Last week, Facebook confirmed that the Federal Trading Commission (FTC) had initiated an investigation into anti-competitive practices. At the heart of this investigation is Mark Zuckerberg’s company acquisition strategy. Indeed, for the FTC, Facebook may well seek to get its hands on potential competitors before they become a real threat.
Acquisition Of Instagram In 2012
In my opinion, the most surprising thing in this story is that the FTC took so long to open an investigation! In 2012, Facebook bought Instagram for $1 billion. At the time of Facebook’s takeover, Instagram was still only a social network with just over 50 million active users per month. Nevertheless, it was very popular with young people and its features made it a potential rival for Facebook in the future.
Facebook therefore decided to go all out by offering $1 billion to the founders to take control of it. It has to be said that Mark Zuckerberg has had a hollow nose because since then, Instagram has continued to grow to exceed one billion active users per month since mid-2018.
Of course, the decisions made by Facebook following its acquisition have contributed to the phenomenal development of Instagram. Nevertheless, even without Facebook, Instagram had set out to grow and could have become a real competitor of Facebook. Mark Zuckerberg’s firm could not therefore take such a risk.
Acquisition Of WhatsApp In 2014
In 2014, WhatsApp was booming as it had just exceeded 600 million monthly users on its mobile messaging application. Faced with such growth, Facebook feels threatened even if it remained largely the leader with its 1.3 billion monthly users. Nevertheless, the giants of the Web know very well that one must never rest on their laurels or risk disappearing in the face of competitors who have the potential to overtake them one day.
Mark Zuckerberg therefore decided to buy WhatsApp for $19 billion. Again, in my view, this is a clear example of Facebook’s defensive policy to protect its dominant position in the social networking market. The increasing integration between Facebook, Instagram and WhatsApp services allowed Mark Zuckerberg’s company to strengthen its monopoly in its chosen field. Whereas the historical founders of WhatsApp just left following differences of opinion with Mark Zuckerberg, WhatsApp now has more than 1.6 billion users active monthly and is even more used than Facebook Messenger around the world.
Failed Acquisition Attempt On Snapchat
In its clearly anti-competitive strategy to ensure that it remains the hegemonic leader in the social networking market, Facebook also tried to buy Snapchat in 2013. The founder Evan Spiegel rejected two takeover offers by Mark Zuckerberg’s company: one for $1 billion and the other for just over $3 billion.
Proof of Facebook’s anti-competitive behaviour in its field, when the company is unable to buy a competitor, it switches to destruction mode. What does that mean? Quite simply that Facebook will gradually copy and integrate all the core features that make this competitor’s strength in an attempt to destroy it.
Facebook has copied most of Snapchat’s star features, starting with stories or stickers and filters that can be added to photos and videos. All copied features have been integrated into Facebook, Instagram or WhatsApp. A sign of Facebook’s lack of inspiration in terms of innovation, it even went so far as to copy the graphic interface of the Snapchat camera part!
If you want to learn more about how Facebook has tried to crush Snapchat in recent years, I suggest you read this excellent article from Wired:
Copycat: How Facebook Tried to Squash Snapchat
Just before Facebook went public in 2012, Mark Zuckerberg had a bound red book titled Facebook Was Not Originally…
Small Startups Even More Damaged
While Snapchat is able to survive Facebook’s anti-competitive practices, this is not the case for many small startups that refuse Facebook’s takeover offers. Indeed, it has been reported several times in the past that when Facebook was kindly rejected, the firm then had only one stated purpose: to copy the startup’s features to cause its loss. This has worked many times causing the loss of many startups.
This is clearly not good for innovation and competition.
Libra Is The Last Straw
From my point of view, Facebook clearly kills any competition in the world of social networks. This is done by buying out all potential competitors or by trying to sink the most resistant ones such as Snapchat via a copy of the features at the heart of their success. Until now, the FTC had never reacted so frankly to Facebook’s practices.
Facebook’s rapid growth has so far been enough to hide their practices in terms of protecting users’ privacy but also their practices in terms of market competitiveness. The various scandals about how Facebook manages the privacy of its users have clearly damaged its image with the US government and legislators in recent years. Thus, many voices are now rising to demand the dismantling of Mark Zuckerberg’s firm.
The announcement of the launch of its own cryptocurrency, Libra, in June 2019 may have been the last straw for Facebook. The American government and MPs have now taken up the subject and no longer seem to want to let anything go to Facebook. They want accounts and Facebook will have to comply with their wishes from now on.
The latest announcements from the Libra project are not very good and it may even be that Facebook’s cryptocurrency is never released! Nevertheless, this will probably not be enough to calm the American regulator’s willpower to break the dominance of Facebook.
Facebook is now in the eye of the storm and the coming months are likely to be very though for Mark Zuckerberg and his firm.