Antitrust

It’s “not true” that Meta shows more ads to people who like sharing with friends and family, Sandberg says, disputing the government’s claim. Judge Boasberg summarizes the FTC’s argument that, because users who prefer sharing with friends are allegedly captive on Meta’s services, the company can increase the amount of ads they see without them leaving. He asks if Meta took those users’ preferences into account in serving ads. “I don’t believe so,” Sandberg says.

Sandberg is echoing something we heard from Zuckerberg, her former boss, over the past few days. These execs argue that consumers seeing more ads in Meta’s apps doesn’t mean the experience is getting worse. Sandberg says ads in features like stories are not very intrusive, and Meta can tell users are still having a good experience based on whether they stop and engage with the ads.

She’s being questioned by Meta’s attorney now, and we’re hearing about her experience working on Google’s advertising business in the early 2000s.

The then-COO had told Zuckerberg in 2012 she thought they were paying too much to acquire Instagram. In retrospect, she testifies, “I was wrong. Like, very wrong.” No one today would say they paid too much for Instagram, she adds, before leaving the stand for the day. We expect she’ll continue her testimony tomorrow.

Sandberg says that network effects — the idea that having more connected users on a platform can make it more valuable — have not done much to help it outcompete rivals in recent years. She points to the popularity of TikTok, which serves content largely from people you already know, and says that “the network effect of having a friends and family graph was much less important over time.”

The FTC is showing Sandberg a 2018 board presentation from soon after the news of the Facebook Cambridge Analytica data scandal broke. Despite a decline in the perceptions users had of Facebook, the company reported to its board that there had been “no visible impact to core engagement metrics” globally or in the US to metrics like time spent.

That’s how Sandberg remembers the discussions leading up to the acquisition. She also acknowledges that Facebook eventually ended its own photos app project after acquiring Instagram.

In a 2011 email, Sandberg told colleagues that Google’s social network meant that “for the first time, we have real competition and consumers have real choice.” She wrote that it would mean “will have to be better to win, our margins may go down over time, we will no longer be able to make as many mistakes and hold onto our core users.” Sandberg testifies she was concerned because Google “created almost an exact replica” of Facebook.

She’s the second witness in the case, and will likely be here for several hours.

The CEO spent around 13 hours testifying over the past three days and he’s finally finished. We heard about his wild ideas for Meta throughout the years, as well as how he views the social media market, and his mindset leading up to his consequential acquisitions of Instagram and WhatsApp, the central focus of the case.

The CEO testifies that it was reasonable for him to take a more assertive role in scaling advertising on Instagram several years post-acquisition. Early on, he says, Instagram co-founder Kevin Systrom “wanted to personally approve every ad that went on Instagram himself.” And while Zuckerberg was initially “happy to oblige,” he says it later made sense to make the app bear more responsibility for generating revenue.

That’s what Zuckerberg tells the FTC attorney who’s questioning him now. Zuckerberg says he didn’t want to deal with the complexity of “any connection that they had to China.” Musical.ly went on to be acquired by China-based ByteDance, was rebranded to TikTok, and grew into a major Meta competitor, he says.

One of WhatsApp’s founders used Craigslist as an example of his ambitions for the messaging service, Zuckerberg testifies, calling the site a “lifestyle company.” And rather than buying WhatsApp to prevent its growth, Zuckerberg says he had to convince its founders to add social features post-acquisition. This cuts against the FTC’s theory that WhatsApp might have grown to challenge Meta’s dominance had it remained independent or under different ownership.

Zuckerberg considered that WhatsApp could pivot its messaging platform into a “formidable competitor” to Facebook until he got to know its founders. “It became completely clear” they would never add the kind of features necessary to do that, he testifies, because they actually “looked down” on such things. “It’s hard to really express the kind of disdain that they had” for what other messaging apps were doing at the time, he says.

But he points out that the largest platforms today have had the backing of larger companies with massive infrastructure, like Google’s YouTube and ByteDance’s TikTok. “Could I say it would have been impossible for them to do it without us? Obviously not. I mean, we did it,” he says. “But does it seem like it would have been likely?” Definitely not, he says.

Instagram’s growth was never preordained, Zuckerberg says, and the app benefited from Meta’s investment to get to the massive reach it has today. At the time of the deal in 2012, Zuckerberg hoped to grow Instagram from 10 million to 100 million users. It reached a billion users by 2018. Had Meta not bought Instagram, Zuckerberg says, “it’s very hard to know” how things would have turned out. That’s a key challenge for the FTC to address.

The CEO is challenging one of the core arguments of the FTC’s case: Meta’s alleged intent to grow its monopoly power by taking out rivals. “Was the intent to stop offering or stop making Instagram good? Absolutely not,” he testifies.

This old Andy Grove quote is how Zuckerberg describes his mindset toward competition. He says it has been interesting to look back on all the things he was worried about that never materialized the way he expected. One example is Dropbox, which he saw as an “upstream” feature that could eventually become competitive based on its photo storage offerings. “I was focused on things that ended up being so different,” he says.

Zuckerberg says network effects — where more users on a platform makes it better — are not always a good thing, even though the FTC says they’ve grown Meta’s power. He’s previously worried about this so much he’s considered resetting users’ Facebook friends. After accumulating friends over time, users might “wake up one day five years later” and realize they’re following people they no longer care about, he says. But AI recommendations have helped solve for this.

We’ve seen a lot of old emails over the past couple of days where Zuckerberg has expressed frustration and a sense of urgency to catch up with rivals that seem to be on Meta’s heels. He’s spinning these documents as a function of his own competitive spirit. “You can bet that I’m not going to rest until we do quite a bit better than where we’re at now,” he testifies about today’s competition with TikTok.

We’re getting started with day three of Meta’s antitrust trial with some controversy. A Snap attorney complains to Judge Boasberg that Meta released slides with inadvertently flawed redactions. He also accuses Meta’s lead attorney of openly referencing Snap’s competitive assessments that should have been private.

In an echo of an infamous exchange from one of Zuckerberg’s earlier visits to Washington, Judge James Boasberg asks the CEO to clarify how iMessage and WhatsApp make money. Zuckerberg explains that Meta sells ads that send people to chat with businesses on WhatsApp. He also tells the judge that he thinks Apple is incentivized to keep iMessage exclusive to iOS so that its users don’t want to switch from iPhones to Android.

When asked by Meta’s lead lawyer, Mark Hansen, Zuckerberg says he doesn’t know what MeWe is and “hadn’t heard of it” prior to this case. Aside from Snapchat, MeWe is the other app the government says is in the same “personal social networking services” market that Meta allegedly monopolizes.

As an aside to a question about European regulations, Zuckerberg says that “it seems no matter what we do, the European Union seems to find we’re not following their rules.”

The company has been hammered by legislators and parents for how it sucks users into its services, but Zuckerberg says Meta focuses on creating valuable experiences, rather than making sure users stay engaged for as long as possible.

FTC attorney Daniel Matheson just passed Zuckerberg as a witness. Zuckerberg has been on the stand for roughly eight hours so far between today and yesterday. Now it’s Meta’s lead attorney Mark Hansen’s turn to question the CEO.

But he’s not giving them much to work with. The government wants to show that Meta dominates a distinct market of social apps for connecting with family and friends that only includes Snapchat and MeWe, a crucial element of proving its case.

He seems resistant to the idea that the professional social network is all that different from his own offerings nowadays. The FTC argues that the market Meta dominates is primarily about sharing content with family and friends, which would exclude services like LinkedIn and Nextdoor that market themselves for more specialized functions. According to Zuckerberg, “all of these are quite a bit more competitive” with Meta’s apps.

Zuckerberg revealed this after the FTC attorney prodded him about whether people come to Facebook or Instagram just to look at ads. “You’ve never chosen to offer a feed of just ads,” the FTC’s Daniel Matheson says. “I think we’ve discussed it at one point,” Zuckerberg responds.

While the FTC has tried to frame Meta stuffing its apps with ads as a consumer harm, Zuckerberg contends that the company’s users enjoy them. Over time, he says, people tell the company that the quality of ads “has basically approached the quality of the organic content.”

With the rapid growth of Snapchat Stories, Zuckerberg told his team in 2014: “We need to take this new dynamic seriously -- both as a competitive risk and as a product opportunity to add functionality that many people clearly love and want to use daily.” Because of Stories, he wrote, “Snapchat is now more of a competitor for Instagram and News Feed than it ever was for messaging.”

The Meta CEO says that the way they were able to grow Instagram post-acquisition gave him confidence he could do the same for other apps, like Snapchat. In 2013, he told his team about an offer to buy the app that Snap CEO Evan Spiegel ultimately rejected.

The FTC is presenting documents from 2013 in which Zuckerberg and another executive, Javier Olivan, discussed messaging app competitors and what they’d need to do to keep up. Olivan wrote that he had spent “sleepless nights” worrying about WhatsApp’s growth and warns that “it might be now or never” to improve Meta’s services, given how fast these guys keep growing / the ambitions they are signaling.

In January 2013, Zuckerberg said he thought his team “should block WeChat, Kakao and Line ads. Those companies are trying to build social networks and replace us. The revenue is immaterial to us compared to any risk.” On the stand, he acknowledges that “we worried about them broadly competing with us” ahead of his purchase of WhatsApp.

Zuckerberg concedes that in a perfect world, he probably would have preferred Facebook’s in-house Instagram competitor to succeed so that he didn’t have to shell out for Instagram.

We got a brief glance into some more casual conversation between Zuckerberg and his then-COO Sheryl Sandberg. “I want to learn settlers of catan too so we can play,” Sandberg messaged her boss in November 2012. “I can definitely teach you Settlers of Catan,” Zuckerberg replied. “It’s very easy to learn.”