In an internal email that emerged as part of the Meta antitrust trial, Meta CEO Mark Zuckerberg was worried about the company’s Instagram acquisition could lead to cannibalism on Facebook. If that happens, it could lead to a “network collapse of more attractive and profitable products.”
Zuckerberg proposed several ways to prevent this cannibalism from occurring. This includes building a bridge between Meta’s apps to act as a single network (suggesting that Instagram is contributing to the loss of Facebook’s cultural relevance). He also openly wondered whether Facebook would provide better service by spinning out Instagram as another business.
In the trial against Meta, the US Federal Trade Commission (FTC) is trying to prove that the company operates a social networking monopoly and can maintain its dominant position in the market by acquiring competing apps such as Instagram and WhatsApp. As evidence, prosecutors have surfaced emails and other messages indicating that Zuckerberg understands the threats that Instagram has cast on Facebook.
In an email in May 2018, Zuckerberg explained to other Facebook executives. He was not involved in Apps’ approach, including Meta Chief Product Officer Chris Cox, former COO Sheryl Sandberg, former CTO Mike Schroepfer, former Chief Growth Director (now COO) Javier Olivan and former CFO David Wehner.
Instagram hurts Facebook’s growth
Specifically, Zuckerberg was worried that Instagram’s growth could hurt Facebook itself. Internal data says it shows that Facebook engagement will be “significantly reduced” when users join Instagram.
“As a large portion of the population is available on Instagram, we are beginning to get more data from the compounds used on Facebook that suggest this depression,” Zuckerberg wrote in the email section entitled Cannibalism and Network Disruption.
The more the company drives Instagram growth, the greater the threat of Instagram posing for Facebook, it appeared Zuckerberg was concluded.
“This raises the question of whether future models may be wrong,” Zuckerberg continued. “We expect both Facebook and Instagram to grow right now, but if you promote Instagram to be roughly the same size as Facebook, it seems likely that it will have a major negative impact on Facebook that you are not currently modeling,” he writes. “So, while the Facebook network could maintain a decline in engagement among some of its members, if the involvement of that entire population is dented, that could lead to significantly worse outcomes than we expect,” Zuckerberg said.
He also said that Instagram’s growth is driven primarily by distribution from the Facebook app and the use of Facebook Friends Graph.
“What this suggests is that you want to grow two products, but it could lead to a network breakdown of more attractive and profitable products, replacing them with something that is more attractive, attractive and less profitable,” says Zuckerberg.
As a result, he said Facebook should reduce promotions to Instagram and that Instagram should instead introduce new integrations that will lean the balance towards Facebook. He explained that the app “will function more and more as a single network in more ways” as he hopes to build a bridge between the two networks.
As an example, Zuckerberg pointed out that it should be easier for video creators with large viewers to engage both apps more easily. Additionally, he wanted to combine WhatsApp, Messenger and Instagram voice calling networks to become a single network. (Meta eventually introduced cross-platform messaging in 2020, then moved back to it a few years later.)
App Strategy Family and Spinout
In particular, Zuckerberg called for the difficulties in building new products and services within Instagram and WhatsApp for “their founder leadership.”
He lamented that management cannot openly discuss concerns, particularly about Instagram. That’s because it could lower the morale of the team and prevent Instagram co-founders Kevin Systrom and Mike Krieger from keeping them.
He also pushed the company to rethink its brand of products so that Facebook brands remain at the forefront and central.
“If you open these apps, you’ll say ‘Instagram by Facebook’ and ‘Whatsapp on Facebook’,” Zuckerberg suggested in his email. “We may need to solidify this relationship in people’s minds with Facebook branding, the app’s chrome, whose app’s name and logo is today.”
Zuckerberg pushed the meta to rethink the brand just as Facebook was on the forefront and center.
In 2021, Facebook was rebranded as a meta instead. Meta has its logo displayed on all company apps.
If the FTC wins that case, Meta may need to spin out Instagram and WhatsApp as separate businesses. Ironically, it was something Zuckerberg himself proposed as an alternative strategy in his 2018 email, perhaps the “only structure” to achieve the company’s goals. Spin-out of Instagram could potentially keep Facebook growing, focusing on the meta team and keeping Systrom, Zuckerberg writes. (The founder of Instagram left in September 2018 later in the same year.)
Ultimately, Meta chose not to spin the acquisition. However, Zuckerberg warned other executives in email that there was a “non-trivial opportunity” that could force Meta to spin out Instagram and WhatsApp in the next five to ten years, building up all the work “what we can’t hold.”
If the FTC succeeds in court, Zuckerberg is proven right.
Meta downplayed the size of these emails in a statement shared with TechCrunch.
“The out-of-and-year documents on acquisitions reviewed by the FTC over a decade ago do not obscure the reality of competition to face or overcome weak cases of FTC,” a spokesman for Meta said.