In an e-mail from 2012, 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”;. The e-mails were revealed during today’s hearing before Parliament’s Antitrust Committee, which included four technology magnates: Tim Cook, Sundar Pichai, Jeff Bezos and Zuckerberg. Emails were first reported by Verge.
Facebook was one of the largest social networks on the Internet in 2012, but its dominant position was not as secure as it is today. There are many competing social networks, and Zuckerberg feared that his company would get stuck when switching to smartphones.
Neutralization of a potential competitor?
On the evening of February 27, 2012, Zuckerberg emailed David Ebersman, CFO of the company, about the possibility of acquiring “mobile app companies such as Instagram and Path to create networks that are competitive with our own.” He feared that “If they grow on a large scale, they could be very disturbing.”
In response the following morning, Ebersman called on Zuckerberg to make sure he had a good reason for getting the acquisition. He suggested three possible reasons for concluding an agreement: “1) neutralizing a potential competitor,” “2) gaining talent” and “3) integrating their products with ours to improve our services.” Ebersman argued that the first reason was “bad reason” because “someone else will immediately take their place.”
Zuckerberg answered within 20 minutes. “It’s a combination of points (1) and (3),” he wrote. Then he explained his thinking:
One thing that can make (1) more sensible is the fact that there are network effects around social products and a finite number of different social mechanisms need to be devised. When someone wins a specific mechanic, it is difficult for others to replace him without doing something else. It’s possible that someone will beat Instagram by creating something better to the point of getting a network migration, but it’s harder if Instagram runs as a product. (3) is also a factor, but in fact we already know the social dynamics of these societies and integrate them in the next 12-24 months.
Zuckerberg added that another way to look at an acquisition strategy is to “buy time.” “Even if new competitors appear, purchases of Instagram, Path, Foursquare, etc. They will now give us a year or more to integrate our momentum before anyone can get back into range, ”he said. The new products “will not gain as much power” when Facebook replicates its social mechanics, Zuckerberg predicted.
Apparently, Zuckerberg soon realized how bad this e-mail might look if it eventually became public. Less than an hour later, he sent another e-mail to Ebersman.
“I didn’t mean to suggest that we would buy them to prevent them from competing in any way,” Zuck wrote. “Buying them would give people and time to incorporate their innovations into our core products, which is the way we would integrate, instead of actually combining those products. build what they invented on the experiences of more people. ‘ “
“Instagram can hurt us”
In an April e-mail, Zuckerberg wrote that “Instagram can meaningfully hurt us without becoming a huge venture.”
A few days later, Facebook bought $ 1 billion worth of Instagram. When exchanging emails on the day of the acquisition, Zuckerberg and an engineer on Facebook discussed the relative importance of Instagram and Google+, Google’s social network.
“I remember your internal post about how Instagram was our threat, not Google+,” Zuckerberg wrote. “Basically, you were right. One thing about startups is that you can often get them. ”
The agreement was sailed under review by the Federal Trade Commission. Instagram was a small company with only 13 employees; It was probably not clear to regulators that it would become one of the largest social networks on the Internet.
Now the agreement is becoming more and more detailed. The Home Democrats picked up emails during a Wednesday meeting when they grilled the Zuckerbergs for a transaction.
“It was clear to me that Instagram was a competitor in mobile photo sharing,” Zuckerberg said during the hearing. “It simply came to our notice then. They competed with applications like VSCO Cam and PicPlz and companies like Path. It was a subset of the total connection space we are in. “