In a 2012 email six weeks before the acquisition of Instagram, Facebook CEO Mark Zuckerberg wrote that one of his motivations for the acquisition was to “neutralize a potential competitor”. Emails came before the House Antitrust Committee during today’s hearing that included four technology moguls: Tim Cook, Sundar Pichai, Jeff Bezos and Zuckerberg. The emails were first reported by Verge.
Facebook was one of the Internet’s largest social networks in 2012, but its dominant position was not as secure as it is today. There were too many rival social networks, and Zuckerberg worried that his company would catch flat-footed by shift on smartphones.
Neutralize a potential competitor?
On the evening of February 27, 2012, Zuckerberg told Facebook’s Chief Financial Officer David Ibersman “about the possibilities of building a network of mobile app companies like Instagram and Path that are competitive with our own.” He worried that “if they develop on a large scale they can be very harmful to us.”
The next morning in a reply, the Ebersman encouraged Zuckerberg to make sure he had a good reason to take over. He suggested three possible reasons for striking a deal: “1) neutralize a potential competitor,” “2) gain talent,” and “3) integrate our products with us to improve our service Huh.” Ebersman argued that the first reason was a “bad reason” because “someone else would spring to his place immediately.”
Zuckerberg responded within 20 minutes. “It is a combination of (1) and (3),” he wrote. Then he clarified his thinking:
One thing that may be more appropriate here (1) is that there are a limited number of different social mechanics to network effects and inventions around social products. Once someone wins over a specific mechanic, it is difficult to suppress them without doing anything different to the others. It is possible that someone can beat Instagram by creating something that is better that they get a network migration, but this is difficult as long as Instagram continues to run as a product. (3) is also a factor but actually we already know the social dynamics of these companies and will integrate them in the next 12-24 months.
Zuckerberg said that “buying time” is another way of looking at the acquisition strategy. “Even if some new contestants are buying Instagram, PATH, Foursquare, etc., we can now give them a year or more to integrate once again to bring their scale to scale before integrating,” he reasoned. Once Facebook has replicated its social mechanics, the new products “will not gain much traction”, Zuckerberg predicted.
Apparently, Zuckerberg soon realized how bad this email might look if it eventually went public. Less than an hour later, he sent another email to the Ebersman.
“It didn’t mean that we would buy them in any way to prevent them from competing with us,” Zook wrote. “Purchasing them will give us time to incorporate people and our innovations into our core products, which is how we will actually integrate rather than a combination of products. I’m mostly excited about what companies do if we work What can she do together. ” To create what they have invented in the experiences of more people. “
“Instagram can harm us”
In an April email, Zuckerberg wrote that “Instagram can hurt us meaningfully without becoming a big business.”
A day later, Facebook purchased Instagram in a $ 1 billion deal. In an email exchange on the day of the acquisition, Zuckerberg and a Facebook engineer discussed the relative importance of Instagram and Google+, Google’s social network.
“I remember your internal post about how Instagram was a threat to us and not Google+,” Zuckerberg wrote. “You were basically right. One thing about startups is that you can often achieve them.”
The deal went through a review from the Federal Trade Commission. Instagram was a small company with just 13 employees; It was perhaps unclear to regulators that this would become one of the Internet’s largest social networks.
Now this deal is being investigated more. House Democrats highlighted the emails during Wednesday’s hearing as they told Zuckerberg about the transaction.
“I have made it clear that Instagram was a competitor in the field of mobile photo sharing,” Zuckerberg said during the hearing. “There were a lot of other people at the time. They competed with companies like VSCO Cam and PickPlus, and companies like Path. It was a subset of the overall location of Connecting in which we exist.”