San Francisco Frontiers - Facebook added 'value' to Instagram, Zuckerberg tells antitrust trial

The federal court trial in Washington has dashed Zuckerberg's hopes that the return of President Donald Trump to the White House would see the government let up on the enforcement of antitrust law against Big Tech.

Federal Trade Commission (FTC) attorney Daniel Matheson showed Zuckerberg emails from 2012 in which Facebook's former chief financial officer listed possible reasons for buying start-ups like Instagram, including "neutralizing a competitor."

Zuckerberg sidestepped commenting on the role of competitive pressure, instead playing up the ability of Facebook to improve features, user numbers and revenue.

"Instagram integration ended up going very well; we were able to add way more value to Instagram than we would have expected," Zuckerberg testified.

"After that, we basically felt more confident that we could identify other social apps, potentially acquire them and grow them faster (than they would have on their own)."

Zuckerberg said he believes that if Snapchat had accepted Facebook's buyout offer in 2013 it would now have billions of users.

Snapchat ended last year with about 450 million daily users.

"For what it's worth, I think we would have accelerated their growth," Zuckerberg said of Snapchat.

The case could see Meta forced to divest of Instagram and WhatsApp, which have grown into global powerhouses since their buyout.

It was originally filed in December 2020, during the first Trump administration, and all eyes were on whether the Republican would ask the FTC to stand down.

Zuckerberg, the world's third-richest person, has made repeated visits to the White House as he tried to persuade the president to choose settlement instead of fighting the trial.

As part of his lobbying efforts, Zuckerberg contributed to Trump's inauguration fund and overhauled content moderation policies. He also purchased a $23 million mansion in Washington in what was seen as a bid to spend more time close to the center of political power.

- 'Really scary' -

Central to the case is Facebook's 2012 billion-dollar purchase of Instagram -- then a small but promising photo-sharing app that now boasts two billion active users.

An email from Zuckerberg cited by the FTC showed him depicting Instagram's emergence as "really scary," adding that is "why we might want to consider paying a lot of money for this."

In his first day of testimony Monday, Zuckerberg downplayed those exchanges as early talk before plans for Instagram came together.

But the FTC argues that Meta's $19 billion WhatsApp acquisition in 2014 followed the same pattern, with Zuckerberg fearing the messaging app could either transform into a social network or be purchased by a competitor.

Meta's defense attorneys counter that substantial investments transformed these acquisitions into the blockbusters they are today.

They also highlight that Meta's apps are free for users and face fierce competition.

FTC attorney Matheson said in opening remarks that Facebook "decided that competition is too hard and it would be easier to buy out their rivals than to compete with them."

Meta attorney Mark Hansen countered in his first salvo that "acquisitions to improve and grow an acquired firm" are not unlawful in the United States, saying that is what Facebook did.

A key part of the courtroom battle will be how the FTC defines Meta's market.

The US government argues that Facebook and Instagram are dominant players in apps that provide a way to connect with family and friends, a category that does not include TikTok and YouTube.

But Meta disagrees.

When asked about Facebook and Instagram main competition, Zuckerberg named Google-owned YouTube and China-based sensation TikTok because video "is the primary way people share content."

On the video front, Meta has a lot of catching up to do, Zuckerberg told the court.

H.Davis--SFF