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Facebook Businesses

Mark Zuckerberg Emails Outline Plan To Neutralize Competitors (theverge.com) 64

Posted by msmash from the closer-look dept.
An anonymous reader shares a report: In late February 2012, Facebook CEO Mark Zuckerberg emailed his chief financial officer, David Ebersman, to float the idea of buying smaller competitors, including Instagram and Path. "These businesses are nascent but the networks established, the brands are already meaningful, and if they grow to a large scale the could be very disruptive to us," he wrote. "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. What do you think?" Ebersman was skeptical. "All the research I have seen is that most deals fail to create the value expected by the acquirer," he wrote back. "I would ask you to find a compelling elucidation of what you are trying to accomplish."

Ebersman went on to list four potential reasons to buy companies and his thoughts on each: neutralizing a competitor, acquiring talent, integrating products to improve the Facebook service, and "other." It's a combination of neutralizing a competitor and improving Facebook, Zuckerberg said in a reply. "There are network effect around social products and a finite number of different social mechanics to invent. Once someone wins at a specific mechanic, it's difficult for others to supplant them without doing something different." Zuckerberg continued: "One way of looking at this is that what we're really buying is time. Even if some new competitors springs up, buying Instagram, Path, Foursquare, etc now will give us a year or more to integrate their dynamics before anyone can get close to their scale again. Within that time, if we incorporate the social mechanics they were using, those new products won't get much traction since we'll already have their mechanics deployed at scale."

Forty-five minutes later, Zuckerberg sent a carefully worded clarification to his earlier, looser remarks. "I didn't mean to imply that we'd be buying them to prevent them from competing with us in any way," he wrote. The emails between Zuckerberg and Ebersman were revealed today during the House antitrust subcommittee's hearing on antitrust issues in tech, as Rep. Jerry Nadler (D-NY) questioned Zuckerberg about the Instagram acquisition. The emails, along with several other messages and documents from 2012, show that Facebook -- and Zuckerberg, in particular -- wanted to buy Instagram to avoid competition, the committee argued.
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Mark Zuckerberg Emails Outline Plan To Neutralize Competitors More

Mark Zuckerberg Emails Outline Plan To Neutralize Competitors

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  • IN THE MIDDLE OF A HEARING ABOUT ANTI-TRUST (Score:4, Insightful)

    by Narcocide ( 102829 ) on Wednesday July 29, 2020 @01:49PM (#60344507) Homepage

    you just can't make this shit up

    • Anti trust has zero teeth in the US because the politicians aren't going to cut off their nose to spite their face.

      • If you want somebody bit, looks like you're gonna have to do the biting.

        • Just call me MadDog then. woof.

          • Git em!  Sic!  Sic!

            • In many other countries and eras, I'd be executed just for the things I speak about. I say it every day, to everyone I can, because that's my duty as a citizen of this nation. We have a responsibility to care for our own government if we are to say that it is of the people, by the people, and fkr the people. These are our people, misguided as they might be.

              If I speak now, maybe the government sanctioned murders in the street can stop. Maybe people living now will get to continue living their full lives. If

      • Vote in your state and national senate and house elections...and preferably not for the candidates that are bought.

    • Re: (Score:3)

      by lgw ( 121541 )

      Do all the people insisting that Facebook not be regulated as a publisher at least agree that they should be regulated as a monopolist? They certainly have "monopoly power", with such a dominant market share. Or is it all anarcho-capitalism now, corporate rights all the way?

      • Do all the people insisting that Facebook not be regulated as a publisher at least agree that they should be regulated as a monopolist?

        Definitely! The big question is how to do it. My preference would be an open protocol (like email) so users can chose their preferred social networking provider (or run their own "social server") and still be able to connect with users who have chosen a different social network provider. Unfortunately, the more likely result will be requiring Facebook to spin off Instagr

      • It's already illegal - that's why the CYA email (Score:5, Interesting)

        by raymorris ( 2726007 ) on Wednesday July 29, 2020 @03:03PM (#60344819) Journal

        Zuckerberg sent the back-pedal email 45 minutes later because he knew that what he had just suggested is illegal. It's *already* illegal to attempt to gain or maintain a monopoly by buying up potential competitors. No new regulation is needed - the FTC could bust Facebook *today*.

        The question of whether I am responsible for the things I write and post on Facebook or whether Facebook is responsible for what I write is a totally unrelated question. That also gets into how thr Facebook algorithm selects which posts display when you first log in. That's a completely separate issue, though, in no way related to their anti-competitive conduct.

        • Nothing wrong with illegal suggestion (Score:5, Interesting)

          by Okian Warrior ( 537106 ) on Wednesday July 29, 2020 @03:35PM (#60344933) Homepage Journal

          Zuckerberg sent the back-pedal email 45 minutes later because he knew that what he had just suggested is illegal.

          And there's nothing wrong with that.

          It's perfectly reasonable for a non-lawyer to suggest something illegal, only to be told that it's illegal. It's how non-lawyers find out what they can and cannot do, and Zuckerberg is not a lawyer. I would expect that the CFO would be much better informed about whether what Mark suggested was illegal.

          It's also perfectly reasonable for someone to send an E-mail and later realize that it might be taken in a way that was not intended. That happens all the time.

          I don't find any of the discussion listed in the OP to be problematic, finding new goods and services, improving their experience is something the CEO is expected to do, and buying up smaller companies is also something we see every day and no one bats an eye at it. Amazon purchased "Whole Foods" and got into grocery delivery, for example, which is a far cry from their original purpose as used book seller.

          What should concern people isn't words, but actions.

          We have free speech for a reason, it's one way that people learn (such as what's possible, what's illegal, what's a good or bad idea) and it's also one way that people build on each others' ideas. It's entirely possible to suggest something illegal, and have someone else have a modification that makes it *not* illegal.

          It's one of the reasons people evolved to have abstract thought: instead of trying something and dying you can generate ideas, run them in mental simulation, and have the ideas die instead of you. You can pass rough and ill-formed ideas to others and have them add their expertise to make a better idea.

          I don't see anything wrong with the dialogue posted in the OP.

          Microsoft examining a company in detail for purchase and then coming up with a competing product 6 months later is action that should be curtailed.

          But talking about things is harmless. That's why it's a right.

          • Re:Nothing wrong with illegal suggestion (Score:4, Insightful)

            by sound+vision ( 884283 ) on Wednesday July 29, 2020 @05:58PM (#60345429) Journal

            Every high school kid knows what a monopoly is. Zuckercluck is college-educated and an entrepreneur. He'd been in business at the executive level for almost a decade. The argument of "He didn't know!" is absurd on its face. It's also not a legal defense.

            • What was true then, is even truer and more relevant today. Combined with brilliant tax structures, and market share - time was bought, and getting legal of what a monopoly is offensive - everyone else knows there is not, and will be no competition going forward. China and India know this, and are taking action. I guess it is up to other companies to reform international taxes/ turnover - better than France did, to ensure some sign of new competition., rather than bitch that they can't actually prove anythi

        • Re: (Score:2)

          by lgw ( 121541 )

          The question of whether I am responsible for the things I write and post on Facebook or whether Facebook is responsible for what I write is a totally unrelated question.

          The question is very related, IMO. The government has the right to control a monopolistic business for the public good, in many ways that it would not otherwise. It's not just about product pricing, it's also about much more general behavior of a monopoly towards its customers. A monopoly can be held to a higher standard of consumer rights than a normal business in a competitive market, precisely because a consumer can't go elsewhere.

          • Re: (Score:2)

            by lgw ( 121541 )

            The Amazon story just posted to Slashdot is a perfect example of my point here. The government has an interest Amazon being both a seller and a platform precisely because they have a dominant position in online retail.

    • I have to say I don't understand your post. Zuckerberg didn't have the e-mail exchange in the middle of an anti-trust hearing. I don't think it's particularly surprising that something from the past was dug up and publicized in the middle of an anti-trust hearing.

    • The emails are from 2012. They just now came up during the antitrust probe as that's the point of the probe, to bring up past actions which may have been anti-competitive.

  • The business "killzones" around Silicon Valley megacorps don't exist by mistake.

  • "Facebook is silencing Trump as much as it can get away with! We've even adopted the memewrapper 'it's not just wrong, it's dangerously wrong! Please don't use laws to hurt us further!"

    Nah. These are completely separate issues, and fb is doing this out of a sense of propriety, so it's not a First Amendment thing.

    Now let's get back to the hearings on hurting facebook by fining them, and section 230 changes.

  • "I would ask you to find a compelling elucidation of what you are trying to accomplish."

    Notice he didn't say "find something compelling to accomplish" but rather "find a compelling explanation for what you're trying to accomplish". It's clear the goal was to squash competition, what he was urging was for Zuckerberg to take care in making it sound as if there was a viable business reason other than anti-competitive behavior.

    Also, Zuckerberg doesn't know the difference between "mechanic" and "mechanism", a c

    • Also, Zuckerberg doesn't know the difference between "mechanic" and "mechanism", a clear indication that he's successful due to sociopathy

      I wasn't aware that grammar mistakes were a symptom of being a sociopath (although I'm pretty sure being a grammar Nazi IS a symptom).

    • Well, Zuckerberg might be a lot of things but he's certainly not stupid. Had he stuck it out at Harvard I have no doubt he would have graduated at the top of his class. He is most certainly a prick, and maybe a sociopath, but I wouldn't read too much into the misspelling in his email. I'm sure he sends hundreds of them every day.

  • Is that illegal though? (Score:4, Interesting)

    by Dynedain ( 141758 ) <slashdot2&anthonymclin,com> on Wednesday July 29, 2020 @02:19PM (#60344657) Homepage

    Is maintaining first-move advantage a type of "preventing competition"? There's a huge grey area between those. This isn't going to be resolved through Congressional hearing.

    • Re: (Score:1)

      by tdailey ( 728882 )

      I also ask this. If you have a company and I make an honest offer to buy your company, where is the evil? Even if my intention is to close the company so it can't compete with mine. If you're a smart business owner, you will want a price today equal to the (future value of) the total profits you expected to earn over X years.

      Essentially, I have to offer to pay you your expected profits in advance in trade for your company. You get your profits now instead of later. I have to deplete my cash now instead of y

  • As much as I do feel these tech giants abuse their power, these hearings are a sham to cover Congress failing in their responsibility. Apple has strong competition from Google in Android and Samsung in the hardware. Yes they can abuse their power, such as the Qualcomm Apple spat, but they still lost (for now). Amazon has a strong competitive advantage but Costco is still kicking ass, WalMart is still enormous, and Alibaba dwarfs Amazon overseas. Google has certainly abused their dominant position in Sea

  • 45 minutes later (Score:3)

    by chill ( 34294 ) on Wednesday July 29, 2020 @02:43PM (#60344737) Journal

    That's how long it took for his legal counsel to recover from the heart attack, run to Zuck's office, and dictate the "clarification" e-mail.

  • He's not wrong (Score:5, Insightful)

    by Headw1nd ( 829599 ) on Wednesday July 29, 2020 @02:53PM (#60344767)

    If there's one thing we've seen in the past 20 years it's that the online world isn't really a healthy marketplace. In most niches there just aren't multiple competing businesses, there is one dominant player and much smaller companies flitting at their ankles, hoping to catch that one wind that takes them to the top spot. Google, Amazon, ebay dominate their market spaces, with their only direct competition being foreign (aka Chinese).

    What Zuckerberg is saying here is that when facebook loses the top spot it will be to a competitor who is leveraging a new feature, and when that happens facebook is essentially done. He doesn't envision a world where there are two social networks, both alike in dignity, engage in productive competition. Instead he sees a world where the ascendant drives the established to ruin. In this worldview, his goal is simply to survive as long as possible. To do that he is trying to keep any weapon he can (ie new features) out of the hands of potential usurpers. Based of what we've seen of online empires so far, I honestly think his reasoning is sound. Something fundamental needs to change in the way we use the internet for multiple competitors to be viable.

    • If we could come up with a federated system that lets people run their own servers it might work, but it would actually need ads and all those games. I say this as a husband that watches his wife surfing facebook. She clicks ads of stuff she might actually buy and it's rather good at those suggestions. Luckily she just likes to window browser a lot. She also must have her games.

      If all you wanted was a chat setup, https://diasporafoundation.org... [diasporafoundation.org] seems like a good fit for the privacy folks but it doesn't ha

    • It's not the network, it's the network effect. It doesn't matter how many Facebook clones you build with your fancy (and even more easily broken) technology, if no one wants to use them, it will be a futile effort.

      The local nerds, as usual, think that the mechanism for shuffling bytes just needs to be there and the internet gets better. That's not how things work. But it's not surprising the nerds get this wrong - success on the internet, for better or worse, is driven by popularity. This is something that

  • from the /. summary

    "I didn't mean to imply that we'd be buying them to prevent them from competing with us in any way...

    That Zuckerberg considered buying out the competition to prevent competition is precisely what he had previously written.

    He obviously sent the followup denial to protect Facebook against legal action for anti-competitive behavior.

    Why does it work that way? Why is the legal system so screwed up that idiotic shit like that works well enough for CEOs to do that?

  • Once Facebook has got a monopoly and all competition is neutralised will they go after their customers who pose a threat to their business, because then openness will be of little use when customers can go nowhere else and getting back the big advertisers who have left will openness pose a threat to their revenue. And threats get neutralised.

  • It takes two to dance: an acquisition needs the CEO of the company to have a will to sell it's ownership as well.

  • You man much much later, when someone edited the mailbox file to put a new "e-mail" in, that would not make Zuck look too bad, before sending it off to congress before anyone would notice the delay.

  • "I didn't mean to imply that we'd be buying them to prevent them from competing with us in any way"

    "Yes, we is blasting into that bank vault, but I don't mean to imply that we is going to steal all the money in there."

  • So if you buy a competitor to stop them from competing with you, that's illegal, but if you buy a competitor to get technology, staff and infrastructure allowed them compete with you, that's legal? Am I getting this right?

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