Project Voldemort Details Facebook's Hardball and Anti-Competitive Practices
Dozens of tech executives and app developers of Facebook’s current and former competitors are talking to the Federal Trade Commission. The discussions surround the growth-at-all-costs tactics that Facebook used to grow from a social network for college students to a tech giant that is used by 25% of all people in the world every day. The FTC's investigators are also talking to executives from startups that became defunct after losing access to Facebook’s platform in addition to those that sold their companies to Facebook.
The FTC is interviewing company's like Snap, Inc. due to a broader antitrust investigation into Facebook's business practices. The Snap, Inc. legal team for years has kept a dossier of the ways Facebook was trying to squash competition from the their nimble start-up. The documents were refereed to as Project Voldemort.
The documents in Voldemort detailed Facebook’s moves that threatened to undermine Snap’s business. Snap believed that Facebook discouraged influencers from referencing Snap on their Instagram accounts and suspects Instagram was preventing Snap content from trending as well. Snap believed Instagram representatives threatened influencers and told them they could lose the users’ “verified” status if they mentioned Snapchat or used links that connected to their Snapchat profile on their Instagram posts. If an Influencer lost the blue "verified" check it could undermine their 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 all together.
"Discussions with rivals are typical in antitrust probes". The FTC is attempting at “putting together a picture of what might be a pattern of behavior to prevent competition to the core Facebook business,” said Gene Kimmelman, a senior adviser at Public Knowledge.
While recently Facebook has had to be publicly question by Congress. The House panel can’t take enforcement actions against the companies. The FTC, however, can.
One area of focus for the FTC is Onavo a company 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 in a central database. That enabled Facebook to quietly track what users did on their phones, including which apps they used and for how long, the Wall St. Journal reported in 2017.
Facebook used Onavi to see Snap's data as specific as the number of messages a user sent or how much time those users spent in specific Snapchat features. Facebook couldn’t see the content of the messages or images. The visibility into Snap usage lessened considerably after Snap encrypted its app traffic.
A Facebook spokeswoman said the app was similar to other industry market research tools.
Facebook’s tactics have long engendered concern across Silicon Valley, said Paul Keable, chief strategy officer at Ashley Madison. The dating site is blocked from advertising on Facebook, which now operates its own dating feature.
“Facebook has created a scenario where they get to pick and choose who wins based on their personal whims,” Mr. Keable said. “All while running their own competitive products.”
Mr. Keable said he hasn’t been in touch with regulators but will provide information if asked.
Another focus of the investigation is whether Facebook Chairman and CEO Mark Zuckerberg acquired or tried to buy startups that he feared would later become competitors. In some cases, after Facebook’s overtures were spurned, the social-media giant copied features of the former targets.
When Mr. Zuckerberg met with the founders of startups, including Evan Spiegel, chief executive of Snap, and Dennis Crowley, co-founder of Foursquare Inc., he presented them with an ultimatum: either they accept the price he was offering for their companies, or face Facebook’s efforts to copy their products and make operating more difficult. In both cases, after the companies rejected the overtures, Facebook released features that mimicked the products from Snap and Foursquare.
“This is competition at work and one of the longtime hallmarks of the tech sector,” a Facebook spokeswoman said. “Businesses continually build and iterate on concepts and ideas in the marketplace—making them better or taking them in different directions. This is good for consumers.”