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Zuckerberg Admits Instagram’s Superior Tech, Considered Spin-Off Amid Antitrust Concerns
Meta CEO Mark Zuckerberg acknowledged on Tuesday that the acquisition of Instagram was partly due to its “better” camera technology compared to Facebook’s. During a landmark antitrust trial, Zuckerberg also revealed considerations of separating the photo-sharing application to potentially preempt regulatory scrutiny.
Landmark Antitrust Case: Zuckerberg Grilled
The tech executive faced rigorous questioning for a second consecutive day in US District Court, Washington, D.C. at the center of a significant antitrust legal battle. The focus included critical emails from Zuckerberg to Facebook executives around 2012, the period when Instagram was acquired.
Instagram’s Camera Tech: A Key Factor
Under examination by Federal Trade Commission (FTC) attorneys, Zuckerberg conceded concerns about Instagram’s rapid growth posing a competitive challenge. He admitted that Instagram had developed a superior camera feature within its platform than Facebook’s in-house efforts.
“Creating a new application is challenging,” Zuckerberg stated during his testimony.
“Historically, we have attempted to develop numerous applications within the company, with most failing to gain traction.”
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Acquisition Strategy: Build vs. Buy
Zuckerberg deflected inquiries regarding whether Meta, previously known as Facebook, purchased Instagram to stifle a potential rival to its dominant social media platform.
“We were evaluating a build versus buy decision,” Zuckerberg explained. “I assessed that Instagram excelled in camera technology, making acquisition the more strategic option.”
Spin-Off Consideration to Avert Crackdown
Crucially, FTC lawyers presented a 2018 document indicating Zuckerberg’s unease about the Instagram purchase. The document showed he pondered restructuring Facebook to mitigate potential federal intervention during the Trump administration.
“I question whether we should contemplate the drastic measure of spinning Instagram off as an independent entity,” Zuckerberg wrote in the document.
“Given the escalating calls to dismantle major tech firms, there is a tangible likelihood that we might be compelled to divest Instagram and possibly WhatsApp within the next 5 to 10 years,” he elaborated.
FTC Alleges “Buy or Bury” Tactic
The FTC contends that Meta employed a “buy or bury” strategy, acquiring key competitors like Instagram and WhatsApp to safeguard its established market dominance in social networking.
The agency seeks to mandate Meta to divest Instagram, acquired for $1 billion, and WhatsApp, bought for $19 billion in 2014.
Emails Reveal Competitive Threat
Federal regulators emphasized a 2012 email exchange where Zuckerberg acknowledged to former CFO David Ebersman that acquiring Instagram would effectively “neutralize a competitor.”
“One perspective is that we are essentially buying time,” Zuckerberg wrote. “Even if a new competitor emerges, purchasing Instagram, Path, Foursquare, etc., now provides us with a year or more to integrate their dynamics before anyone can approach their scale again.”
Snapchat Rejection and WhatsApp Competition
FTC lawyers also disclosed that Zuckerberg offered a substantial $6 billion to acquire Snapchat, which was declined by CEO Evan Spiegel.
Another 2012 exchange revealed Zuckerberg’s frustration and pressure on former Facebook COO Sheryl Sandberg due to concerns that WhatsApp was surpassing Facebook Messenger, its own messaging service.
“Messenger is not definitively outperforming WhatsApp, and Instagram experienced such rapid growth that we had to acquire it for $1 billion,” Zuckerberg stated in an email to Sandberg. “That’s hardly indicative of dominance.”
Upcoming Witnesses and FTC Market Definition
Sandberg is anticipated to testify imminently. Other prominent witnesses expected include Instagram co-founder Kevin Systrom and current Instagram head Adam Mosseri.
During his testimony, Zuckerberg disputed the FTC’s assertion that Facebook acquired Instagram solely due to its expanding user base.
“Attributing our interest solely to scale or growth rate is inaccurate,” Zuckerberg stated.
“We possessed the capacity to develop a similar application,” he added. “Its potential success, however, remains speculative.”
Trial Hinges on Market Definition
The FTC’s case may depend on successfully persuading Judge James Boasberg in the non-jury trial about the validity of their market definition for Meta.
The potential loss of Instagram is considered particularly detrimental for Meta, as the photo-sharing platform generates over half of its US advertising revenue.
Defining Social Media Competition
The FTC argues that Facebook and Instagram’s only direct competitors are Snapchat and MeWe, a lesser-known privacy-focused application. Platforms like TikTok, focused on video, and LinkedIn, geared towards professionals, are categorized separately by the regulators.
Zuckerberg Disputes Dominance Claim
In his Monday testimony, Zuckerberg resisted the FTC’s endeavor to categorize Meta as dominant among social media platforms centered on sharing with friends and family.
“The ‘friend’ aspect has diminished somewhat, but it remains a priority,” Zuckerberg commented.
Damning Emails Highlighted
The FTC also underscored several incriminating emails from Zuckerberg during their opening statement, including a 2012 message acknowledging that “Instagram could significantly harm us” and poses a “considerable threat.”
Another scrutinized email from 2008 revealed Zuckerberg stating, “it is preferable to buy than to compete.”
Meta Defends Against Monopoly Allegations
Meta’s legal team countered, arguing that the FTC incorrectly excludes significant competition from platforms like TikTok and YouTube in the battle for user attention.
Efforts to Cozy Up to Trump Previously
It was noted that Zuckerberg had previously attempted to build rapport with President Trump, seemingly to avoid the FTC trial through a settlement.
Political Donations and Policy Adjustments
Zuckerberg’s efforts included a $1 million donation to Trump’s inauguration fund, attendance at the swearing-in ceremony, and the elimination of fact-checking and DEI initiatives that had drawn criticism from the president’s allies.
Washington DC Presence
Furthermore, Zuckerberg acquired a mansion in Washington D.C. and reportedly made personal visits to the White House at least three times since January.