In a 2012 email six weeks before acquiring Instagram, Facebook CEO Mark Zuckerberg wrote that one of his motivations for the acquisition was to “neutralize a potential competitor.” The emails were revealed during today’s hearing before the House antitrust committee with four tech tycoons: Tim Cook, Sundar Pichai, Jeff Bezos, and Zuckerberg. The 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 were many rival social networks, and Zuckerberg feared that his company would be caught by the switch to smartphones.
Neutralize a potential competitor?
On the night of February 27, 2012, Zuckerberg sent an email to Facebook’s chief financial officer, David Ebersman, about the possibility of acquiring “mobile app companies like Instagram and Path that are building networks that are competitive with ours.” He was concerned that “if they grow on a large scale they could be very harmful to us.”
In a response the next morning, Ebersman encouraged Zuckerberg to make sure he had a good reason to make an acquisition. He suggested three possible reasons for making a deal: “1) neutralize a potential competitor,” “2) acquire talent,” and “3) integrate their products with ours to improve our service.” Ebersman argued that the first reason was a “bad reason” because “someone else will immediately emerge in his place.”
Zuckerberg replied in 20 minutes. “It is a combination of (1) and (3),” he wrote. Then he exposed his thought:
One thing that can make (1) more reasonable here is that there are network effects around social products and a finite number of different social mechanisms to invent. Once someone wins at a specific mechanic, it is difficult for others to impersonate him without doing something different. It is possible that someone will beat Instagram by creating something that is better to the point of getting network migration, but this is more difficult as long as Instagram continues to function as a product. (3) is also a factor, but in reality we already know the social dynamics of these companies and we will integrate them in the next 12-24 months anyway.
Zuckerberg added that another way of looking at the acquisition strategy is as a way to “save time.” “Even if new competitors emerge, buying Instagram, Path, Foursquare, etc. will now give us a year or more to integrate their dynamics before anyone can return to their scale,” he argued. The new products “won’t have as much traction” once Facebook has replicated its social mechanics, Zuckerberg predicted.
Evidently, Zuckerberg soon realized how bad this email could look if it were eventually made public. Less than an hour later, he sent Ebersman another email.
“I didn’t mean to say that we would be buying them to prevent them from competing with us in any way,” Zuck wrote. “Buying them would give us the people and the time to incorporate their innovations into our core products, which is how we would do integration instead of combining products. I’m excited about what companies could do together if we worked to build what they’ve invented in the experiences of more people. “
“Instagram can hurt us”
In an April email, Zuckerberg wrote that “Instagram can harm us significantly without becoming big business.”
Days later, Facebook bought Instagram in a deal worth $ 1 billion. 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 our threat and not Google+,” wrote Zuckerberg. “You were basically right. However, one thing about startups is that you can often buy them.”
The deal was sent through a review by the Federal Trade Commission. Instagram was a small company with only 13 employees; It was probably not obvious to regulators that it would grow to become one of the largest social networks on the Internet.
Now the deal is becoming more scrutinized. House Democrats highlighted the emails during Wednesday’s hearing when they questioned Zuckerberg about the transaction.
“It has been clear to me that Instagram was a competitor in the mobile photo sharing space,” Zuckerberg said during the hearing. “There were plenty of others at the time. They competed with apps like VSCO Cam and PicPlz and companies like Path. It was a subset of the overall connection space we exist in.”
