Why Facebook wants WhatsApp’s phone numbers

Posted on August 29, 2016 by Eric Benjamin Seufert

WhatsApp_Logo_1

Last week, WhatsApp announced changes to its privacy policy on its blog, revealing that the service would share its users’ phone numbers with Facebook. Each WhatsApp account is anchored to a phone number as that user’s effective unique identifier, and WhatsApp boasts over 1BN users.

The blog post also highlighted WhatsApp’s intention to allow users to interact better with the businesses that “matter” to them, providing two examples of such communication: an airline contacting a customer via WhatsApp about a delayed flight and a bank contacting a customer via WhatsApp about a potentially fraudulent transaction.

The change to the privacy policy encapsulates both of these changes (as well as articulating the fact that all WhatsApp communication is encrypted), but the blog post announcing the privacy policy change, being vague and somewhat inscrutable, didn’t do a good job of explaining that the two initiatives — deepened data integration with Facebook and allowing for businesses to contact WhatsApp users directly — are two separate things.

By giving businesses a direct line to communicate with WhatsApp users, the company will be utilizing a fairly well-worn advertising mechanic for mobile messaging services, and it will also be doing exactly what Facebook announced it will allow for in this year’s F8 conference — not just in Messenger, but in WhatsApp as well. That WhatsApp would become a business-to-consumer communication platform is not news; WhatsApp is simply only just updating its privacy policy to allow for it now.

The bigger story is that WhatsApp will share its phone number data bank with Facebook, but not because it likely portends the introduction of ads on WhatsApp. In February 2014, just following the WhatsApp acquisition, I reasoned that a large component of WhatsApp’s value to Facebook was its ownership of phone number data on users; not because those numbers could be used to deliver unsolicited advertisements to users (via SMS or whatever other medium), but because they serve as a link between that person’s identity and their current device. At the time, I wrote:

But what’s striking about the WhatsApp acquisition is its timing relative to Facebook’s recent announcement of a proprietary ad network. In acquiring WhatsApp, Facebook may not get additional ad inventory to sell, but it gets something that’s perhaps even more valuable: phone numbers.

WhatsApp has been open about the fact that it mines users’ contacts lists for phone numbers and stores that information. This is incredibly valuable within the context of mobile device targeting: in acquiring WhatsApp, Facebook now has device data for each user and that users’ contact list that it can tie directly to their phone numbers. Most device targeting is achieved through a combination of device fingerprinting and platform-specific advertising identifiers; a phone number serves as a “real world” anchor that marketers can use to precisely link usage data to individuals, not just behavioral profiles.

This means that Facebook’s new mobile ad platform – in which it will broker ads across third party apps but facilitate targeting via its own data infrastructure — will be able to match devices to individuals even after they upgrade their phones. In other words, it will allow for Facebook to maintain a complete “history” of users for as long as they retain their phone number – which, given the increasing ease of phone number portability, could in some cases be a lifetime.

Users upgrade their phones, on average, every few years (for iPhone owners, it’s three years). When you’re logged into Facebook, the company has a large bank of data to utilize in targeting ads at you. But for users that aren’t logged into Facebook (but might be exposed to Facebook-brokered ads via Facebook’s Audience Network, FAN, which uses Facebook’s targeting machinery to deliver ads to non-Facebook apps and sites on the mobile web), or for users that only have WhatsApp installed and not Facebook, or for users of Messenger that don’t have Facebook accounts (Facebook recently allowed for registration with only a phone number), a unique user identifier linked to a device (the phone number) is very beneficial for targeting ads.

This change represents the very valuable addition of more than 1BN data points to Facebook’s already massive ad engine, which spans not only its Facebook properties but also Instagram and FAN. Facebook can use those data points to more accurately target ads everywhere (via FAN), even if ads never show up on WhatsApp.