The great social media exodus

Monica Chan

Lessons from WhatsApp’s botched privacy update

The world’s biggest social media platform, Facebook, has been besieged by security issues for years. From the attack mounted against almost 50 million of its users in 2018, to the serious vulnerability exposed on its messenger service Whatsapp 12 months later, it is clear that scale alone is no shield against cybercrime.

More recently, changes relating to data sharing policies at Whatsapp have incensed a customer base that has become dramatically more concerned over internet security and privacy in the decade and a half since Facebook was founded.

Whatsapp’s downloads shrunk by 2 million in the 72 hours following an announcement that it would be sharing information with Facebook and ultimately third party businesses. Competitor’s including Telegram and Signal, meanwhile, reported a 500 percent increase in users, in a move Telegram founder Pavel Durov described as the “largest digital migration in human history.”

But while it may be Whatsapp’s blunder that is dominating the headlines, there are lessons here for all businesses about the dangers of misjudging your customers.

Lesson 1: Businesses must be sensitive to the values in today’s society

From climate change to the MeToo# movement, societal concerns are evolving at an unprecedented rate – ironically, in part, because of the power of social media – and woe betide any business that doesn’t keep pace.

As WhatsApp was busy becoming the most popular messaging app in the world, it failed to notice that its vast user base was increasingly prioritising privacy. Similarly, consumers are looking more deeply into the ethical values behind businesses, even boycotting those associated with negative practices, such as the use of slave labour in Xinjiang’s cotton industry.

Equally, however, shared values can drive customer loyalty, placing a renewed emphasis on the importance of corporate social responsibility. To stay competitive, companies must be sensitive to the macro environment and shifting societal values.

Lesson 2: Consumers determine business performance

It is clear, that the quality of a company’s products and services is no longer enough to ensure its market position. The features offered by Facebook and WhatsApp appear superior to those of emerging competitors MeWe and Signal, and yet still users are actively switching.

User numbers are a fundamental indicator of business performance and so success can only be achieved with an active customer base. Meanwhile, the reputational damage also comes at a financial cost. The CallMiner Churn Index 2020 revealed that US companies lose $136.8bn a year due to avoidable customer switching. All businesses would be wise to remember that familiar mantra, the customer is king.

Lesson 3: Always keep the original intention of the business in mind

It is important to have a clear understanding of a company’s raison d’etre and how that aligns with the expectations of its customers. Facebook’s original purpose was to allow people to connect with one another, not to connect people with advertisers. If users find that Facebook no longer serves their needs as a social media platform – if they tire of the targeted ads – they will cease to focus on the benefits of the business, but rather focus on its threats.

It is vital that the balance between serving intention and generating profit is carefully maintained, or consumers will begin searching for alternatives.

Palladium is a digital and technology due diligence provider and digital transformation partner to Private Equity firms and their portfolios across Europe and the US. Palladium was named by Real Deals as 2020 Specialist Advisor of the Year at The Private Equity Awards.

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