Internal emails between Facebook CEO Mark Zuckerberg and chief financial officer David Ebersman were brought to light during the House antitrust subcommittee hearing on Wednesday. The emails, obtained by The Verge and originally sent in 2012, reveal Zuckerberg openly discussing competition from Instagram as well as Path, noting that they were "nascent" but could become "very disruptive to [Facebook]."
"Given that we think our own valuation is fairly aggressive and that we’re vulnerable in mobile, I’m curious if we should consider going after one or two of them," Zuckerberg wrote to Ebersman. "What do you think?"
In the back and forth, Ebersman can be read suggesting that the move should consider four reasons for acquiring Instagram co-founder Kevin Systrom's app: "neutralizing a competitor, acquiring talent, integrating products to improve the Facebook service, and 'other.'" Zuckerberg went with options one and three. Less than an hour later, the CEO followed up to say, "I didn’t mean to imply that we’d be buying them to prevent them from competing with us in any way."
Now the subcommittee — already boiling with criticism against anti-competition practices — says that Zuckerberg was avoiding fair competition by seeking to acquire Instagram and ultimately crush the existential threat it posed to Zuckerberg's business model.
Antitrust panel gets heated — New York Democratic representative Jerry Nadler was the one to grill Zuckerberg over these internal emails going back to 2012. The representative argued that Facebook wanted to avoid fair competition after noticing its services were inadequate and decided to simply buy the app. Zuckerberg backtracked the admission of wanting to "neutralize" Instagram only after realizing that this position could land him in legal trouble, the committee argued. One of the slides showing the email, according to The Verge, was labeled "Whoops!"
Even Twitter wanted Instagram — For years now, critics view Facebook's stance toward Instagram as that of a powerful giant feeling an existential threat from a then-smaller competitor. On Wednesday, Zuckerberg told Congress that Instagram was a rival as far as mobile photo-sharing was concerned. Still, it's clear that Silicon Valley titans viewed Instagram as a lucrative venture, including Twitter, which once offered Instagram company stock worth $500 million to $700 million, according to No Filter author Sarah Frier. Ultimately, Systrom sold the app for the final price of $715 million (initially tagged at $1 billion).
Zuckerberg goes on defense mode — To defend the acquisition, Zuckerberg pointed to the Federal Trade Commission review that unanimously voted to let the deal go forward in 2012. Two other agencies to review and approve the deal were United Kingdom’s Office of Fair Trading and the California Department of Corporations.
With the backing of these reviews, Zuckerberg might be able to shield himself from criticism for now. But it's clear that the Facebook CEO has always seen Instagram, Path, Foursquare, WhatsApp, and others as threats to Facebook's longevity and relevance. How he has gone about dealing with these apps may haunt Zuckerberg and his reputation forever.