Zuckerberg spent vast sums of money buying Instagram ($US1 billion in 2012) and WhatsApp ($US19 billion in 2014) before either was generating revenue, let alone profit.
Perception of the merits of those deals has changed over time: first they were viewed as extremely risky moves taken by a young CEO; then, as Facebook’s share price continued its meteoric rise and its rivals withered, they were seen as acts of corporate genius.
Increasingly, though, they are viewed as deeply problematic deals that eliminated potential competitors to Facebook and cemented its dominance in social communications to the detriment of broader society.
In its December report into digital platforms, the Australian competition regulator described Instagram as “the closest substitute to Facebook in both functionality and the size of its network” and questioned whether Facebook should have been allowed to buy it.
“With the benefit of hindsight, a view could be taken that this acquisition should not have been cleared or should have been subject to closer scrutiny,” it said.
Last year, many users who attempted to quit Facebook in the aftermath of its myriad scandals migrated straight across to Instagram without realising Facebook owns that platform, too. If not, (and as some users drift from public social networks to private messaging groups) there’s a strong chance they use WhatsApp instead.
“In the end people did not leave the company’s platforms en masse,” Hughes laments in his op-ed, referencing the utter failure of the #DeleteFacebook movement that sprung up last year “After all, where would they go?”
The case for breaking up Facebook may be strong, but actually making it happen is far easier said than done.
Hughes has joined a growing chorus of voices calling for Facebook to be dismantled. They include US Senators Elizabeth Warren and Bernie Sanders, who are both candidates for the Democratic Party’s nomination in next year’s presidential elections.
The ACCC wants powers to scrutinise future strategic acquisitions by Facebook (and Google). But, while this proposal has a lot of merit, it wouldn’t do anything to force Facebook to divest Instagram or WhatsApp.
And the horse may have already bolted: there may not be any future acquisitions for the ACCC to review. For instance, Facebook did not need to buy Snapchat to ape its ‘stories’ video format, which has become a highly popular feature of both the main blue app and Instagram.
US competition laws view corporate activity through the narrow lens of the impact on consumers, as measured through prices. Both Instagram and WhatsApp are free services, so from the perspective of US regulators at the time, there was nothing to see here.
Warren’s plan relies on employing tougher regulators, but also the passage of new legislation that would reclassify big tech companies as “platform utilities”, which would not allow them to own competing services.
There are signs of support among Republicans for more regulation of tech companies, but getting new laws through America’s bitterly dividend and at times completely insane Congress is no easy feat these days. And that’s before the inevitable court challenges that will follow any break-up attempts are even considered.
In short, any attempt to get Facebook to divest Instagram and WhatApp will require a lot of political resolve, and global co-ordination. These are two qualities that are not in abundance in the international community these days.
As users will attest, breaking up with Facebook is hard, but not impossible. Regulators and lawmakers might find that dismantling Facebook the company is a similar challenge.
Foxtel’s funding raises questions
The revelation that Foxtel had to rely on a $300 million loan from its biggest shareholder News Corp to cover debts maturing in April is a worrying sign for the pay TV platform.
The fact that Telstra, 35 per cent shareholder in Foxtel, did not tip any money in, is also highly significant. News and Telstra have long clashed over Foxtel and it is clear the telco wants out. The problem is, Foxtel’s apparent inability to raise debt on the open market suggests it is not in any position to be sold.
Foxtel’s new streaming service KayoSports is growing solidly. But long-term questions about the product remain: can it grow big enough to offset the declines in Foxtel’s traditional (and much more expensive) pay TV products? And if so, how quickly?
John McDuling is a business, media and technology writer for The Sydney Morning Herald and The Age.