2012 In an email six weeks before acquiring Instagram, Facebook CEO Mark Zuckerberg wrote that one of the reasons for his acquisition was to “neutralize a potential competitor.”; El. The letters were revealed during today’s meeting of Parliament’s Antitrust Committee, which was attended by four technology moguls: Tim Cook, Sundar Pichai, Jeff Bezos and Zuckerberg. El. The letters were first reported by Verge.
Facebook was one of the largest online social networks in 2012, but its dominant position was not as secure as it is now. There were a lot of competing social networks, and Zuckerberg was worried that switching to smartphones would put his company on flat feet.
Neutralize a potential competitor?
2012 February 27 In the evening, Zuckerberg emailed Facebook’s chief financial officer, David Ebersman, about the possibility of acquiring “mobile app companies such as Instagram and Path that build networks competing with our own.” He worried that “if they grow on a large scale, they could greatly damage us.”
In response the next morning, Ebersman urged Zuckerberg to make sure he had a good reason to buy. He suggested three possible reasons for the deal: “1) neutralize a potential competitor”, “2) gain talent” and “3) integrate your products with us to improve our services”. Ebersman said the first reason was a “bad cause” because “something else will happen in their place right away.”
Zuckerberg responded within 20 minutes. “It’s a combination of parts 1 and 3,” he wrote. He then expressed his thinking:
One thing that (1) may be more acceptable is that there is a network effect around social products and many different social mechanics invented. When someone wins at a certain mechanic, it is difficult for others to oust them without doing something else. It may be that someone is overcoming Instagram by creating what is better ported to the network, but it is more difficult to do so if 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 will still integrate them over the next 12 to 24 months.
Zuckerberg added that another way to look at an acquisition strategy is to “buy time”. “Even if some new competitors appear after buying Instagram, Path, Foursquare, etc., we will now give a year or more to integrate our dynamics so that someone can regain their scale,” he said. The new products “won’t get as much attraction” when Facebook replicates their social mechanics, Zuckerberg predicted.
Obviously, Zuckerberg soon realized how bad this email could be. A letter if it eventually becomes public. Less than an hour later, he sent another email to Ebersman. The letter.
“I wasn’t going to assume we’d buy them so they couldn’t compete with us in any way,” Zuck wrote. “Purchasing them would give people the time to integrate their innovations into their core products. That’s how we do integration, not really product alignment. What worries me most is what companies could do together if we worked to adapt what they came up with that more people would suffer ”.
Instagram can hurt us
April In the letter, Zuckerberg wrote that “Instagram can significantly harm us without becoming a huge business.”
A few days later, Facebook bought Instagram for a $ 1 billion deal. Exchange email 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, not Google+,” Zuckerberg wrote. “You were basically right. But one thing about beginners is that you can often buy them.”
The deal ended with 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 into one of the largest online social networks.
The transaction is now more screened. Democrats in the House have emphasized the Letters at a court hearing on Wednesday when they accused Zuckerberg of the deal.
“It was clear to me that Instagram was a competitor in mobile photo sharing,” Zuckerberg said at the hearing. “There were many others at the time. They competed with programs like VSCO Cam and PicPlz and companies like Path. It was a subset of the common connectivity space we’re in.”