In the initial week of the Meta antitrust trial, several new insights emerged about the strategies employed by the company, previously identified as Facebook, in response to the competitive challenge posed by Instagram in the early 2010s.
The U.S. government has accused Meta of breaching competition laws by acquiring Instagram and WhatsApp, which were seen as threats to Facebook’s dominant market position. Should the attorneys representing the U.S. Federal Trade Commission (FTC) prevail, it is possible that the government might compel Meta to divest itself of Instagram and WhatsApp.
During the trial proceedings, the FTC presented persuasive evidence illustrating that Facebook was acutely aware of the threat Instagram represented as its popularity surged. Internal emails from Facebook executives were disclosed, revealing their concerns about Instagram’s growth and deliberations regarding an acquisition price for the app.
Further discussions among the company executives considered alternative tactics to stifle Instagram’s growth, such as replicating its features, launching a proprietary app, or acquiring Instagram and halting further feature developments on it while focusing on Facebook’s own products.
The government’s arguments showcase Facebook’s strategy to either acquire or undermine its competition through these communications. These documents not only shed light on the company’s competitive mindset at the time but also highlight the aggressive strategies that contributed to Meta becoming the prominent social networking entity it is today.
Key points from these communications include:
Mark Zuckerberg and Others Express Concern Over Instagram’s Rapid Expansion
Mark Zuckerberg expressed apprehension about Instagram’s growth, noting in February 2011 that the app had reached 2 million users with 30,000 daily photo uploads within four months. He emphasized the need to monitor this closely, especially as Dropbox was gearing up to enhance its photo-sharing capabilities.
In September 2011, Zuckerberg warned that continued success of Instagram on mobile, or a potential acquisition by Google, might enable them to incorporate elements of Facebook’s current services, posing a genuine challenge given their rapid growth to approximately 5-10 million users at the time. He stressed the urgency of launching a competitive product to prevent Instagram from further solidifying its user base.
Chris Cox, Facebook’s Chief Product Officer, observed in February 2011 the success of Instagram’s simple photo-sharing app, which outpaced Facebook’s mobile photo uploads. He recognized the need to streamline Facebook’s mobile experience and explore standalone products for messaging and photos.
- In February 2012, Zuckerberg noted a concerning trend: many users, including Facebook employees, were daily Instagram users but limited their Facebook photo uploads, indicating a significant gap Facebook needed to address.
Facebook Contemplates Acquiring Instagram to Halt Its Development
By February 2012, Zuckerberg was considering the possibility of acquiring Instagram, even at a cost of roughly $500 million, recognizing Instagram’s strengths in having a good camera and a photo-centric sharing network.
Zuckerberg also debated whether Facebook’s initial strategy might have been incorrect and that the focus should perhaps be on offering superior photo-taking experiences, suggesting that a significant investment in Instagram might be warranted.
Samuel W. Lessin, then Facebook’s Vice President of Product, corresponded with Zuckerberg in February 2012, proposing the potential acquisition of various innovative companies like Path, Pinterest, Instagram, and Evernote. He suggested maintaining their products while transitioning the teams to focus on Facebook’s core platform.
Zuckerberg envisioned keeping Instagram’s product operational without introducing new features, funneling future development towards Facebook’s main products. By doing so, he aimed to avoid negative public perception while preventing a market gap allowing other competitors to emerge.
- He viewed potential acquisitions as buying time, proposing that buying companies like Instagram, Path, and Foursquare could provide Facebook with a buffer to integrate them and forestall competitors from scaling to their level promptly.