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Illustration: Sarah Grillo/Axios

Facebook's decision to shift gears to focus on encrypted private messaging will either cement the social network's global dominance or end it. Either way, it will change the way more than one-third of the world's population engages with the internet.

Driving the news: Zuckerberg's Wednesday announcement is a clear response to public outcry over Facebook's flawed custody of users' data. But the shift, if it actually happens, could go a lot further than privacy principles.

Think big: If the move from desktop to mobile brought us Facebook 2.0, a pivot from open networks to private ones would usher in Facebook 3.0.

The big picture: Transforming any product the size of Facebook is daunting. Dominant tech companies that pull it off extend their sway into new eras. Otherwise, they fade.

  • Microsoft pulled this off when it scrambled its jets to build a web browser two decades ago.
  • Apple deftly transitioned from a computer-centric to a phone-oriented company over the past decade.
  • Both Google and Facebook (after some missteps) made the leap from desktop-focused services to mobile, too.
  • Zuckerberg is painting Facebook's next shift on the same scale.

Driving cryptocurrency adoption: Facebook is reportedly working on making a cryptocurrency that will let users transfer money in WhatsApp, using what's being dubbed "Facebook coin."

  • If Facebook successfully deployed that system to the combined messaging platform it plans to build from WhatsApp, Instagram and Messenger, it could become a dominant cryptocurrency overnight — building an onramp to the new technology for millions the way AOL populated the internet in the '90s.

Changing data storage: In his note, Mark Zuckerberg conceded that these changes would make it difficult for Facebook to operate in some countries that are increasingly demanding platforms store users' data locally.

  • Zuckerberg said Facebook would protect user information by keeping data centers out of "countries that have a track record of violating human rights like privacy or freedom of expression."
  • That might lock Facebook out of some countries altogether (it's already banned in China). But since Facebook is synonymous with the internet in many places, it's plausible to imagine that this change could force some governments to think differently about those policies.

Tougher misinformation tracking: Encryption makes it even harder for researchers to track and study misinformation, and for platforms to limit it.

  • Many of the worst cases of misinformation globally have been on messaging platforms, not Facebook or Instagram, because it was nearly impossible to catch and stop in real time.
  • Facebook has 30,000 people moderating content today and faces a barrage of criticism for how it handles content. The encrypted-messaging world may look more attractive to it right now.

Redefining small business and micropayments: Facebook sees business as a prime market for the unified messaging service that it's building.

  • Consumers may not care about Messenger, WhatsApp and Instagram integration, but it's attractive for businesses — particularly small businesses — trying to reach customers.
  • Zuckerberg said on last quarter's earnings call that creating a new buying experience, where users have a more direct relationship with sellers, is a "very big" opportunity for Facebook.

Be smart: The more information users exchange behind encrypted doors, the less data Facebook has to target ads.

  • Facebook's efforts to increase commerce and payment interactions on its platform could suggest the company is looking to replace ad revenue it might lose in the future.
  • But the company has said that it doesn't want to become a payment processor, since that imposes a lot of red tape. (This position could change, of course.)
  • Facebook's $40 billion advertising business today centers around targeted ads next to News Feed posts. That business isn't going anywhere any time soon, and it's hard to imagine Facebook has any long-term interest in ditching the open social network that has been its cash cow for so long.

Go deeper

1 hour ago - World

Tunisian president ousts prime minister, suspends parliament amid unrest

Tunisians stage a protest in response to the problems in the health sector in the country, demanding the resignation of the government and the dissolution of the parliament in Tunis on July 25. Photo: Yassine Gaidi/Anadolu Agency via Getty Images

Tunisian President Kais Saied announced Sunday that he had dismissed the country's prime minister and frozen the parliament amidst mass protests in the country, Reuters reports.

Why it matters: The move, which comes on the 64th anniversary of Tunisia's independence, escalates Saied's longstanding feud with Prime Minister Hichem Mechichi and poses a challenge to the 2014 constitution that "split powers between president, prime minister and parliament," per Reuters.

Updated 5 hours ago - Politics & Policy

Pelosi appoints GOP Rep. Kinzinger to Jan. 6 committee

House Speaker Nancy Pelosi (D-Calif.) announced Sunday that she has appointed Rep. Adam Kinzinger (R-Ill.) to serve on the House select committee investigating the Jan 6. Capitol riot.

Why it matters: Pelosi's announcement comes after she rejected two of the five Republican appointments offered by House Minority Leader Kevin McCarthy (R-Calif.).

USCP chief: Officers testifying before Jan. 6 committee "need to be heard"

Thomas Manger, the new chief of the U.S. Capitol Police, Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

New Capitol Police chief Tom Manger said officers testifying before the Jan. 6 select committee this week "need to be heard."

Driving the news: The select committee's first hearing is set to take place on Tuesday and will feature testimony from law enforcement officers who were subject to some of the worst of violence during the insurrection.