Analysis: Mark Zuckerberg confronts old foe in mobile messaging app Telegram

Until last week, few outside of Russia had heard of Telegram Messenger, the mobile messaging app that’s similar in both service and style to WhatsApp. This all changed on 23 February when a router failure made WhatsApp inaccessible across the globe for almost four hours. A day later and Telegram had reported 4.95 million new sign-ups in 24 hours. It’s difficult to predict whether the new users will hang around. What’s known is that Facebook’s purchase of WhatsApp for an astronomical $19bn left many pondering the future direction of the service. What exactly was Facebook’s plan for recovering the investment? And would WhatsApp be obliged to reverse its no-ads policy?

Telegram, which launched in August 2013, is a relatively new service with just a tiny fraction of WhatsApp’s market share (and its 400 million monthly active users). It owes its funding and design to Pavel and Nikolai Durov, the brothers who built and manage Vkontakte (known officially as VK), the most popular online social network in the Russian-speaking world. Regularly dubbed the “Russian Facebook” in the western press, it is Vkontakte that has obstructed Facebook’s growth in this part of the world. The spike in Telegram’s users is not just a battle of the apps but the latest twist in the ongoing struggle for market share between Durov and his old adversary, Facebook founder Mark Zuckerberg.

Vkontake’s success against Facebook in Russia has not come without hiccups. In late 2011, when the largest street protests in two decades swept Russia, police pressured Pavel Durov, Vkontakte’s chief executive, to shut down several of the website’s groups formed in opposition to United Russia, the ruling party. Defiant, Durov instead lifted restrictions on the maximum number of posts a community could host in a day.

“Telegram is not intended to bring revenue, it will never sell ads or accept outside investment. It also cannot be sold. We’re not building a ‘user base’, we’re building a messenger for the people”

But his reputation as a defender of free speech was badly damaged in March 2013, when one of Russia’s leading opposition newspapers, Novaya Gazeta, published hacked emails allegedly between Durov, Vladislav Tsyplukhin, Vkontakte’s former press secretary, and Vladislav Surkov, the Kremlin’s former chief ideologist. In those emails, Durov and Tsyplukhin indicated that Vkontakte — contrary to its show of resistance in December 2011 — had secretly acquiesced to the authorities, sharing users’ private data with the Federal Security Service (FSB) and the Interior Ministry.

A month later, and for reasons that remain murky, Durov found himself abroad, evading police summons for a bizarre traffic accident involving an injured police officer. During this chaos, two of Vkontakte’s cofounders — the men who provided the startup cash — sold their combined 48% stake in the company to the investment group United Capital Partners. This made UCP the single largest shareholder in Vkontakte, though Durov remained in command entrusted with a controlling interest that combined his 12% with leading internet company Mail.ru Group’s 40%.

Photograph: Desiree Catani under a CC licence

Since buying almost half of Russia’s largest social network, UCP has expressed concerns about keeping Durov at the helm of the company. One of the investment group’s chief complaints against him is his involvement with Telegram, which, UCP alleges, comes at VKontakte’s expense. Durov finally parted with his 12% ownership although for the moment he remains chairman of the company.

Journalists and others are fond of describing the pressure on Durov as a form of political repression. The young libertarian tech genius who defied the authorities has at last run out of lives and now Putin’s cronies will soon force him out for good. This reading treats UCP’s concerns about Durov and his relationship with Telegram as window dressing for a Kremlin-orchestrated takeover of Russia’s biggest social network.

“The number one reason for me to support and help launch Telegram was to build a means of communication that can’t be accessed by the Russian security agencies”

There is some truth to this version, but it isn’t the whole story. The drama at Vkontakte is undeniably political, but it is wrong to divorce that dimension from the very real financial issues at play. It is impossible to understand Vkontakte’s politics without also appreciating how disputes about its profits and disagreements over Durov’s stewardship divide the two very powerful groups that own the website.

On the one hand, there’s UCP President Ilya Sherbovich, who sits on the board of directors at Rosneft, the largest public oil company in the world. Sherbovich is chummy with the president of Rosneft, Igor Sechin, who allegedly pushed UCP to acquire its Vkontakte shares. So what’s Sechin’s opinion on the political role of online social networks? In an interview in February 2011, he accused Google of “manipulating the energies of the [Egyptian] people” during the Arab Spring. Not an insignificant statement given that Sechin is perhaps the most influential man in Russia, second only to Putin.

Then there’s Alisher Usmanov, co-owner of Mail.ru, whose criticism of Durov has been muted, relative to UCP’s. That said, Usmanov’s apparent support for Durov seems to have weakened more recently. Last December, he criticised Durov for poorly managing the relationship with UCP, warning that he could lose his job, if concerns about Telegram proved justified. Days later, Durov sold his stake in Vkontakte to another Usmanov ally.

“Telegram is the fastest and most secure mass market system in the world”

Durov has said his commitment to Vkontakte’s independence is no more than market necessity. (Indeed, he justified resisting the police in 2011 as an effort to preserve the site’s lack of censorship and therefore “competitive edge” against rivals like Facebook.) His business philosophy, though, is anything but orthodox. Thwarting efforts to launch an IPO and opposing suggestions to monetise Vkontakte with more targeted advertising, Durov has demonstrated repeatedly that his views on technology follow a unique doctrine.

His peculiar blend of monetary and political beliefs is what led to the creation of Telegram, which claims to have his “ideological support”, in addition to his funding. Several hundred million dollars richer since divesting from Vkontakte last month, Durov now has the resources and the financial security to throw his weight behind a project that reflects his convictions about autonomy and consumer experience.

Forcing out Durov, if it ever happens, will likely undermine Vkontakte (driving users to other websites with fewer advertisements and less political baggage), but his departure could pose an even greater threat to WhatsApp and its new owner, Facebook. In the coming years, the world’s largest social network will be looking to recoup all the billions it spent acquiring an application that now competes with Telegram, a non-profit venture. According to the website’s FAQs: “Telegram is not intended to bring revenue, it will never sell ads or accept outside investment. It also cannot be sold. We’re not building a ‘user base’, we’re building a messenger for the people.”

What marks Telegram further apart from WhatsApp is Durov’s commitment to security. The company claims that “Telegram is the fastest and most secure mass market system in the world.” In an eye-catching offer, Telegram is offering $200,000 to anyone who can hack its encrypted protocol. The app even offers a feature called Secret Chat, an end-to-end encryption service that means only the sender and the recipient can read the messages sent. Like Snapchat, messages self-destruct in a designated time from two seconds to one week. This lack of faith in tech companies comes in the aftermath of leaks by US whistleblower Edward Snowden who revealed that the US National Security Agency tapped directly into the servers of nine internet firms including Facebook. In a recent interview with TechCrunch, Durov reaffirmed his commitment to security: “The number one reason for me to support and help launch Telegram was to build a means of communication that can’t be accessed by the Russian security agencies.”

This could be a reason for Telegram’s overnight success, which elevated it to fourth place in the App Store rankings for free apps just days after the WhatsApp outage (it has since slipped to 20). While it would be absurd to suggest that Telegram can overtake WhatsApp in the near future, time may be on Durov’s side. Concerns about privacy have haunted both Vkontakte and Facebook, as both networks are headquartered in countries (Russia and the US) with governments known to spy on their own citizens. Telegram’s head office is in Berlin, however, and Durov’s divestment from Vkontakte means he may have unshackled himself from the problems of operating in Russia. In other words, Durov may be able to challenge WhatsApp even more successfully than he did Facebook with Vkontakte. Were that to happen, the blow to America’s internet giant might be something even Igor Sechin could enjoy.