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Home / Business / Put detailed Facebook aggressive tactics in "Project Voldemort" file

Put detailed Facebook aggressive tactics in "Project Voldemort" file



Facebook
Inc.


FB -0.11%

For most of the last decade, the Silicon Valley 800-pound gorilla, crushing rivals, tore off their best ideas or bought them directly when it cemented its dominance of social media.

Now the knives come out.

A number of Facebook's current and former competitors talk about the company's hardball tactics to Federal Trade Commission investigators, as part of the broader antitrust investigation into the social media giant's business practices, according to people familiar with the matter.

One of them is

Snap
Inc.,


SNAP 0.95%

where the legal team for years filed a case document over the ways Facebook tried to prevent competition from the lively startup, according to people familiar with the matter. The title of the documents: Project Voldemort.

The files in Voldemort, a reference to the fictional antagonist in the popular Harry Potter children's books, chronicled Facebook's move that threatened to undermine Snap's business, including discouraging popular account holders, or influencers, from referring to Snap on Instagram accounts their, according to people familiar with the project. Leaders also suspected that Instagram prevented Snap content from training on their app, the people said.

In recent months, the FTC has been contacting dozens of technology executives and app developers, say people familiar with the outreach. The agency's investigators also talk to executives from startups who were shut down after losing access to Facebook's platform as well as the entrepreneurs who sold their companies to Facebook, according to people familiar with the calls.

Facebook's Mark Zuckerberg in Washington September 19. .


Photo:

Samuel Corum / Getty Images

Discussions have focused on growth at all costs tactics that propelled Facebook from a student social network 15 years ago to a collection of services now used by more than one in four people in the world every day.

The conversations show that the FTC "is putting together a picture of what could be a behavioral pattern to prevent competition at the core of the Facebook business," said Gene Kimmelman, senior adviser at Public Knowledge, a consumer group focusing on technical issues that was a Justice Department antitrust official in the Obama administration. Discussions with rivals are typical in antitrust investigations, he said.

Inside Facebook, senior executives are concerned about the possibility that rivals will disclose harmful information to federal officials and have discussed ways to improve the company's relationship around Silicon Valley, according to a person familiar with the discussions.

The FTC investigation is one of several antitrust probes for Facebook and major tech giants in the United States and around the world. Earlier this month, the House Judiciary Committee asked Facebook-leading communications about the company's decisions to buy Instagram's photo and video sharing network in 2012 and the messaging app WhatsApp in 2014. Lawyers have contacted several of those companies' competitors as part of that probe, the magazine reported earlier.

The House panel cannot initiate enforcement actions against the companies. However, the FTC can.

The Department of Justice is investigating the largest US technology companies for allegedly monopolistic behavior. About 20 years ago, a similar case threatened to destabilize Microsoft. WSJ explains.

A focus area for the FTC is Onavo, an Israeli mobile analytics startup that Facebook purchased in 2013. Onavo offered a free mobile app that described itself as a way to "keep you and your data safe" by creating a virtual private network. To do this, the company redirected Internet traffic on Onavo to Facebook's servers, which allowed it to log every action into a central database.

This allowed Facebook to quietly track what users were doing on their phones, including what apps they were using and for how long the Journal reported in 2017. Onavo data was often cited in internal research and strategy decks, according to former employees and internal documents , and helped inform Facebook's acquisition of WhatsApp for $ 22 billion in 2014. Facebook closed the Onavo app earlier this year amid growing scrutiny of its data collection practices.

Snap was founded in 2011, when Facebook was already the dominant player in social media. It quickly became a social media hit after its Snapchat messaging app took off among young people. At one point, Facebook – through Onavo – could see Snap data as specific as the number of messages a user sent or how much time users spent on certain Snapchat features, former employees say. Facebook could not see the content of the messages or pictures. The visibility of using Snap diminished after Snap encrypted app traffic.

A Facebook spokeswoman said the app was similar to other industry market research tools.

Another focus of the investigation is on Facebook Chairman and CEO

Mark Zuckerberg

acquired or tried to buy startups that he feared would later become competitors, according to people familiar with the investigation. In some cases, the social media giant copied features from the previous goals, after Facebook's overtures had been angered.

For example, when Zuckerberg met the founders of startups, including Evan Spiegel, CEO of Snap, and

Dennis Crowley,

co-founder of Foursquare Inc., he presented them with two scenarios: either accept the price he offers for their companies, or face Facebook's efforts to copy their products and make operations more difficult, according to people familiar with the matter. In both cases, after the companies rejected the overture, Facebook immediately released features that mimicked Snap and Foursquare products.

Foursquare in 2014 began to shift from a consumer-focused app to providing location-based tech and data to businesses.

Facebook rolled out a string of products similar to Snap's most popular features, including stories, filters, and stickers. Snap's growth slowed at times, partly due to competition from Instagram, and it now has around 200 million daily users, less than 15% of Facebook's total. After a rocky update in 2018, partly due to a botched redesign, Snap adds yet again to users and the stock has returned. Snap has also managed to attract more young users between the ages of 13 and 34 in the US than Facebook and Instagram.

The Facebook spokeswoman said that consumers are given more choices when two companies offer similar services and features.

"This is competition at work and one of the hallmarks of the technology sector," she said. Businesses are constantly building and iterating on concepts and ideas in the market – making them better or taking them in different directions. This is good for consumers. ”

Externally, Snap has often addressed the tension with humor. After Snap launched filters related to specific regions, in 2014, it created one that only appeared to Snap users at Facebook's headquarters. The filter showed a picture of Snap's ghost logo laughing and pointing at the user, presumably an employee of Facebook.

A major frustration point for Snap executives was the belief that Facebook prevented Snap's most popular content from training on Instagram, which they considered an abuse of monopoly power. When users uploaded Instagram videos and snapshots of Snap's most popular lenses – such as people throwing rainbows and using bunny ears – users often included the hashtag #snapchat and the name of the lens.

In Project Voldemort documents, according to people familiar with them, Snap executives noted that they believed that Instagram blocked searches for these Snap-related terms and did not include this content on Instagram's "Explore" – page where users discover new content.

Instagram representatives also began pushing influencers to stop adding Snapchat links to their Instagram profile pages, according to people familiar with the matter.

The representatives on Instagram suggested to some influencers that they could potentially invalidate users' "verified" status, which means that an account is legitimate and popular, according to a person familiar with the discussions.

Losing the blue mark that comes with being fied can undermine an influencer's ability to secure paid deals, which can range from hundreds to millions of dollars depending on the influencer's popularity.

In 2016, Instagram added a rule that prevented users from adding links to their Snapchat profiles.

Facebook's tactics have long raised concerns about Silicon Valley, says Paul Keable, Ashley Madison strategy strategist. The dating site, which caters to married people seeking cases, is blocked from advertising on Facebook, which now runs its own dating feature.

“Facebook has created a scenario where they can pick and choose who wins based on their personal whim. , Said Mr. Keable. "All while running their own competing products."

Mr. Keable said he hopes he can work with Facebook to improve the relationship with the dating industry. He said he has not been in contact with regulators, but will provide information if asked.

Write to Georgia Wells at Georgia.Wells@wsj.com and Deepa Seetharaman at Deepa.Seetharaman@wsj.com

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