Analysis | Facebook and its family of apps want to be a mega digital bazaar

Facebook is planning to set up its platforms for brands to interact with consumers by making messaging the key for businesses and people   | Photo Credit: Reuters

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Most of us know Facebook and its family of apps as platforms that let people stay connected with friends and family. That idea may soon change as the largest social network is throwing brands and products into the mix, and says it means business. To get a sense on the company’s next phase of growth, look no further than its recent developer conference, F8, that makes a strong pitch for businesses and consumers to coalesce on Instagram, WhatsApp, and Messenger.

The California-headquartered company is planning to set up its platforms for brands to interact with consumers by making messaging the key for businesses and people to engage “using the same familiar apps and features used to communicate with family and friends”.

This is a territory Facebook is walking into with about 2.8 billion monthly active users on its platform as of the end of 2020. And about 1.8 billion Facebook users check its apps on a daily basis. Nearly half of them are based in Asia Pacific region, and India alone accounts to about 320 million active Facebook users. It doesn’t end there; installs of the company’s apps are also growing, with about 985 million installs in just 2020.

With nearly a third of the global population on its platform, Facebook is aspiring to be a mega digital bazaar, enabling brands to advertise, sell and talk to consumers. Its Marketplace platform makes users sell their merchandise to others on the platform. Now, the social networking firm is opening up its Messenger application programming interface (API) to all developers. This move will enable businesses to interact with users on Instagram and Facebook. Brands with accounts on Instagram can link to the API and converse with their customers online.

The company is also looking to leverage its messaging platform, WhatsApp, to make businesses engage with customers. It says that over 175 million people text WhatsApp Business accounts every day to get information on products. With its new API, business users can alert users about a products availability in their stores. Facebook invested in Reliance’s Jio Platforms last year to expand in this line of business.

WhatsApp and privacy backlash

But Facebook’s foray into making its apps business friendly has an uncomfortable zone - - user privacy. Facebook-owned messaging platform WhatsApp faced a major backlash earlier this year after it rolled out a new privacy policy asking users to either accept its new terms or leave the platform altogether. That style of communication didn’t go well with users, and some countries’ regulators, including India's, which asked Facebook to roll back its new terms.

Germany was the first country to ban Facebook from processing WhatsApp user data. The European country’s lead data protection regulator called the messaging platform’s privacy update “illegal” just a few days before its proposed policy opt-in deadline, May 15th. Hamburg’s data protection office Johannes Caspar said his objective was to prevent damages associated with such a “black-box” procedure. In response, WhatsApp said the German regulator’s claims were wrong, and that the country’s order won’t impact its continued roll out of the policy.

Caspar had invoked extraordinary powers under the European Union’s General Data Protection Regulation (GDPR) to order a three-month ban on Facebook’s collection of WhatsApp user data. He also noted that he would seek an EU-wide ruling on the company’s policy. Another European nation, but a non-member of the EU bloc, Turkey launched a probe into Facebook’s January privacy policy update. The country’s competition regulator noted that the social network’s update could potentially violate Article 6 of Protection of Competition Act by “abusing its dominant position”.

In India, the messaging platform buckled under pressure after the government intervened on its privacy policy update. The company said it won’t delete user accounts even if they don’t accept the new terms. It clarified that users won’t lose any specific functionality in the app. But it did note that it would continue to send privacy update notification, urging users to opt-in.

Also Read | Explained: Why is WhatsApp opposed to traceability?

WhatsApp is facing another challenge in India with the country’s latest Information Technology rules, which mandates that the platform find the originator of a message on request by the government. This kind of tracing will hit at the core of the platform’s end-to-end encryption. It has sued the government over implementation of the new rules.

Marketplace and advertising

As it tackles privacy-related issues in different countries, another important area of Facebook’s business ambition is under the European Competition Commissioner Margrethe Vestager’s scanner - - Facebook Marketplace. It drew scrutiny in 2019 when the commission wanted to know whether companies within the bloc saw Marketplace as a close rival in online classified ads service. On Friday, the EU and UK opened a formal antitrust probe into its Marketplace service.

Also Read | Facebook tweaks ad tools ahead of Apple's privacy changes

The online bazaar-type service was launched six years ago with an aim of formalising a kind of barter system prevalent in some Facebook group - - users buying from and selling to each other. The service is being used by over 800 million users in 70 countries to buy and sell items. The platform allows users to sell anything to anybody. It runs on the idea that the person at the other end is real and connected to friends within the network.

The EU commission’s investigation will assess whether Facebook links its Marketplace service with the regular social media platform in violation of EU competition rules. The regulator sees Facebook’s online bazaar as doing the same service as any other online classified ads firm. As these ad firms advertise on Facebook, the regulator seeks to understand whether the social media company uses the advertiser’s data against those companies.

“We will look in detail at whether this data gives Facebook an undue competitive advantage in particular on the online classified ads sector, where people buy and sell goods every day, and where Facebook also competes with companies from which it collects data,” EU antitrust chief Margrethe Vestager said in a statement.

"In today's digital economy, data should not be used in ways that distort competition."

Facebook is betting on its e-commerce ambition against the backdrop of a moving privacy policy deadline and a marketplace model under probe. Nevertheless, it is moving in the direction of infusing commerce into the world of social media.

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Printable version | Jul 28, 2021 5:15:08 PM |

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