing calls and texts on Android phones, etc.). When a user opts for deletion, they are prompted if they wish to download their info. While this dump helps keep a record of their data, it also reveals the extent of data the platform maintained. But that was Facebook; what about other platforms?
Sharing user-data by different apps in different countries
Just focusing on Facebook ignores the data that could be shared by its group-concerns WhatsApp and Instagram, forget others like Google (owners of Gmail, Youtube), Twitter, Snapchat and the rest. Within the Facebook group, WhatsApp itself has become as big as Facebook in key markets. For example, it has a user-base of 200 million in India, which is Facebooks largest user-base at 250 million. Facebook is not the only platform where your personal data is susceptible to be used (or misused); that risk exists in varying degrees on every platform. This challenge is more imminent in developing countries where data privacy laws have still not matured, hence offer scope for legal loopholes.
As far as user-data on WhatsApp is concerned, there is mixed news. Over the last year, WhatsApp agreed not to share user-data with Facebook in the USA by signing an undertaking with the Information Commissioners Office. The same occurred in the UK, which decided WhatsApp was sharing user-data without users consent. In India, the Supreme Court asked Facebook and WhatsApp to file an affidavit to give the assurance that they would not share user-data to a third party till its government framed a law for data protection. In France, its Chair of the National Data Protection Commission sent a formal notice to WhatsApp asking it to stop sharing user-data with Facebook. In Germany, the data-sharing deal between WhatsApp and Facebook was banned. Italy fined WhatsApp for sharing user-data with Facebook. China has anyway blocked WhatsApp and Facebook, along with Google.
Where do WhatsApp’s profits come from?
But at the same time, the issue of Facebook-Cambridge takes the WhatsApp data sharing debate on another track. As per WhatsApps Terms of Service and Privacy Policy in 2016, it said it transferred user-data to Facebook for three purposes: advertising, security and service improvement. This was because Facebook was the advertising outlet for it, hence brought the chunk of the revenues for WhatsApp. But with that data-sharing now struck down and Facebooks ties with external agencies anyway under the scanner, how does WhatsApp earn revenue and stay profitable?
Most of the $19 billion valuation that the messaging app received during its sale stemmed from the fact it had one of the largest user-bases globally. That was its single-point USP; in fact, the user base is the main USP for most digital startups in the consumer space. Has the time come for WhatsApp to monetise its massive user-base directly for advertising? Yes, it earned from app-purchases in certain countries and certain devices for some time, but that was always a smaller portion of its commercials. Following the data sharing bans it faced in recent months, WhatsApp is on track to launch an app for business-customer communications to generate revenues through a business account model. As of now, it is only testing its new features!
Advertising and the revenue it generates
Let us come to advertising, a faster revenue source for social platforms. WeChat, the equivalent of WhatsApp in China already uses advertising as a revenue source. Although the end-to-end encryption in WhatsApp makes data mining tough (ironically WhatsApp was banned in China possibly because its end-to-end encryption made it difficult for Chinese intelligence agencies to spy), the necessity to stay afloat may necessitate it to explore advertising in countries where regulations offer loopholes to do so with external agencies. Developing countries like India, Brazil, Philippines, Indonesia, Egypt and Mexico, where Facebook has seen its fastest growth in recent years, are possibly the most susceptible. This makes it imperative for those governments to fix on adequate data sharing and privacy regulations between WhatsApp and external agencies at the soonest before WhatsApp users start seeing targeted advertising on their accounts and a possible repeat of the Facebook-Cambridge episode.
With regulations varying across geographies, what is unacceptable in one country can pass the loopholes in another. It is more pertinent in developing nations where regulations have historically been reactive, not proactive!
So while other platforms (including WhatsApp) may talk long now about their data protection, the truth is that the survival to earn revenue and remain profitable to justify the high valuations makes every platforms records susceptible to be used (or misused) at some point. It depends on how much the law allows it to get away with. After all, Facebook itself maintained the same line on data protection till this scandal broke. In India alone, only 1 out of 40 consumer startups showed profits in 2016 missing profitability and over-expensive valuations is a toxic mix!
With data-sharing drying up for WhatsApp and its new business tool yet to pick steam, one has to wait and watch if it eventually resorts to advertising. At that time, based on its data policies, users who did #DeleteFacebook now may have to decide on #DeleteWhatsApp!
Published originally at South Asia Fast Track.