How Facebook Is Changing to Deal With Scrutiny of Its Power

Last December, Facebook executives were in advanced discussions to buy Houseparty, a social networking app that lets multiple people video chat on their mobile phones at once, said two people with knowledge of the talks. Houseparty, founded in 2016 by a Silicon Valley entrepreneur, Ben Rubin, was especially popular with audiences under the age of 24. Facebook, whose members are getting older, has coveted younger users.

But weeks into the discussions, Facebook’s corporate development team killed the talks with Houseparty, the people said. Houseparty’s executives were told that a deal would draw unwelcome federal government scrutiny to Facebook, they said. Houseparty was later purchased by Epic Games, the makers of the video game Fortnite.

Facebook’s changes that appear to make a breakup of its apps more difficult began more than a year ago. Mr. Zuckerberg focused on combining the underlying infrastructure of WhatsApp, Instagram and Facebook Messenger. The project, called “interoperability,” requires years of deeply technical and difficult engineering work.

The aim, in part, was to create less of a hodgepodge of companies and more of a unified network, said people briefed on the strategy. Publicly, Mr. Zuckerberg has said the initiative will help build a more “private” version of Facebook so customers can “communicate across networks easily and securely,” as users flock to messaging services en masse. People will also get a better and more streamlined user experience, he has said. Mr. Zuckerberg has added that a unified messaging system would better lend itself to moneymaking efforts on WhatsApp, which today brings in little revenue.

But the idea of “interoperability” was a departure for Facebook. While Facebook and Instagram have long shared much of the same infrastructure, its different messaging products generally operated independently.

Though employees at Facebook, Instagram and WhatsApp are in separate physical buildings, executives have also pushed for them to share more internal resources and have reorganized their reporting lines. In one instance, Facebook executives ordered a change in the messaging teams, two of the people said, requiring the Instagram messenger division to report to the leaders at Facebook’s Messenger app. Bloomberg earlier reported on the internal reorganization.

Last year, Facebook also began a rebranding project, tapping at least one outside agency for help, said three people familiar with the initiative. The agency, Prophet Brand Strategy, was asked to make Facebook into a “branded house,” where Facebook’s moniker always preceded the names of WhatsApp and Instagram, they said. The rebranding mandate came from Mr. Zuckerberg and Antonio Lucio, Facebook’s chief marketing officer, they said.

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