Israeli Cyber Unit Veterans Help Facebook Destroy Competition

Israeli-based Onavo, which was acquired by Facebook in 2013, plays a central role in Facebook's efforts to thwart competition, U.S. suit alleges

Send in e-mailSend in e-mail
Facebook CEO Mark Zuckerberg speaks via video conference during a House Judiciary subcommittee hearing on antitrust on Capitol Hill in Washington. July 29 2020
Facebook CEO Mark Zuckerberg speaks via video conference during a House Judiciary subcommittee hearing on antitrust on Capitol Hill in Washington. July 29 2020Credit: Graeme Jennings,AP

In July, Facebook CEO Mark Zuckerberg sat before the U.S. House of Representatives’ subcommittee on antitrust, commercial and administrative law. One of the questions he was asked was whether Facebook’s acquisition of the Israeli firm Onavo gave his social media giant the ability to surveil users. Zuckerberg waffled, saying, “I’m not sure I’d characterize it in that way.”

As part of an investigation scrutinizing the history of Facebook’s acquisitions and how the companies it eventually acquired were chosen, a suit filed by the U.S. Federal Trade Commission a few days ago argued that Onavo’s technology plays a central role in Facebook’s efforts to thwart competition.

>> Do you work in Israeli hi-tech and have a story to share with us? We can promise full anonymity: Click here to send us an encrypted email

Facebook bought Onavo in 2013 for $150 million. According to the suit, Onavo – which the FTC terms a “user surveillance company” – was the technological tool Facebook used to learn about rival apps. The suit claims Onavo was used to understand which apps could constitute a potential threat to Facebook so it could neutralize them before they grew. “Onavo marketed itself to users as providing secure virtual private networking services, but—unknown to many users—it also tracked users’ online activity,” the complaint said. 

A virtual private networking, or VPN, allows users to go online anonymously and usage of such services has shot up during the coronavirus. Cyber security experts warn that alongside its benefits, many VPNs, especially those provided for free, actually sell user information to so-called data brokers in what is termed the “man in the middle” problem.

Onavo founders Roi Tiger (right) and Guy Rosen (left) in 2011.Credit: David Bachar

Since its purchase, Onavo has made headlines repeatedly for troubling involvement in collecting user information without their knowledge, sometimes through improper methods, for example as part of the Facebook Research app.

Not your usual exit

Onavo was founded in 2011 by Guy Rosen and Roi Tiger, both veterans of the Israel Defense Forces secret cyber intel Unit 8200. It raised $13 million from well-regarded venture funds like Sequoia Capital, Horizons Ventures and Magma, and at the time of its purchase by Facebook, it employed around 40 people. 

Onavo’s purchase wasn’t just another run-of-the-mill Israeli exit. Onavo’s sale to Facebook served as the basis on which the social media firm built its research and development center in Israel. Today, that center is the company’s second largest, rival only to its American center.

Onavo developed several products. One of them is Onavo Extend, a service that monitors apps that guzzle data and then compresses the data to reduce the cost of using them. 

But the product that apparently most influenced Facebook’s decision to buy the company was Onavo Insights. This service gives companies information about which apps are most popular, what a given app’s market penetration rate is, usage patterns of competing apps and indexes that measure users’ involvement and their rate of use of these apps. Onavo collects the data it provides from users who install its app.

After buying Onavo, Facebook launched several features based on Onavo’s technology, using it to collect information about rival apps’ capabilities. The goal, it seems, was to understand the competition Facebook was facing in the fields of instant messaging and social media. Tens of millions of users worldwide are thought to have installed this surveillance tool without fully understanding the way it works.

A ‘secure connection’?

Onavo’s modus operandi has produced previous scandals as well. In August 2018, Apple removed Onavo Protect – a free “secure connection” app that people could use while using Facebook – from its app store. The reason was the discovery that the app was violating Apple’s privacy policy by collecting information about iPhone users’ usage of apps that didn’t belong to Facebook.

Also in 2018, the British parliament published internal Facebook documents it had obtained that showed that Facebook was surveilling users as a means of dealing with potential commercial rivals. The documents included some 200 pages of email correspondence from 2012 to 2015 in which senior Facebook officials discussed how to conceal Onavo’s ability to continue to gather information about users from the unwitting users themselves.

The documents bolstered the claim that Facebook used Onavo, for example, to conclude that WhatsApp was growing rapidly and had more users than Facebook Messenger. This in turn contributed to Facebook’s decision to buy the rival app.

The documents also showed how Facebook works to thwart competition. When Twitter launched its video app Vine in 2013, Facebook responded by limiting the app’s access to information about its users. 

One email noted that Vine enables users to locate friends on its platform via Facebook. “Unless anyone raises objections, we will shut down their friends API access today,” it added, referring to an application programming interface which allows different types of software to connect with each other. Zuckerberg’s response was “Yup, go for it,” per the documents. 

Onavo Protect also reportedly helped Facebook realize that the launch of Instagram’s Stories feature was significantly reducing the growth of Snapchat, which had been on track to become a serious competitor to Facebook. Facebook had failed to buy Snapchat, so it simply copied its capabilities, thereby stunting its growth.

Another scandal linked to Facebook and Onavo erupted in 2019, when it emerged that Facebook had paid users aged 13 to 35 up to $20 to install the Facebook Research app. This app, which is based on Onavo’s technology, collects information about users with their consent. The news sparked so much criticism that Facebook stopped using Onavo.

Facebook declined to comment for this report.

Comments