Seven years ago, Mark Zuckerberg considered spinning off Instagram from his social media empire as the technology industry became increasingly regulated and he grew concerned that the photo-sharing app was cannibalizing Facebook's growth. In a message to company executives in May 2018, the billionaire said that given that the company may face a breakup in the next five to 10 years, it is necessary to think ahead about how to proactively deal with this possibility.
These forward-looking remarks came to light during the first week of the antitrust trial in Washington federal court. The U.S. Federal Trade Commission (FTC) alleged that Meta Platforms Inc. The acquisition of Instagram in 2012 and WhatsApp in 2014 established a social media monopoly, and the FTC is seeking to break up the company. Meta argued that it does not monopolize the market and currently faces many competitors, including Google's YouTube and Apple's iMessage.
On April 15, it was reported that in order to avoid litigation, Zuckerberg had proposed a settlement of US$450 million at the end of March this year, but this was far from the US$30 billion requested by the FTC. New FTC Chairman Andrew Ferguson found the proposal unconvincing and rejected it. According to reports, Zuckerberg has been trying to build a good relationship with US President Donald Trump in recent months, and in order to avoid this trial, he has also launched a "frenzy lobbying operation."
“We have never been shy about pointing out that the FTC’s taking this matter to court makes no sense,” Meta spokesperson Dani Lever said in a statement. “We are prepared to prevail.”
White House officials did not immediately respond to a request for comment.
The FTC first launched an investigation into the company, formerly known as Facebook, in 2019 and eventually filed an antitrust lawsuit in 2020. However, the political pressure faced by the world's largest social media company has emerged several years ago. Massachusetts Democratic Senator Elizabeth Warren began criticizing the centralization of the technology industry and companies in 2016. In 2018, Meta also faced an FTC privacy investigation due to the Cambridge Analytica data privacy scandal.
“I began to wonder whether spinning off Instagram was the only architectural solution to achieve a number of important goals,” Zuckerberg wrote in a 2018 message to executives. It also mentioned taking steps to "immediately stop artificially promoting Instagram's growth in a way that harms the Facebook network."
Years later, in court testimony, the Meta CEO explained his thinking by saying he had to "consider the political winds at the time."
existential threat
The FTC's court challenge poses an existential threat to Meta's dominance. Meta's split will affect many of its popular global digital products, overturn Meta's efforts over the years to deeply integrate between applications, and also raise questions about the government's standards for evaluating and approving large technology transactions.
In the first two days of the trial, the focus was on how Zuckerberg viewed potential competitors from 2010 to 2014. At the time, he was shifting the social network's strategic focus toward mobile users. On April 15, he was asked about a 2012 email exchange with then-chief financial officer David Ebersman, in which the two discussed the rationale for acquiring Instagram.
Ebersman suggested that one reason for acquiring Instagram might be to "eliminate a competitor," and Zuckerberg responded that this was indeed one of the motivations.
Instagram and Path, another social network application, "are building social networks to compete with us," Zuckerberg wrote in an email exchange in 2012. "From a certain perspective, what we are really buying is time. Even if new competitors emerge and acquire Instagram, Path, Foursquare and other applications, it will buy us at least more than a year to integrate their product logic before other platforms reach their scale."
Not quite a "big win"
Under questioning by FTC lawyer Daniel Matheson, Zuckerberg did not admit that the main motivation for acquiring Instagram was its broad user scale, although multiple internal emails showed that Instagram's rapid growth posed a significant threat to Facebook. Zuckerberg said Instagram's popular photo filter feature was also a key factor in the acquisition.
“It’s not accurate to explain our acquisition motivations solely by user volume or growth rate, and I think that’s what your question implies,” he said.
On April 14, Zuckerberg accepted more than three hours of questioning, which mainly focused on the acquisition of Instagram and Facebook’s failed attempt to develop its own photo-sharing application from 2011 to 2012. FTC lawyers produced a large number of emails and documents showing that Facebook was repeatedly frustrated in its competition with the fast-growing Instagram and finally chose to acquire the startup.
The email shows that Zuckerberg is worried that as Instagram continues to grow and develop, it may in turn copy Facebook's social network functions. On April 15, the court was shown additional emails outlining his motivations for the two acquisitions.
“Messenger didn’t beat WhatsApp, and Instagram was growing so much faster than us that we had to spend $1 billion to acquire them,” Zuckerberg wrote in a November 2012 email to then-chief operating officer Sheryl Sandberg. “This is hardly a victory.”
When Matheson asked Zuckerberg whether he would prefer to build an Instagram-like service within the company, Zuckerberg replied: "I think so, $1 billion is too expensive." He admitted that even if Meta built a similar product in-house, "it's hard to say what the outcome would be."
The rise of instant messaging
Zuckerberg also admitted that he had blocked messaging apps such as WeChat, Kakao and Line from advertising on Facebook. He said in a 2013 email that these platforms were "trying to build social networks that could replace us." However, he tried to walk back that statement in his testimony on April 14, saying that "it is difficult to judge their true intentions."
On April 15, Matheson tried to show during the inquiry that in the years before the acquisition of WhatsApp, instant messaging services had gradually become a key competitive area for Facebook; at that time, some instant messaging services in Asia had begun to integrate social functions. In February 2013, Zuckerberg wrote in an email to Facebook's board of directors that he was concerned that competitors such as China's Tencent Holdings Ltd. might expand outside Asia, including through the acquisition of WhatsApp.
“Mobile instant messaging is our biggest risk and opportunity,” he wrote. “Tencent has not yet expanded outside of Asia, but this is a significant risk to us.”
User harm
The FTC's lawsuit claims that it is based in part on the idea that after Meta acquired the two companies, it harmed the interests of users by increasing the number of ads and weakening privacy protection.
In its inquiry on April 15, the FTC tried to explain that Zuckerberg’s decision to increase advertising on Instagram and his consideration of spinning off the service showed that Meta’s post-acquisition strategy weakened the user experience of its products. For example, Zuckerberg mentioned in a message to other executives that he was concerned that Instagram was "cannibalizing" Facebook's user base.
But in response to those questions, Zuckerberg said his main focus at the time was improving Instagram's profitability. "There was an imbalance in the internal management of the company at the time," Zuckerberg said, adding that Facebook contributed most of Meta's revenue at the time.
The FTC ended its questioning of Zuckerberg about an hour before the end of the day's trial. He is expected to appear in court again on April 16 to accept questions from Meta's lawyers. Sandberg is also scheduled to testify later this week. The trial is expected to last until July.