What's up, WhatsApp?

Not only is that a princely sum, but it's actually more than what the other company had originally asked for. The original asking bryce from that company that got acquired was sixteen billion. That company was WhatsApp, and for old fogies like me, this announcement came as a total shock. I had even heard of WhatsApp at that time. How could this company be worth such a staggeringly huge amount of money and why would Facebook pay more than what

they were asking for. That's not how negotiation typically goes, at least as far as I understand it. I am admittedly not a business type person. Well, in this episode, we're going to talk about the history of WhatsApp and what the app does for the two or three of you who don't know, and how things have changed in the years since Facebook acquired it, because things changed a lot,

and it's a fascinating story. WhatsApp didn't start out as an end to end communication tool build upon a premise that the users could send private messages that were secure from prying eyes. It started as a much more modest tool that would let a user set a status so that other users would know if that first person was free to chat or whatever. That was the original WhatsApp. It was just to say, hey, is it okay if

I call you right now? Essentially, And I guess that takes a bit off the edge over making a phone call For the folks who hate doing it. I'm pretty much in that boat. And while the story of WhatsApp is not over, there's been major drama over the last couple of years, and we will cover that along the way. Anyway,

I'm getting ahead of myself. The story of WhatsApp should start with the story of its founders, Yon Coomb and Brian Acton, and I'll start off with comb first, as his story really tells us all we need to know about his motivations, both for developing WhatsApp the way he did, as well as why he would ultimately leave Facebook in two thousand and eighteen, and uh, I guess spoiler alert. So Comb was born in the Ukraine in nineteen seventy six. Back then, the Ukraine was part of the Soviet Union.

And you may, oh, my drew gees have forgotten what the U S. SR was like. Back in those days. The authoritarian government was infamous for spying on its own citizens, eager to assess out any possible resistance to total government control. The KGB, which was the U. S s RS State Security Force, was justifiably feared throughout the country. Soviet citizens were cowed into obedience, and speaking ill of the government,

even in private, was a potentially dangerous activity. The government was known to tap phones and to intercept messages, and the story of how people lived under that kind of umbrella is part of the reason why folks like me get a bit upset when we find out organizations like the n s A here in the United States were combing through phone records with no real checks or balances. But let's get back to Comb. Jancomb came from a humble home. His father worked in construction management, his mother

took care of the home. Growing up, he lived in a house with no hot water By the time Comb was in his teens, things were getting really rough over in the Ukraine. There was a growing anti Semitic movement, and John's family was Jewish. So Jan and his mother immigrated to the United States, moving to Mountain View, California. His father remained behind, unable to follow his family in

the United States. Komb's mother earned enough money through babysitting to make ends meet a little bit in Jan himself took a part time job at a grocery store, sweeping up the aisles. His mother grew ill and so the two ended up having to depend upon a disability allowance from the government. They relied on food stamps to help with their grocery purchases. Times were really hard. Comb became interested in computer programming and computer networks. He would read

books and teach himself how to hack and code. He joined hacker communities and he enrolled in San Jose University and he got a job with a professional services firm called Ernston Young part time gig as a security tester. In that role, he would visit various companies to test their networks, probing for vulnerabilities in an effort to shore up defenses against the real bad guys out there. One of his jobs brought him to the offices of Yahoo, and there he met Yahoo employee number forty four, a

k a. Brian Acton. So let's switch over to him for a moment, because he would become the other co founder of WhatsApp. So Brian Acton had a very different background than yon Comb. Acton was born in Michigan in nineteen seventy two. That makes him about four years older

than John Is. But he grew up in Florida. And for those folks not in the United States who aren't familiar with our geography, Michigan and Florida are pretty darn far apart from each other, ones on the north end of the country, the others on the south end of the country. His mother was a businesswoman. She founded her own freight forwarding business. Acting credits much of his work ethic to his mother, whom he said would work tirelessly in an effort to make sure she could make payroll

for her employees during tough times. Acting attended the University of Pennsylvania to study engineering, and after a year of studying there, he transferred over to Stanford and focused on computer science instead. He graduated in nineteen nine and he worked for a few big companies like Adobe and Apple in various roles, but then ended up working at Yahoo in nineteen nine six. That's when he became employee number

forty four and he worked in the infrastructure team. Yahoo, just so you know, had started up as a two person project back in ninete, so it's still a very young company when act and joined, and it was on the rise, just as people began to suspect that there

might be gold in them the our webs. No one was totally sure how the Internet was going to generate cash, like an out of control bit oin minor, but the general consensus was that the Internet was pretty much going to be the future of business, and the web in particular was going to take front and center stage in that regard. Acting and Comb clicked early on. Comb was working there as a security contractor, and of course Acting was employee number forty four. Both of them had a

no nonsense approach to communication and feedback. Both of them would just cut to the chase, not necessarily to be rude, but to be efficient. Comb would end up getting a job offer from Yahoo in early nine seven, and he took the job offer he joined the company not long

after his initial visit. He was still attending San Jose University at the time when he took the job at Yahoo, but after a server emergency at Yahoo pulled him out of class, he ultimately decided he was actually learning more on the job and being more useful at Yahoo, and so he dropped out of school and he worked for Yahoo full time. And now we can kind of fast for word a bit. Because the two men stayed at Yahoo for several years as early employees, they benefited from

earning shares of Yahoo. The company had held its initial public offering in nineteen and those shares were growing in value year over year. The dot com crash of two thousand and two thousand one was a really rough time. Those those stock prices took a beating. Yahoo weathered the storm and came out the other side, but it was brutal. Before the bubble burst, Yahoo stock was up to more than four hundred seventy dollars per share before a stock split.

And a quick side note on what stock splits are. You can think of a company's value as being the number of shares of that company multiplied by the market price for those shares. So if I've got a company that has one thousand shares held by shareholders, or they're on the market or whatever, and the market currently values those shares at ten dollars each, then the overall value of my company is ten thousand dollars ten dollars per share.

One thousand shares, my company is valued at ten thousand dollars. That's a very high level way to describe this, but it's generally how it works. So in a stock split, companies will issue more shares of stock, giving each shareholder additional shares. So in a two for one stock split, each shareholder would have the number of shares doubled. However, the price per share would go down to half. So in my example where I said I have a thousand shares at ten dollars of share, now would be two

thousand shares, but at five dollars per share. So why does the price come down on it's because you can't magically make the company be worth more. Remember, the company's value is based on the number of shares times the market price for those shares, So you can't just drive up your company's value by adding more shares at the same price as what is currently on the market that

would be insanity. However, all that being said, after the stock splits, the Yahoo stock was worth about eighteen dollars per share at its peak, which is still incredible. However, on the low side, a couple of weeks after September eleven, two thousand one, which exacerbated the already uh struggling dot com market, the stock price for a yah who share was down to below ten dollars a share, So that's like finding your dollar bill is suddenly only worth a

dime or ten cents. Still, Yahoo rebounded, and both Acting and Comb were still employees there during this time, so while they saw their fortunes totally crumble, they also saw them slowly build back up again. Now, by this stage, Comb had tragically lost both his parents. His father had passed away in nine having never moved to the United States. His mother passed away in two thousand. He and Brian

Acton were friends as all his colleagues. They would hang out, they would play frisbee together, and they chatted a lot. So Acton's own resolve was being tested while he was working at Yahoo. He was put on a project in which he was helping build out an advertising strategy, and Brian Acton does not like advertising. He finds it distasteful, and he was discouraged that the only real goal of this particular job that he was doing was to convince

people to buy stuff. By two thousand seven, both Comb and Acton felt they had done everything they wanted to do at Yahoo and now they were just doing stuff in order to have a job. So they decided it was time to go, and in the fall of two thousand seven both of them resigned from Yahoo, and they each took time to consider what they should do next. After about a year, both men had applied to and

been rejected by Facebook. Now, if Facebook had hired one or both of them, this story might not have happened at all. What app may have never been a thing. But because neither were hired, it's set the stage for what would come next. Comb had purchased an iPhone in early two thousand nine, and he could see something that took other folks a lot longer to notice. The web experience was inevitably going to move to a mobile platform.

Comb anticipated that people would be relying on devices like smartphones a lot more in the future, shifting the focus of the web experience from desktops and laptops to mobile phones and other mobile devices. And he had an idea for an app that he wanted to create, and I just want to say, like this whole move to the

mobile experience. I remember us looking at that move as well when we were with how stuff works the website, because the experience of accessing website on a phone is different from the way you would access it on a desktop or on a laptop, and it meant that we had to really focus on how to optimize is that experience so people would still want to come and visit the website. It's a real challenge. And Come was already ahead of the game. He was seeing that this is

where things were headed. So his idea was pretty simple. He thought it would be useful if the address book on his smartphone allowed the people on his address book to set a status. So that way, if he's thinking about calling someone, he pulls up the address book, he looks at their name and he sees the status and he sees, oh, that person is busy. You know they're on a conference call or something. I know not to

call that person. So the status could let other users know if the person is available to text or chat, or if they're in a meeting or going to a movie or are otherwise occupied. It could give an alert

if someone's phone battery had was low. So let's say you're looking at your your phone book and you say, oh, I want to call my dad, but my dad's phone batteries about to die, so I should probably hold off so that he can conserve that battery life in case he needs it for something important, and I'll just call him later. Or it might even be used to let people know if someone's interested in hanging out or grabbing

dinner or something. You just set a status saying you know that you're looking to see if anyone else wants to grab a bite to eat. You could do that as well. Comb already had a name in mind for this, and it was WhatsApp, which itself was a play on the phrase what's up. The status would tell users at a glance what was up with their various contacts, saving them time if they see that someone's unavailable to chat

or whatever. There was reportedly one other name in contention, which was zapp, but we got WhatsApp on his birthday February twenty, two thousand nine, Comb Incorporated WhatsApp Incorporated in California. He still had some cash from his Yahoo days when he left the company. He left just shy of half a million dollars. He was working on the back end

side of WhatsApp. He was researching regional phone codes and stuff like that in an effort to build out the systems that would actually in able his idea to work. And he got in touch with an iPhone app developer named Igor Slomnikov and they got to work. They spent a month trying to get things working properly, and it

was slow going. For one thing, Comb needed people to download and install the app, just to test it out and to be able to work on these features, and there weren't a whole lot of folks available to do it within his circle. He got discouraged, and he talked with Brian Acton. He said, maybe I should just give up on this thing and just walk away. But Acton said, no, no, no, you should stick with it, stay with us a bit longer.

I think you're onto something. In the summer of two thousand nine, Apple change things and it made push notifications available to app developers, and a push notification in case you don't know gives an app the ability to send an alert to an end user, even if that user is not actively engaged in that app. Jan included push

notifications in his version of WhatsApp. Now, if user change their status, it could send out a notification to everyone else in that user's address book who also had downloaded and installed WhatsApp. So you need both of those things right. You have to be within the address book of the person, and you also had to have WhatsApp installed on your phone. But if you did, then someone could change their status to something like I'm washing my hair and it would

go out to all their WhatsApp friends. So it was a way of not just notifying people, but communicating with them in a new and interesting way. And then something kind of strange happened, and actually I would argue, it's not that strange, but comb didn't anticipate it. WhatsApp users began to leverage the app as a sort of messaging service. They were communicating through these status updates, which in a way is a lot like how Twitter evolved over time.

And so it's not unusual for people to come up with alternative ways to use a tool once they get their hands on the tool. You know, the person developing it had an idea of how it's going to be used, but that doesn't necessarily follow through once people get access to it. But a good developer will take note of those behaviors and cater to them. A great developer will enhance those abilities even further. And Joan was about to turn into a great developer. I'll explain more in just

a moment, but first let's take a quick break. What Jan had inadvertently done is create a free messaging service. And this requires us to think back a little bit. It's not necessarily as common now, but a decade ago, it was not unusual for phone companies to charge customers for text messaging. Some still do. Phone plans varied, however, Some allowed for a certain number of text messages per month, and if you went over that then you would have to pay a fee, possibly a small fee per additional

text message. Others were pay as you go, and a fee here in the United States could range between ten to thirty cents per text message. A few plans allowed for unlimited texts, but you were probably paying a lot more for that plan. And then there was the policy that to this day I think is a total scam, which is that you would get charged for sending out too many texts. I kind of understand that. I mean, in a way, I think it's kind of you know,

stone age policy, but I understand it from a certain perspective. However, you would also get fees for receiving texts, not reading them, just receiving them. So how is that fair? How is it fair for a carrier to charge you both for sending and receiving a text. In fact, if both people on a text message conversation, we're using the same phone carrier, it was possible for that carrier to collect on both the sending and the receiving side of a text message.

This would be like if you were receiving a letter in the mail you had to pay for the stamp. They were double dipping for the same communication, charging both parties, and that's rotten if you ask me. But it gets even more expensive if you're trying to communicate with someone who happens to be in another country, not here in the United States. The average person might not do that too frequently. You know a lot of people do, but I'd say the vast average of the United States citizens

were communicating within the US. However, in places like the European Union, where citizens in an EU country can travel freely to other EU countries to work or to study, it's not unusual at all to have to communicate with

someone who's in another country. SMS messages, that is, text messages are an effective way to communicate succinctly, but those text fees could get pretty hefty, or at least they were, at the very bottom line, a nuisance, and WhatsApp got around that messages were sent through the app, not as SMS messages, So if you connected to WiFi with your smartphone, you weren't even using out the data on your cell phone plan. So you can now send messages for free

through the status updates. You didn't have to worry about those text fees, and the log in for WhatsApp was just your phone number, you didn't need a user name. It was a great work around all on its own. People loved it. Like you knew the phone numbers you wanted to text, you just did it through WhatsApp and you avoided having to do all that nonsense with the SMS fees. Acting and COMB began to work on fleshing out WhatsApps so that it wasn't an ad hoc messaging system,

but rather a purpose built messaging system. Acting also reached out to several of his former Yahoo colleagues and he raised some investment money to the tune of a quarter of a million dollars two hundred fifty thousand dollars. He officially joined WhatsApp in November two thousand nine. Now WhatsApp shifted toward being a messaging service. Users could reach out to people in their address list who also had the

app and send text messages over WiFi for free. They could send out group messages to contacting a bunch of people at once instead of one at a time, And there was this great double check feature. You would get one check when WhatsApp detected that your message had been received by the other party. You would get another one when that message was read. You didn't have to worry

about a message getting lost in the ether. You know, if you send a text message, the only way you know the person actually got it is if they responded. This way you could actually see if they got it. You could see if they responded, or see if they read it, and if they hadn't read it, you would be like, hey, what is going on here? You know whether or not it made it to the correct destination to expand beyond the iOS crowd. The co founders reached

out to a developer named Chris Piper. He was getting to work on another version of the app, but it wasn't for Android because Android hadn't really gained a lot of traction yet. It would become an enormous part of WhatsApp straight g further down the line, but at this time, hardly anyone was running around with an Android phone. I mean I was, but I'm a dork. Not many other people were doing it. Pipher was able to create a BlackBerry version of WhatsApp because yeah, back then, BlackBerry was

still a powerhouse in smartphones. You have to remember that before the iPhone came along in two thousand seven, BlackBerry was practically the only smartphone game in town. That's an exaggeration, but it's not much of one. BlackBerry was pretty much it when it came to smartphones pre iPhone. They set up a temporary office space and they continued to work on the app. Meanwhile, more people were beginning to discover WhatsApp, and at first it wasn't a money maker at all.

In fact, it was mostly a drain on Comb's personal resources. As part of the verification process when signing up new users, WhatsApp would send an old school SMS text message to that user's phone with the verification, but the come and he had to pay for this service, And depending upon where that end user was, it could get expensive, because a message to a place like the Middle East might

cost sixty five cents per message. And yeah, a little more than half a dollar isn't much all on its own, but when you consider that thousands and later millions and then tens of millions, and then hundreds of millions of people were signing up, those costs begin to add up. Sometimes the app would be available for free. Sometimes it was a paid app. So what was going on? Why did people have to pay for it sometimes? And sometimes it was just available for free. This wasn't necessarily a

revenue strategy. It kind of was, but it was also a way of metering adoption. And what I mean by that is that the founders were using the paid option to help slow down growth. When things were getting out of hand. They would see a ton of people adopting WhatsApp, and in order to slow things DOWND. They'd say, all right,

let's switch it to a paid app. And it was not necessarily to make money, although that was definitely welcome, but it was more to say, let's slow things down because fewer people are going to download it if we charge for it. So they charged like a dollar for the app, and if the adoption began to a spike, they would flip that switch. They'd make it a paid app, and when things would calm down, they would switch it

back down to free. By the end of two thousand nine, they included the ability for iPhone users to send photos over WhatsApp. And they also saw that when they were charging that dollar for the app, people were still downloading the app. They were still paying that dollar, and they realized that maybe they could make this continue as a

paid app. The general strategy was that WhatsApp would be free to users for the first year, but after that year, users would be required to pay a one dollar subscription fee for the next year, and every year after that they would renew with another one dollar. Now, when you compare that to the amount of money they might be spending on text messaging fees, that was nothing. So the money was coming in one other really big decision that Acting and Coma agreed upon is that the app would

never ever include advertising. They both felt that ads were a bad idea, that it would ruin the experience and that just felt wrong. Brian even left a note for Jon with the phrase no ads, no games, no gimmicks, and Jan would thumbtack that to his desk. Acting felt passionately that the experience shouldn't be diluted by these things or monetized in those ways, and Jan agreed. The downside of that approach is that it was harder to make money.

Comen Acting weren't really about to make the rounds with the press. They didn't want to do that either. They didn't try to do PR blasts or anything like that. The service was picking up steam from users all by itself. Venture capitalists actually sought out the co founders, and the two of them resist did the overtures of these investors for a while. They were worried that people coming in with investment money would make demands that they compromise on

their service. They were also worried that investors would make them have to incorporate ads or somehow change things beyond what their vision was for WhatsApp. They did eventually make an agreement with the investment firm Sequoia for around a funding that amounted to eight million dollars after they were assured that the firm would only act in a strategic advisor capacity. Internally, the company continued to grow slowly over

the first couple of years. By two thousand and fourteen, when Facebook would swoop in, the company boasted fifty five employees. About half of them were engineers working on WhatsApp services, and the rest were essentially customer service representatives who are providing support in dozens of languages. The user numbers were growing really fast, but the company itself was still very small. They would have been actually moved to a nondescript office building.

There was no sign indicating the company was even there, and it was the sort of place you had to know about before you visited, or else you might just spend all day just looking for it. The whole endeavor was keeping a fairly low profile. In two thousand thirteen, one year before Facebook's acquisition, Acting and Coomb decided to hold another round of funding. By that time, the service

was really going strong from a user standpoint. They boasted two hundred million active users by the beginning of and an active user is someone who uses a service at least once a month. As Joan would say, active users are what's important, not registered users, because anyone can register to a service and become a user, but then never touch the app or service again, so a registered account

doesn't really mean much. Active users are how you should measure success because it shows that those people depend upon and hopefully whatever it is you are offering. The co founders had decided on this secret round of funding because they wanted to make certain there was money in the company in order to make payroll. Acting was remembering the lessons he picked up from his mother's freight forwarding business. So with this round they raised another fifty million dollars.

At the time, the company had eight point to five seven million dollars in its accounts, which means that they actually still had more money than the original eight point to five million dollars that had been invested in it. But it wasn't like WhatsApp was raking an enormous revenue. It was stable, you know, it was generating income and profit at least some quarters. It was profitable, but it wasn't what you'd call a runaway success from a profit perspective,

the company had made some other decisions. On top of turning down ad deals and keeping games and gimmicks off the app, they also decided that these servers running the service would not hold onto user messages, so when people communicated over WhatsApp all data, the message data would be stored locally to the users phones, but not on the

WhatsApp servers. John and Brian both felt strongly about this that the users deserved privacy and they should be you know, confident that no one's eavesdropping or snooping along WhatsApp servers to learn about their private data. And they didn't want any of that to reflect poorly on their service, So as just a matter of policy, they didn't hold onto messages. All of this leads up to the Facebook acquisition in

two thousand fourteen. So why would Facebook, a company that inteen was closing in on a billion daily active users. These days it's like two point four five billion monthly active users. Why would this company go after a messaging service that was not an enormous revenue generator. It was a service that wasn't keeping tabs on users at least not to the extent that Facebook does with its users.

What was the motivation behind this deal and why did Facebook agree to hand over even more money than the asking price of sixteen billion dollars for a company that had recently had a valuation of one point five billion dollars that was a fraction of the asking price. Well, there's actually several answers to that question. First, Facebook has its own messaging app or layer known as Facebook Messenger,

and that tool is incredibly valuable for Facebook. Keep in mind, Facebook makes its money primarily through advertising, the very thing that acted in comb are staunchly trying to avoid at this time, and Facebook can offer advertisers are really enticing deal, and that deal would be you, or rather the data

that indicates who you are and what you like. By analyzing the stuff you post the status is, you interact with the groups, you join, the messages you engage with, Facebook and advertisers can earn an awful lot about you and your preferences, which means Facebook can target you with the ads that are most likely to appeal to you. That in turn means you're more likely to act on those ads. We have to remember that with platforms like Facebook, we users are the product. We're what is being bought

and sold. The website is just the method for keeping us there and convincing us to share more information about ourselves. It has to be a compelling experience so that we give up our time and thus our data, and in turn that data can be sold effectively. But What's App represented a distraction from Facebook's Messenger. It was a problem. If people were using WhatsApp rather than a Facebook property,

then all that sweet data just goes to waste. Worse, What's that wasn't even keeping that data, They were just discarding all that valuable information the very nerve. Now being facetious here, but that was one reason Facebook was interested. When we come back, I'll mention a couple of others. But first let's take another quick break. Okay, So one reason Facebook went after WhatsApp was that WhatsApp represented competition

with Facebook's own Messenger app. Another is that Mark Zuckerberg heard that some other companies like Google had expressed interest in WhatsApp. Now, John and Brian weren't really looking for a deal at this time, but Zuckerberg didn't know that, and the thought of a competitor potentially grabbing up what was rapidly becoming a behemoth messaging app, though again not necessarily a profitable one, didn't set well with the markster. See.

At this point, WhatsApp had more than four hundred million active users on a typical day, and on that typical day, nearly twenty billion messages would go across its servers, So it was clear that the service had value, even if it wasn't really capitalizing on that value the way a traditional service company would. And again, the time people spent

on WhatsApp meant they weren't spending time on Facebook. But if Facebook bought WhatsApp, well, now those users are spending even more time on Facebook owned products and services, even if they're not fully monetized. And then there was the fear that Facebook would take what was intended to be a simple service, free of advertising and one that wouldn't hold onto user data like messages, and then turn it

into a money generating ad platform. This is part of why Facebook tacked on that additional three billion dollars to the sixteen billion dollar asking price that John and Brian had demanded. This was all in an effort to convince the staff of WhatsApp to stay on to come over to Facebook and continue to work on the WhatsApp service, So it pushed up the price up to nineteen billion dollars.

And this deal was based largely on Facebook stock shares, and those stocks actually increased in value before the deal was finally closed, so really, when you look at it was closer to twenty two billion dollars when it was

all said and done. In an amazing symbolic move, the co founders would sign the agreement for this acquisition outside the building where Comb's mother would stand in line to get her allotment of food stamps, which is a heck of a rags to rich's journey food stamps to billionaire.

In addition, Zuckerberg promised Yawn and Brian that Facebook wouldn't make any move to incorporate advertising in WhatsApp for like five years, and that they would run everything by the founders first, and that the company would be able to operate pretty independently from the rest of Facebook. WhatsApp should be able to do its own thing. Now, if this sounds familiar to you, it might be because as they said the same thing to Instagram when Facebook acquired Instagram.

That was the same messaging and like Instagram, the founders of WhatsApp would become increasingly disenchanted with Facebook's moves over time. Around the same time that they were getting acquired, the WhatsApp founders were also looking to incorporate end to end encryption in WhatsApp messaging. This provides a level of security in communications, though it's by no means perfect. So let

me explain what I mean by that. So, with end to end encryption, you have someone typing in a message into WhatsApp, and that message gets scrambled or encrypted in a predetermined way. It's encoded. The person on the other end can only descramble that message if they hold the appropriate key the decoder, and in this case only the

recipient would possess that particular decoder. The process itself establishes the keys, and it's a bit complicated, but you should just know that the process allows both the parties to hold an encoder and decoder that's unique to their communication. No one else has that that decoder, So it means that if anyone were to intercept a message in transit, that person would only be able to see the encrypted

scrambled version. It would be meaningless. They might know the origin of the message, and they might know the destination for that message, but they wouldn't know what was actually in the message itself, which is good. This is an important component in secure communications. However, it is not a

bulletproof vest against eavesdroppers and spies and hackers. That's because someone could target the end devices in other words, the phones or you know, the phone of the person making the message or the phone of the person receiving the message. If the hacker does that, if they can exploit a vulnerability in that device, then they can potentially read messages once they get unencrypted. On the other side, so the message in transit would be difficult to suss out, but

the hackers have bypassed that. They're going straight to an end point. They're getting the information through the phone, not pulling the communication out of the air. Here's what makes matters worse. In the old days, you could follow good browsing protocol and avoid most of these traps. You know, things like don't go to websites you don't know, don't

open links from strange sources, that kind of thing. But in the world of apps with push notifications, it's possible to either sneak an app into an app store that pushes out malware automatically. If you've enabled push notifications for that app, then your phone would just take care of

all that on its own. Or maybe you can even find a vulnerability in an existing app and hide some malware that way, and then you have a big install base that could receive a push notification that could potentially make their phones more vulnerable. This isn't great. Now. My thing is that end to end encryption is not the ultimate insecurity, but it frequently gets presented that way. So if the messages, hey, we can't read your messages because

they're encrypted, that's not necessarily true. On top of that, you have governments around the world, including the United States, pushing companies that run encryption communication services to include a backdoor method of access for official government agents and investigators. Government agencies argue that this is necessary so that intelligence

officers can detect potential threats. But there's a general rule of thumb that we should all keep in mind, and that is security vulnerabilities are a bad thing, intentional or otherwise, because a backdoor is a security vulnerability just by its very nature. It allows someone to bypass the security measures

that are in place to protect users. That's the same thing that hackers look for when they're probing systems for vulnerabilities, except in this case the vulnerability is purposefully created and implemented by the service provider, And you can bet that if such back doors are created, armies of hackers will

be seeking out ways to exploit those back doors. So even if you have a deep trust of intelligence agencies doing the right thing, and if you do have a trust and intelligence agencies doing the right thing, you might want to rethink that you should keep in mind it's not just the quote unquote good guys who will want to use these back doors. So anyway, I'll get off the high horse. Moreover, around the same time that WhatsApp was incorporating into end encryption as be around two thousand sixteen,

Facebook was making another big change. WhatsApp would be sharing some user data with Facebook, which in turn would be using that data in an effort to serve up targeted ads to Facebook users. This was a big shift, one that was controversial among WhatsApp users and the tech world in general really as well as within WhatsApp. That being said, according to the press release, the data being shared would

be limited. It would include the phone number, which for WhatsApp is equivalent to a user name, and the last time the app had been used. The information was spelled out in the updated terms and conditions for WhatsApp. But then the average person and I include myself in this, rarely gives the old T and C anything more than a cursory glance. And I'm sure that is even being generous. I suspect many of you, and again I am not

leaving myself out here. Skip right on down to that little check box that turns us all into big old liars. You know the check box. I mean, it's the one that says, yeah, sure, I read all that stuff. Well. In the mass of text in these terms and services, there was a message about how to opt out of this data sharing feature, this idea of sharing your information for the purposes of ads, But again it was kind of buried in the bottom of that terms and conditions.

It really sounded like Mark Zuckerberg was pulling out the old Darth Vader routine. You know, the I have altered the deal, pray I do not alter it further. And just like Lando, John and Brian were probably feeling that this deal is getting worse all the time, and they weren't the only ones. The European Union would end up finding Facebook more than a hundred million dollars for collecting that information. They ordered the company to knock it off in the EU. The EU is generally far more protective

of personal information than places like the United States. But this really shouldn't come as a surprise to anyone. Facebook has long pursued a goal of aligning its various properties to maximize the payoff. It's also what drove the creators of Instagram away. They would leave Facebook largely because they had been told that Instagram would remain its own thing and that they wouldn't be asked to either incorporate Facebook features into Instagram, nor would Facebook a tip to integrate

Instagram features in Facebook only. That's pretty much what Facebook did do well. The watsapp creators were facing a similar situation. In September two thousand seventeen, Brian Acton had had enough. He chose to leave Facebook, and this was an expensive decision. He was six months away from having his shares vest with the company. Those shares were worth around eight hundred

fifty million dollars. But the agreement also hinged upon Facebook holding up their end of the deal, which included an agreement not to implement quote monetization initiatives end quote without the founders agreement. But then a lawyer for Facebook argued that the company was just, you know, exploring the possibility of monetization. They weren't actually implementing anything yet, so acting couldn't just grab his shares because they hadn't done anything.

They were just talking about it. It's just talk, and rather than fight, Acton walked away. He left behind almost a billion dollars. Jean Koum stuck with Facebook for six more months, and he left after his shares vested, but he did leave in two thousand and eighteen. He also resigned his seat from the board of directors for Facebook, and between Acton's departure and Combs, the Cambridge Analytica scandal

also had become world news. Act and gained even more attention because he called for people to delete their Facebook accounts hashtag delete Facebook. Comb kept quiet, and when he left, he said he would be pursuing his other interests, which

include collecting very expensive, very fast cars. Since then, other WhatsApp executives who were either with the company pre Facebook acquisition or post have left, and Comb's replacement, a man named Chris Daniels, would leave even two thousand nineteen, along with his boss, a Facebook executive named Chris Cox, who at one time was thought of as a possible replacement

CEO if Zuckerberg were to ever step down. This was after Zuckerberg had announced plans to realign Facebook toward a focus on private messaging, and it did little to make people feel better about what was going on over there. Will Cathcart would take over as the head of WhatsApp, and he remains that to this day. More than a billion people use WhatsApp today as a messenger service. Facebook's intent to monetize the service hasn't led to a massive drop in users, but for many people it was a

bridge too far. It certainly was a bridge too far for co founder Brian Acton, who has since invested in an encrypted messaging service called Signal that uses the same encryption technology that WhatsApp uses. So you could argue he's effectively backing a semi competitor to the company he co founded back in two thousand nine, and that the story of WhatsApp so far from what I've read, Acting has held himself accountable for his decisions, perhaps to the point

of self flagellation, saying I sold out. I'm sure Yawn is also frustrated with how things turned out, though I guess you can feel somewhat comforted if you happen to be sailing around the world on a yacht. Still, I can't say that I would have made a different decision had I been in their shoes. No one's ever offered me billions of dollars, But hey, if you want to see how I would handle that situation, I'm totally game. I'm welcome for you to give it a try. Go ahead,

throw a couple of billion dollars at me. See if you can get me to compromise in my values. Please. And that wraps up this episode of tech stuff. I hope you guys enjoyed this story of WhatsApp and where it came from and why Facebook paid so much money for it. It's something that people are still wondering if it will pay off in the long run. I would argue it has simply because any distraction from Facebook is a detriment to Facebook. So as the company eliminates those distractions,

it makes itself stronger. If you guys have suggestions for future episodes of tech Stuff, send me a message. You can do so on Twitter or Facebook. The handle for both of those is text stuff H s W and I'll talk to you again really soon. Text Stuff is an I Heart Radio production. For more podcasts from I Heart Radio, visit the i Heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows.