What if Mark Zuckerberg had not bought Instagram and WhatsApp
In 2012, when Facebook’s chief executive, Mark Zuckerberg, cut a $1 billion check to buy the photo-sharing app Instagram, most people thought he had lost his marbles.
“A billion dollars of money?” joked Jon Stewart, then the host of “The Daily Show.” “For a thing that kind of ruins your pictures?”
Mr. Stewart called the decision’really lame’. His audience, and much of the world, agreed that Mr. Zuckerberg overpaid for a photo-sharing app that featured a bunch of filters.
Two year later Mr. Zuckerberg again opened his wallet when Facebook agreed to purchase WhatsApp for $19 billion. Many Americans were unaware of the messaging app. It was well-known internationally, but not in the United States. It seems that hindsight is 20/20. On Monday, the government claimed in a landmark antitrust case that both acquisitions, now considered to be among the largest in Silicon Valley’s history, were the actions taken by a monopolist protecting his turf. Mr. Zuckerberg, who was called as the first witness in the trial, has previously denied that buying Instagram and WhatsApp hurt competition.
But the case, which could bring about the breakup of one of tech’s most powerful companies, largely deals in hypotheticals. The government and Mr. Zuckerberg couldn’t have predicted the technological advancements since he paid $1 billion for Instagram or what would have occurred if regulators hadn’t approved the purchases. That makes the antitrust case against the company — which has been renamed Meta — one of the most slippery in a tech industry that has long been defined by unpredictability.
“It was a very, very different time in Silicon Valley,” said Margaret O’Mara, a tech historian at the University of Washington, about Facebook’s acquisitions. “There was a vibe of ‘Oh, wow, Facebook really is just a bunch of kids spending extravagantly!'”
I happened to have a front-row seat into Facebook’s deal-making at the time, especially with Instagram. As a reporter at Wired Magazine in San Francisco, I had a desk next to Instagram’s HQ. Kevin Systrom, Instagram co-founder and 6-foot-5, was 28. He would walk around the wood and iron swing set at South Park Commons, while taking calls or discussing product ideas with his employees. Jack Dorsey – a cofounder of Twitter, who identifies as more of an artist than a techie – also hung out on the same South Park playground with friends and talked about ideas that became his social media application. WhatsApp, which grew quickly internationally, was just a text messaging app with no business model. And clones of these apps were plentiful, such as Color, Flickr and VSCO in photo sharing, and Kik, Skype and Viber in messaging.
Even Facebook faced questions then about whether it was a viable business. Two months after the Silicon Valley firm announced that it would be buying Instagram, the company held one of its most disastrous tech IPOs since the dot-com boom of the late 1990s. Price.
But fortunes in Silicon Valley can rise and fall quickly. In a few short years, companies can go from being frivolous fancies into juggernauts. What may seem like a clever business move made by a CEO one moment, can be branded as a mistake the next. (Half the apps mentioned above are dead, dying or were sold as parts long ago. My favorite kimchi-burrito restaurant is no longer in business. )
At the time, Mr. Systrom gave a positive spin on the Instagram deal as the future looked increasingly grim for Facebook.
“I’ve been taught throughout my life that there’s upside and downside in all public markets,” he said at the California Department of Corporations hearing in August 2012, which I attended on the sixth floor of the department in downtown San Francisco. “I still believe strongly in the long-term worth of Facebook.” Instagram and WhatsApp are today two of Meta’s most important business units. The platforms are used to drive global conversation about sports, politics, news and culture. The apps have millions of users.
In a way, the antitrust case is about competing versions what tech history might have been. What if Mr. Dorsey had won the bid to buy Instagram from Mr. Zuckerberg, who was also trying the purchase the photo-sharing application for Twitter? What if WhatsApp had sold to Google, which was champing at the bit to add the messaging app to its own portfolio?
What if other competitors had created superior photo-sharing apps that could have thrived if Facebook hadn’t used Instagram to crush them? And what if Facebook had screwed up both deals, or could not keep up with competing apps and fell behind even after buying Instagram and WhatsApp?
These are unknowable and can be answered only by someone with a time machine. Each side is arguing its version of what would have occurred if Meta’s acquisitions had never been approved.
On the same “Daily Show” segment from 2012, Jessica Williams, the senior youth correspondent, said — tongue fully in cheek — that Facebook’s purchase of Instagram made perfect sense.
“Before Instagram, if I wanted my pictures to look like they were taken in the ’60s, I’d have to invent a time machine and travel back 50 years,” she said. “You know how much a time machine would cost to build?
“Easily a billion dollars.”
