قالب وردپرس درنا توس
Home / Business / “Instagram can hurt us”: Mark Zuckerberg spreads emails about the plan to neutralize competitors

“Instagram can hurt us”: Mark Zuckerberg spreads emails about the plan to neutralize competitors

In late February 2012, Facebook CEO Mark Zuckerberg emailed his chief financial officer, David Ebersman, to consider acquiring smaller competitors, including Instagram and Path. “This business is nascent, but networks have been created, brands already make sense, and if they grow on a large scale, it can be very destructive for us,” he wrote. “Given that we believe that our own assessment is quite aggressive and that we are vulnerable to mobile phones, I wonder if we should consider going for one or two of them. What do you think?”

Ebersman was skeptical. “All I̵

7;ve seen is that most deals fail to create the value that the buyer expects,” he wrote. “I would ask you to find a convincing explanation of what you are trying to do.” Ebersman went on to list four potential reasons for acquiring companies and their views on each: neutralizing a competitor, acquiring talent, integrating products to improve Facebook, and more.

It’s a combination of neutralizing a competitor and improving Facebook, Zuckerberg said in response. “There is a network effect around social products and there are a limited number of different social mechanisms. Once someone wins in a particular mechanic, it’s hard for others to displace them without doing something else. “

Zuckerberg continued: “One way to look at it is what we really buy – it’s time. Even if some new competitors appear, buying Instagram, Path, Foursquare, etc., we will give us a year or more to integrate their dynamics before someone can get closer to their scale again. During this time, if we include the social mechanics they used, these new products will not get much traction, because we will already be deploying their mechanics on a scale.

Forty-five minutes later, Zuckerberg sent a carefully explained explanation to his earlier remarks.

“I did not mean that we would buy them to prevent them from competing with us in any way,” he wrote.

The emails between Zuckerberg and Ebersman were revealed today during a hearing of the Subcommittee on Antitrust Committee of the Chamber of Antitrust in the field of technology, as rep. Jerry Nadler (D-NY) asked Zuckerberg about the purchase on Instagram. Emails, as well as several other messages and documents from 2012, show that Facebook – and Zuckerberg – in particular, wanted to buy Instagram to avoid competition, the committee said.

“Facebook, by its own admission … viewed Instagram as a threat that could potentially move business away from Facebook,” Nadler said during Wednesday’s hearing. “So instead of competing with it, Facebook bought it. This type of anti-competitive acquisition was developed by antitrust law.”

Clarifying how not to prevent companies from competing with Facebook is evidence that Zuckerberg knew he had found too much, the committee said, a calculated reversal that would have helped the company avoid further scrutiny of the deal. (During the presentation of e-mails to members of Congress, the lawyers of the Antimonopoly Committee marked the slide “Unfortunately!”)

At the beginning of April 2012, Zuckerberg was moving towards an agreement. “I just need to decide if we’re buying Instagram,” he wrote in a series of emails sent a few days before making an offer to buy the company. “Instagram can hurt us a lot without turning into a huge business,” he wrote. On the other hand, if Facebook didn’t buy Pinterest or Foursquare and they succeeded, “we’ll just regret not doing them” internally, he added. “We’re kind of already working on a version of Foursquare.”

From Mark Zuckerberg to the Editor, Thursday, April 5, 1:05 p.m., 2012.

The emails are evidence that Zuckerberg saw Instagram as a potential existential threat to the company, according to the committee – clear statements that the CEO has moved to buy the simplest app to isolate Facebook from current and future competition. For its part, Facebook said that Instagram competed with some aspects of Facebook, but also complemented its main features.

“It was clear to me that Instagram was a competitor in the photo-sharing space,” Zuckerberg told Congress on Wednesday. “It simply came to our notice then. They competed with applications such as VSCOCam and PicPlz, and companies such as Path. It was a subset of the common space of communication in which we exist. And by forcing them to join us, they definitely went from a competitor in the mobile camera space to a program where we could help grow and help get more people to use. ”

Instagram was hugely popular in Silicon Valley before its acquisition, and Facebook was not the only member interested in acquiring it. Twitter, which helped Instagram a lot in its early days by allowing users to find their friends on the Twitter app, took the aggressive step of acquiring the company. As Sarah Frier reported in her book this year Without filter, Twitter offered shares of the company worth from 500 to 700 million dollars.

But Instagram co-founder Kevin Sistrom turned down the offer, and in the first week of April 2012, Zuckerberg called and offered to buy the company and its 13 employees. Systrom’s board, led by Matt Kohler, an early former Facebook employee, encouraged him to accept the meeting. At the time, Facebook was preparing for its initial public offering, and it had yet to figure out how to move its large audience of desktop Internet users to mobile phones, which are fast becoming ubiquitous.

After meeting, Zuckerberg offered Systrom what Twitter did not do: relative independence. In exchange for joining Facebook, the company will give him huge resources to create Instagram and allow him to manage it as CEO. Systrom agreed, and among the reasons he shared with his board was that “if Facebook took steps to copy Instagram or target the app directly, it would make it much harder to grow,” Frier said. The Facebook Guidance Guide for New Employees said, “If we don’t create something that kills Facebook, something else will happen.”

Systrom famously sold the company for $ 1 billion, although the final purchase price was $ 715 million, as the deal was closed after the famous skeletal IPO from Facebook, when the company’s shares lost great value. (He recovered!) The deal passed a standard Federal Trade Commission audit, in which each company hired its own lawyers to look for any evidence that the deal was anti-competitive and should not be approved. Facebook has claimed that it does not compete directly with Instagram, but that Facebook Camera, a recently launched photo sharing app, has done so and is one of dozens of photo sharing apps on the market.

This approach has neatly overturned Instagram’s true strategic value of helping Facebook build the world’s largest user base around which to continue to build a dominant advertising business. And this value was not obvious; when the deal was announced, CNN said Zuckerberg “pays a hefty price for a startup that has a lot of noise but no business model.”

The FTC has refused to prosecute, in part because antitrust regulation since the 1960s has been based on the idea of ​​harm to consumers, which is largely measured by rising prices. Because both Facebook and Instagram offered their services for free, the FTC thought it would be difficult to prove that the deal would harm consumers. One possible outcome of the antitrust hearing in Congress is the improvement of this standard for a more detailed study of such agreements.

Both Facebook and Instagram were much smaller in 2012 than they are today, and it was unclear then that Instagram, in particular, would become much more than a photo-sharing app. In recent years, when it gained more than 1 billion users, it actually became a continuation of the original Facebook – a universal social network with a much younger audience than its parent company.

“I think the FTC had all these documents … and then voted unanimously not to challenge the acquisition,” Zuckerberg said Wednesday. “Given it’s probably obvious, Instagram would have reached the scale it is today. But at the time, it was far from obvious.”

The FTC completed its review of the acquisition in the summer of 2012 without conducting any public hearings or public reporting. The agency noted that it could resume the investigation on a certain future date, “as the public interest may require.”

The UK’s Fair Trade Office has also revised the deal, as has – with a rare step – the California Department of Corporations. No one found a reason to block the deal. A few months after the acquisition of Instagram and its 80 million users belonged to Facebook.

However, Zuckerberg’s emails suggest that he knew better than regulators how valuable it would be to buy Instagram – and other competing startups – for Facebook.

“Google+ is a red herring,” a senior engineer wrote on Facebook in January 2012. “We’re being distracted by a fragile clone, and guys like Instagram and Pinterest are speeding up and creating new markets that we should have seen.”

After completing the deal on Instagram, Zuckerberg emailed the engineer, citing the publication. “I remember your internal post about how Instagram was our threat, not Google+,” he said. “In principle, you were right. One of the startups is that you can often buy them. “

“One of the reasons people underestimate the importance of browsing Google is that we can probably always buy any competitive startups,” Zuckerberg wrote in an email to another employee who wrote to congratulate him on his acquisition of Instagram. “But we can buy Google. It’ll be a while.”

Source link