By Deepa Seetharaman and Betsy Morris
Months before social-media company Snap Inc. publicly disclosed
slowing user growth, rival Facebook Inc. already knew.
Late last year, Facebook employees used an internal database of
a sampling of mobile users' activity to observe that usage of
Snap's flagship app, Snapchat, wasn't growing as quickly as before,
people familiar with the matter said. They saw that the shift
occurred after Facebook's Instagram app launched Stories, a
near-replica of a Snapchat feature of the same name.
In February, just before going public, Snap confirmed that its
user base grew more slowly in the last three months of 2016 than
the prior year. Snap's latest financial figures Thursday showed
that its growth challenges persist.
Facebook's early insight came thanks to its 2013 acquisition of
Israeli mobile-analytics company Onavo, which distributes a
data-security app that has been downloaded by millions of users.
Data from Onavo's app has been crucial to helping Facebook track
rivals and scope out new product categories, The Wall Street
Journal reported earlier this week.
Interviews with more than a dozen people familiar with
Facebook's use of Onavo data show in detail how the social-media
giant employs it to measure what people do on their phones beyond
Facebook's own suite of apps. That information shapes Facebook's
product and acquisition strategy -- furthering its already
formidable competitive edge, the people said.
A Facebook spokesman said it is clear when people download Onavo
what information it collects and how it is used. "Websites and apps
have used market-research services for years," the spokesman said,
noting that the company also uses outside services to help it
understand the market and improve services.
Alphabet Inc., through its Google Android operating system for
smartphones, and Apple Inc. also have the ability to monitor how
rivals' apps perform on their mobile platforms, but it isn't clear
whether they use that information to shape their product road maps.
Apple declined to comment. Alphabet unit Google didn't immediately
respond.
Onavo's data comes from Onavo Protect, a free mobile app that
bills itself as a way to "keep you and your data safe" by creating
a virtual private network, a service used to encrypt internet
traffic.
When an Onavo Protect user opens a mobile app or website, Onavo
redirects the traffic to Facebook's servers and the action is
logged in a database, according to Onavo's website and the people
familiar with the system. Facebook's product teams can analyze the
aggregated data to get detailed information on things such as which
apps people generally are using, how frequently, for how long, and
whether more women than men use an app in a specific country. If
data inside an app isn't encrypted, the information can be as
specific as the number of photos the average user likes or posts in
a week.
Onavo Protect has been downloaded an estimated 24 million times,
mostly on Android devices, according to app-research firm Sensor
Tower. It isn't clear how many people use it regularly.
The app's privacy policy says it may share information with
"affiliates" that include its owner, Facebook. "As part of this
process, Onavo receives and analyzes information about your mobile
data and app use," according to the app's description on Apple's
App Store.
"Instead of converting data for the purpose of advertising,
they're converting it to competitive intelligence," said Ashkan
Soltani, an independent researcher and former chief technologist
for the Federal Trade Commission. "Essentially this approach takes
data generated by consumers and uses it in ways that directly hurts
their interests -- for example, to impede competitive
innovation."
Facebook's use of Onavo on iPhones could violate its agreement
with Apple, said Adam Shevell, an attorney with Wilson Sonsini
Goodrich & Rosati who advises startups and large tech companies
that publish apps. That is because Facebook is using Onavo to
gather information to improve Facebook, he said, whereas Apple's
developer agreement allows apps to use data "only to provide a
service or function that is directly relevant to the use of the
Application, or to serve advertising."
Apple and Facebook declined to comment on this matter.
Within a few months of Facebook's acquisition of the Tel
Aviv-based company in 2013, Onavo's data paved the way for the
social-media firm's biggest deal, the February 2014 purchase of
WhatsApp for what eventually was $22 billion, the people familiar
said.
Onavo showed the messaging app was installed on 99% of all
Android phones in Spain -- showing WhatsApp was changing how an
entire country communicated, the people said. That metric in
particular put Facebook on notice, the people said.
Onavo also helped shape Facebook's live-video strategy, other
people familiar said. Employees could see usage patterns for
live-video apps such as Meerkat and Twitter Inc.'s Periscope, one
person said. That helped guide Facebook's decision to add a
live-video feature to its main app in early 2016.
With Snapchat, one of Facebook's biggest rivals, Onavo, at one
point, revealed information as detailed as how many Snaps were sent
every day.
A year ago, Facebook began rolling out disappearing photo and
video strings on Instagram called "Stories", similar to the
identically named feature on Snapchat, which spurned Facebook's
acquisition attempt in 2013.
After seeing Snapchat's growth slow, Facebook rolled out the
Stories format across all its major apps: Messenger, WhatsApp and
Facebook.
--Tripp Mickle and Jack Nicas contributed to this article.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com and
Betsy Morris at betsy.morris@wsj.com
(END) Dow Jones Newswires
August 13, 2017 07:14 ET (11:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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