Antitrust

Testifying in the Google Search antitrust trial yesterday, Chrome general manager Parisa Tabriz said Chrome’s features and functionality owe to its “interdependencies” on other parts of the company, reports Bloomberg. She reportedly said over 90 percent of Chromium code has originated from Google since 2015.

The court is hearing from FTC expert Kevin Hearle and is also expected to hear from Discord’s Julia Tang. I’m back in the Google courtroom today following testimony DuckDuckGo’s CEO and executives from Microsoft and Yahoo’s search businesses. There’s no court on Fridays in the Meta case, but we’ll bring you live updates from this case again next week.

As reported earlier by The Information, data shown in court during the remedies portion of Google’s search antitrust trial says that as of last month, Google’s internal data counted 35 million daily active users for Gemini.

I’m running upstairs to a different courthouse media room to follow the Google search remedies case. In that trial, Perplexity Chief Business Officer Dmitry Shevelenko just took the stand. We’ll set this stream live again when there’s more to share from the Meta trial.

That’s what we’re hearing from the FTC’s expert witness, Professor Cliff Lampe, an expert on human-computer interaction. He’s affirming the FTC’s view that the way people use and see apps like Instagram and Facebook is different from how they use and view other apps like TikTok or Pinterest.

Stoop says the goal of the project had been to make uploading multiple photos to Facebook faster and more fun, and that it achieved that. After Facebook had finished a major technical overhaul of its iOS app, it just made more sense to integrate the features with the main app where users already existed, he says.

That’s how Meta is trying to frame the product on cross-examination. Stoop says the two had different distribution models and audiences, since Facebook didn’t have a public following feature at the time and was more focused on sharing photos with friends, while Instagram lets users follow people they didn’t know. He adds that Facebook continued the project after the Instagram acquisition, and his team grew from about 10-15 people to about 40-50 over two years.

An internal May 2012 document discussing how to discuss the launch of Facebook Camera lists key external “messages to avoid.” The first was, “Facebook Camera launches filters, like Instagram,” and the second was “Facebook squashes competition.” Stoop says they wanted to make sure the press wouldn’t pigeonhole the product and miss the bigger picture.

The FTC is attempting to demonstrate that Meta viewed its Facebook Camera app as a competitor to Instagram, and that until the deal to acquire Instagram, it was actively working to address its issues and release it. In notes to his team in January 2012 from what Stoop says is known within Meta as a “Zuck Review,” Stoop summarized Zuckerberg’s feedback. “Instagram is growing quickly,” he wrote, so getting Facebook Camera “out the door fast is a huge priority.”

Dirk Stoop is the first witness of the day. He’s testifying about his role in leading development for the Facebook Camera app, which was ultimately shut down after the company’s acquisition of Instagram.

After a full day of testimony in the FTC v. Meta trial, which was largely positive for the government, the Instagram co-founder has left the witness stand. Tomorrow, we’ll hear from Dirk Stoop, a former Facebook product manager who worked on the company’s early standalone camera app, as well as one of the FTC’s expert witnesses.

While Meta ultimately created a centralized integrity team to support Facebook, Instagram, and WhatsApp, Systrom says that his app required its own team to address issues that wouldn’t otherwise receive support from Meta. He compares this to how Meta removed his access to its central growth team, prompting Instagram to establish its own.

Wasn’t joining Meta exactly what the Instagram app needed as an accelerator? Systrom responds to that question by saying that’s not exactly what happened. Sure, some things Meta did helped Instagram grow more quickly, but there were also “parts that were more challenging that didn’t get fulfilled. It was a mixed bag.” Systrom later concedes that working with Meta’s growth team was great “if you could work with them,” which calls back to his earlier testimony that Zuckerberg at one point pulled that staff off Instagram.

But Systrom concedes it’s not zero. He continues to give Meta’s attorney a hard time by firmly resisting attempts to get him to admit that he’s merely speculating about his prediction that Instagram would have been big on its own. “You deal in a world of probabilities,” Systrom says. “You can never be sure.”

Instagram has since “generated many multiples of that price and then some,” Systrom says, adding that, “the number of people at Facebook who said, ‘I don’t know where we’d be without you,’ was many.” He dryly gives Zuckerberg some credit: “Sometimes you make a bet and it turns out well, and I think Mark did that.”

In another tense exchange between Huff and Systrom, the Meta attorney presents a 2012 email Systrom sent Zuckerberg before the acquisition. Systrom wrote that the photos people post on Instagram rather than Facebook are quite actually different, describing the photos on Instagram as “not social photos” but rather photos of the world. On the stand, Systrom calls this a “negotiation tactic,” and says, “that was probably less true than I was leading on.” When Huff calls it misleading, Systrom says, “I think it is okay to play your hand a certain way.”

Meta attorney Kevin Huff suggests that Instagram benefited largely from cross-posting to Facebook prior to the acquisition, but Systrom says it mostly cut the other way. “We helped Facebook make their app more engaging by posting photos over to them,” he says. After Huff shows him a 2012 email Systrom sent to Zuckerberg crediting Facebook cross-posting for Instagram’s success, he asks if Systrom was lying to Zuckerberg at the time. Systrom answers with a stern look and a single word: “Sir.”

He is now being questioned by Meta’s attorney and says that “network effects make it very difficult to displace large incumbents, including Instagram.” The question for Systrom is “how big” rivals like Snapchat and TikTok “could have gotten” absent Meta’s network effects, which disincentivize people from leaving a service that many of their friends are already on.

A 2018 document lists the features that Meta integrated with Instagram, including cross-posting with Facebook, and explains how they impacted each app. The overall effect is described as increasing Instagram’s active users by millions each year, while the impact on Facebook was described as “neutral.” Systrom says Zuckerberg decided to cut these integrations that largely benefited Instagram.

The Meta CEO’s reaction to Instagram’s growth, as Facebook’s growth plateaued, stirred complex feelings in him, Systrom says. “My experience of him is that he was always very happy to have Instagram in the family,” he testifies. “But also, I think as the founder of Facebook, he felt a lot of emotion around which one was better, meaning Instagram or Facebook, and I think there were real human emotional things going on there.”

Zuckerberg had mixed feelings about Instagram over the years, depending on how it was impacting engagement on Facebook, Systrom testifies. “Depending on the temperature of that feeling, we would get more investment or less investment.” Systrom believes that Zuckerberg “was not investing in Instagram” because he saw it as a threat to Facebook.

Meta dispatched a few members of its growth team to work with Instagram on growing after the acquisition, Systrom testifies. But then, he says, “I woke up one day and they were gone.” Systrom complained in a 2014 message to another Instagram executive that “no startup would simply pull growth people,” and he says on the stand that if Instagram were still independent, “the probability of that happening is very close to zero.”

Systrom says he received “zero” of the trust and safety headcount allocation Meta created after the Cambridge Analytica scandal, and was instead told to work with Meta’s central team. “I felt that was not appropriate given the scale of Instagram,” he testifies. “To get zero of some of these major proclamation investments felt like there was something going on there.”

After the acquisition, Systrom says he informed his board that Twitter had decided to restrict access to part of its API, which allowed people to find their Twitter friends on Instagram. A Twitter executive “made it clear that this is in direct retaliation to Facebook cutting off the same API access to Twitter. I can only imagine Jack + Dick are also not very happy about the acquisition.”

Systrom recounts talks he had with each of these companies in 2011 and 2012. He says he had at least ten meetings with Twitter executives about their acquisition interest, including a “sushi dinner” with its then-CEO, Dick Costolo. Google seemed more coy, but Systrom suspected the company was also interested. Talks with Apple never really wrapped up neatly, he says.

He says he didn’t feel pressure to monetize right away because investors placed so much emphasis on growth to secure the strong network effects of a large user base. Even still, in early funding rounds, he pitched a mock-up of what advertising on Instagram could eventually look like, which he says is “exactly what you see when you open up Instagram today.”

Systrom testifies that the app managed to stay online before Meta bought it, and that he was already dealing with spam and problematic content filtering. He contrasts this with Twitter, which became known for its “fail whale” page when the service was down. This undermines Meta’s pro-competitive justifications for the deal, which argue that it improved Instagram for consumers by making it safer and more reliable.

Systrom confidently answers that building out video, messaging, and photo tagging features would have been entirely possible without Meta, and that he already had plans to pursue some of those features prior to the acquisition. “It was not necessarily difficult, and there were plenty of other companies that had functionalities similar to this,” he says. When Meta’s attorney objects that this is speculation, Judge Boasberg overrules him, saying, “I feel that in our but-for world discussion, it’s all going to be speculation.”

“The first slowdown that we had was maybe a year into being at Facebook,” Systrom testifies. The FTC is making the point that Instagram’s rise was unique and validated before the social media giant acquired it. After winning “App of the Year” from Apple, Systrom recalls that new registrations “skyrocketed.”

At launch, Systrom says the app’s growth was “exponential, unstoppable,” with 25,000 users registering in the first day. It was growing so quickly in the early days that, in his eyes, it didn’t even matter exactly how many active users were on the platform; he just had to keep up with the demand, he testifies.

We’re going all the way back to 2009, when Systrom and co-founder Mike Krieger were working on a location check-in app called Burbn, which they later pivoted into the photo-sharing app Instagram. Systrom says Instagram’s October 2010 launch occurred as the Apple App Store was making it easier for developers to get started, and advances in smartphone cameras, particularly with the iPhone 4, had significantly improved photo quality.

The FTC just called the former Instagram CEO as their next witness to kick off the sixth day of trial. He’s likely to be testifying all day about his experience selling to Meta and then working there for six years.

The court has wrapped for the day after it was briefly closed to play some sealed testimony from one of the video depositions. Instagram co-founder and former CEO Kevin Systrom is expected to testify for most, if not all, of the day tomorrow.

Amin Zoufonoun, a former Meta corporate development executive, testifies in a video deposition about “spirited debates” over whether mobile messaging could threaten Facebook’s flagship app, though he doesn’t specifically recall colleagues seeing it as a threat. He remembers colleagues wondering, for example, if messaging apps could “use that as a Trojan horse wedge to get into the social networking space.”

Botha says that, if he had suggested a $1 billion valuation for Instagram at the time, he probably wouldn’t have gotten support from his partners. It wasn’t clear it’d be worth that much, he says.

Botha recalls expressing to Instagram’s founders that if they wanted to get their “payday” from Meta, that’s their prerogative. But, he recalls saying, “if your ambition is to build an independent company, then you should partner with people like us.”