Page 66 - Forbes Magazine-October 31, 2018

FORBES BRIAN ACTON

mean it won’t make as much money as . . . ,’ and she kind of The biggest internet deal in a decade was rushed through
hemmed and hawed a little. And we moved on. I think I made over Valentine’s weekend in the offices of WhatsApp’s law-
my point. . . . They are businesspeople, they are good business- yers. There was little time to examine details, like the clause
people. They just represent a set of business practices, prin- about monetization. “It was just me and Jan saying we don’t
ciples and ethics, and policies that I don’t necessarily agree want to put ads in the product,” Acton says. He recalls Zuck-
with.” erberg being “supportive” of WhatsApp’s plans to roll out
When Acton reached Zuckerberg’s office, a Facebook law- end-to-end encryption, even though it would block attempts
yer was present. Acton made clear that the disagreement— to harvest user data. If anything, he was “quick to respond”
Facebook wanted to make money through ads, and he want- during the discussions. Zuckerberg “was not immediately
ed to make it from high-volume users—meant he could get evaluating ramifications in the long term.”
his full allocation of stock. Facebook’s legal team disagreed, Questioning Zuckerberg’s true intentions wasn’t easy
focusing on the word “implementing.” Zuckerberg, for his when he was offering what became $22 billion. “He came
part, had a simple message: “He was like, This is probably the with a large sum of money and made us an offer we couldn’t
last time you’ll ever talk to me.” refuse,” Acton says. The Facebook founder also promised
Rather than lawyer up or try to meet in the middle, Acton Koum a board seat, showered the founders with admiration
decided not to fight. “At the end of the day, I sold my compa- and, according to a source who took part in discussions, told
ny,” he says. “I am a sellout. I acknowledge that.” them that they would have “zero pressure” on monetization
for the next five years.
ACTON’S MORAL CODE—OR PERHAPS NAIVETE, given what Facebook, it turned out, wanted to move much faster.
he should have expected at a $22 billion sale price—trac-
es back to the matriarchs of his family. His grandmoth- THE WARNING SIGNS emerged before the deal even closed
er had started a golf club in Michigan; his mother founded that November. The deal needed to get past Europe’s famous-
a freight-forwarding business in 1985, teaching him to take
the responsibilities of a business owner extremely seriously.
“She would lose sleep at night [over] making payroll,” Acton WITHIN 18 MONTHS, A
told Forbes right before the Facebook sale.
Acton graduated from Stanford with a bachelor’s in com- NEW WHATSAPP TERMS
puter science and eventually became one of the first employees OF SERVICE LINKED THE
at Yahoo in 1996, making millions in the process. His biggest
asset from that time at Yahoo: befriending Koum, a Ukraini- ACCOUNTS AND MADE
an immigrant he clicked with over their similar no-nonsense ACTON LOOK LIKE A LIAR.
style. “We’re both nerdy, geeky guys,” Acton recalled in that
earlier interview. “We went skiing together, played Ultimate ly strict antitrust officials, and Facebook prepared Acton
Frisbee together, played soccer.” Acton left Yahoo in 2007 to to meet with around a dozen representatives of the Euro-
travel before returning to Silicon Valley and, ironically, inter- pean Competition Commission in a teleconference. “I was
viewing at Facebook. It didn’t work out, so he joined Koum at coached to explain that it would be really difficult to merge
his fledgling startup, Whats App, persuading a handful of for- or blend data between the two systems,” Acton says. He told
mer Yahoo colleagues to fund a seed round while he took on the regulators as much, adding that he and Koum had no de-
cofounder status and wound up with a roughly 20% stake. sire to do so.
They ran the business in the style that suited them, on a Later he learned that elsewhere in Facebook, there were
cash basis, with obsessive attention to the integrity of their “plans and technologies to blend data.” Specifically, Face-
infrastructure. “A single message is like your first-born book could use the 128-bit string of numbers assigned to
child,” Acton would say. “We can never drop a message.” each phone as a kind of bridge between accounts. The other
Mark Zuckerberg first reached out to Koum over email method was phone-number matching, or pinpointing Face-
in April 2012, leading to lunch at Esther’s German Bakery in book accounts with phone numbers and matching them to
Los Altos. Koum showed the email to Acton, who encour- WhatsApp accounts with the same phone number.
aged him to go. “We weren’t shopping our company,” Acton Within 18 months, a new WhatsApp terms of service
remembers today. “We had no exit planned.” linked the accounts and made Acton look like a liar. “I
But two things sparked Zuckerberg’s mega-offer in early think everyone was gambling because they thought that the
2014. One was hearing that WhatsApp’s founders had been EU might have forgotten because enough time had passed.”
invited to Google’s Mountain View headquarters for talks, No such luck: Facebook wound up paying a $122 million
and he did not want to lose them to a competitor. Another fine for giving “incorrect or misleading information” to
was a document analyzing WhatsApp’s valuation, written by the EU—a cost of doing business, as the deal got done and
Morgan Stanley’s Michael Grimes, that someone had shown such linking continues today (though not yet in Europe).
to the deal teams at Facebook and at Google. “The errors we made in our 2014 filings were not intention-

56 | FORBES OCTOBER 31, 2018