Antitrust

A June 2019 document says that the data privacy scandal “is the most likely significant event that would have had a negative impact on both revenue and engagement.” But even so, Meta’s research team found, “we failed to detect significant and consistent effects of sentiment (or adverse events) on these metrics.” Cobb quibbled with how the FTC’s attorney restated the finding back to him, and Boasberg noticeably leaned back in his chair and rolled his eyes after a repeated back-and-forth, before ending the proceedings for the day.

In 2018, Meta found that a majority of Facebook users came to the platform for this reason. A document from the time describes “Facebook’s core value proposition” as “robustly anchored on ‘keeping up with friends and family,’” which is exactly the trait the FTC says is unique to personal social networking services. Cobb makes a point of saying that this was true at the time, seven years ago.

Meta VP of Research Curtiss Cobb, who tracks how users feel about the brand, just took the stand. His team surveys Facebook and Instagram users about how they feel about whether the company cares about its users. In 2020, for example, the team found that “in the US this year Facebook has slid to the 21st place and falls behind all other tech companies we measured” in the metric it calls “Relative Cares About Users” or RCAU.

Drawing on filings in TikTok’s litigation against a US ban, Meta points out that TikTok has said it could take years to perform the maintenance needed to keep a US-only app running if it were separated from ByteDance. TikTok also said that reconfiguring its content moderation systems for a US-only app would reach unsustainable costs, despite serving a platform of 170 million US users. Meta is drawing a comparison to how it believes it was uniquely positioned to help Instagram with its infrastructure and content moderation because of its own scale and success.

Meta is asking about statements TikTok made in its lawsuit against the US ban of its app to show that when TikTok is unavailable, users often turn to Instagram — showing that users consider it to be a substitute in at least some respect. TikTok told the court in its own case that even a temporary shutdown could cause it to permanently cede ground to competitors like Instagram, YouTube and Snapchat. Earlier in the Meta trial, the company showed that TikTok’s temporary shutdown led to a spike in engagement for Instagram.

In a 2022 document presented to TikTok’s leadership, the company wrote that Instagram would likely make Reels its “no. 1 format.” TikTok predicted, “Instagram will redesign the interface and consolidate everything to Reels to make the short-form video first.”

Presser is reluctant to say so straightforwardly, testifying that’s not exactly how he thinks about it. But Meta’s attorney shows him a 2021 internal document where TikTok wrote, “YouTube and Instagram are TikTok’s most important competitors.”

Meta is trying to muddy Presser’s testimony about the distinctions between TikTok and Instagram by pulling up a filing TikTok made with an Australian regulator, arguing against an age restriction exemption for YouTube. “Today, TikTok, Reels and Shorts are virtually — and deliberately — indistinguishable in function and user experience,” the company wrote in March. Presser reiterates that while their features are very similar, the experience of the content on each app is different.

Presser says that only a “very minuscule” percentage of time spent on TikTok is in the friends tab — just about 1 percent. They keep it around in hopes that eventually it will help enhance users’ experiences, he says. Similarly, only a small percentage of users upload their contact lists from their address book or from Instagram and Facebook, he says, reinforcing the FTC’s argument that users don’t really go to TikTok to connect with their real-life connections.

The FTC brought up a declaration from TikTok in its own case against the US government over the law that seeks to ban the app unless it’s sold from its Chinese parent company ByteDance. The government used the declaration to show how TikTok described itself as offering a distinct service from other social platforms available in the US. It’s a reminder of the deeply strange context behind this case and Presser’s appearance today in the same courthouse where the TikTok ban law was litigated (and upheld).

Looking at a screenshot of the same video experience on TikTok, Instagram Reels, and YouTube Shorts that Meta has shown throughout trial to show the similarity between the products, Presser says the snapshot doesn’t tell the whole story. “When you click out of this view for these other platforms, you would get to essentially what I think of as their core business,” Presser says, which for Instagram, is its feed of content and stories. Plus, he says, “as you swipe on any of these platforms, the mix of content that you would get might feel different” because of the different recommendation algorithms.

Presser says the video app doesn’t offer this kind of service, reinforcing the FTC’s view that TikTok operates in a market distinct from the one it claims Meta monopolizes — which focuses on connecting users with friends and family, rather that surfacing content based on users’ interests. Presser’s testimony is significant for the FTC, in part because ByteDance’s submission to European regulators in 2020 uses the term “personal social networking” to define Facebook and Instagram, which Meta has tried to paint as a made-up label.

It’s now TikTok’s turn to explain why it does (or doesn’t) compete with Facebook and Instagram for a social network connecting friends and family. Adam Presser, who leads operations and trust and safety, is walking through a submission by TikTok’s owner ByteDance to the European Commission, where it distinguishes between social networking services like Meta’s apps and “online content creation and sharing services,” which are focused around sharing and consuming content based on interests.

Meta is trying to draw an analogy between Yahoo’s $1 billion acquisition of Tumblr in 2013 with Meta’s 2012 acquisition of Instagram for the same price. Tumblr wasn’t making a profit when it was acquired but had a large user base. A big difference, of course, is the trajectory of each startup. When Meta’s attorney asks if Tumblr’s subsequent sale to Automattic was “significantly less” than $10 million, Tucker says, “I saw a joke that it was near the price of a modest home in Silicon Valley.”

Eli Tucker is walking the court through the blogging platform, including its app store listing that describes it with the words, “Fandom, Art, Chaos.” Just like the FTC did with Pinterest, Strava, and Reddit, the government is trying to show Judge Boasberg that the way these other platforms are designed and used are more about connecting over interests than with friends — and therefore outside of the market Meta allegedly monopolizes.

Meta is pointing out on cross-examination that Apple has chosen to list its own messaging app in this category on the App Store, suggesting there may be more overlap with Meta’s services than the FTC would argue.

Shah testifies that would probably be “distracting” for users who just want to focus on their conversations with friends.

In a screenshot of an example group chat, “Momma Chloe” asks this — presumably because she doesn’t have most of the messengers’ numbers. The FTC is making the point that iMessage users don’t have profiles that automatically populate if a user doesn’t already have someone else’s info — making it different from the social apps Meta runs. It’s a bit of a painstaking line of questioning for anyone who already uses iMessage regularly, but it’s driving home the point but the app is distinct from a personal social networking app.

Ronak Shah, director of product management who oversees services like iMessage and Safari as well as user privacy and security, is now testifying remotely. We’ll likely hear more about the messaging space that WhatsApp competes in.

The company invested extra to make sure it’s infrastructure wouldn’t melt down if TikTok were suddenly to go dark in the US after the ban took effect. Meta feared that “the flood in traffic of all those users coming to Reels … could potentially overwhelm our data centers to the point that our site would go down,” Olivan testifies. The company was already aware that Reels usage is higher in India, for example, where TikTok is banned.

All social network apps have to do to figure out who their users are connected with is ask for permission to read the address book on their phones, Olivan says, which is something most do when users first join an app. This pushes back on the FTC’s theory about the importance of network effects to Meta’s dominance — meaning that the more users are on a platform, the more value it has to those users.

Rather than stifle Instagram, Olivan testifies that Meta wanted the app to thrive after it acquired it. In a 2012 email after the acquisition was announced, Olivan said the startup founders were “barely being able to keep the site up & running” because of the influx of sign-ups. He suggested helping the app with translations and analytics that would help it grow, using existing frameworks that Facebook had already used.

Olivan says “there was no signs of them morphing into anything else” besides a replacement for SMS messaging. Besides the founders’ distaste for social features, Olivan says that the way WhatsApp grew outside the US — through arbitrage of high international telecom SMS fees — didn’t exist in the US. He flatly testifies that Meta did not buy WhatsApp because it feared the app becoming a social network competitor.

Even though the 2018 data scandal led users to view Facebook’s brand more negatively, Olivan concedes it had a relatively lower impact on users actually deactivating their accounts. The FTC seems to be positioning this as a measure of Meta’s alleged monopoly power, since the ability to raise prices without losing customers is a common indicator of such power.

Facebook has at points worried about cannibalizing its flagship platform by promoting users moving to Instagram. Instagram co-founder Kevin Systrom described this in his testimony as Meta depriving Instagram of resources to favor Facebook Blue. But Olivan says it’s okay for one side of the business to shrink a little if growth expands overall. “As long as this one grows much more, I’m willing to take a little hit on the other one,” he says.

“Out of all the potential buyers, I thought Google and Apple would be the worst ones because they already ran the operating systems of the phones,” Olivan testifies. They were “particularly dangerous acquirers because they have an unfair advantage on us” by running the underlying operating system, he says.

Olivan describes a “huge chain of ifs” that might have led Google to becoming a significant social player in at least some countries around the world, had it acquired WhatsApp — something he and other Facebook execs feared in 2012. Two of those “ifs” would be if Google would run a social app without killing it, and whether it could convince WhatsApp’s founders to add social features, which they infamously resisted.

“The plan was to figure it out down the line,” Olivan testifies about the $19 billion acquisition. After all, he says. “Mark didn’t have a plan for how to monetize Facebook when he started it, either.”

In 2013, the company’s-then director of corporate development Amin Zoufonoun wrote that perhaps Facebook needs “a separate, free sms focused and branded messenger product to compete in this space if we cannot buy whatsapp. Zoufonoun worried “that FB messenger, with its legacy connotations may not do it in the space defined by whatsapp no matter what we do.” Olivan, who had recently taken over the Messenger team, advocated for improving the existing app, instead.

Even though Facebook closely tracked WhatsApp’s growth in 2012 and 2013 alongside other mobile messaging apps — some of which were adding social features — Olivan says they were not concerned about WhatsApp trying to become a social network. The app only aimed to be a replacement for SMS messaging in countries where telcos charged high rates for the service, Olivan testifies. Still, several documents show Facebook executives tracking WhatsApp’s growth with concern about how it stacked up to Facebook Messenger’s.

Olivan opposed letting competing messenger apps advertise on Facebook’s platform because he worried it was a bad tradeoff to a make a quick buck. He’s testified repeatedly he doesn’t like to help competitors, and wrote in a 2013 email that “we will look like complete idiots if we lose our business to these messenger services and help them along the way for a couple of $s.” He testifies he was “being a bit hyperbolic.”

Olivan testifies that he was “paranoid” as head of growth in 2012 about the expansion of mobile messaging apps into social apps, especially in countries where Facebook’s flagship app had less of a stronghold. In a 2012 message, Olivan told a colleague he worried that the shift to mobile combined with “messengers growing organically with huge retention and virality = potential recipe for not be around in a couple ... years from now.”

Olivan, who previously managed Facebook’s messaging efforts, asked staff in a 2012 email to “compile a ‘this shit is getting scary deck’ given all the data we have now” about the growth of messaging apps worldwide, which were also adding social features. Olivan wanted to circulate the deck to Facebook leadership “with a message: we really need to double down on messenger / our messenger is broken.”

Olivan is poking holes in the FTC’s market definition which relies on the way users come to Facebook and Instagram to connect with friends and family they know in real life. He says he’s actually been surprised to learn there’s some users who engage on Facebook without any connections at all — though he can’t say how many people that is.

Microsoft Azure executive Jason Vallery gives even more detail about how cloud services can help companies efficiently run their businesses at relatively low cost, even without their own massive data centers. Again, this speaks to the FTC’s argument that a company like Instagram could have scaled without Meta’s help. In a 2023 deposition, Vallery talks about how customers use cloud services for their cost, capability, and security benefits.

In a 2023 deposition, AWS general manager for sales Jason Bennett testified about how companies use its services to run their businesses. Instagram used AWS prior to its acquisition, but we’ve also heard from other AWS customers like Pinterest and Reddit. The testimony seems meant to demonstrate that Instagram theoretically could have scaled with AWS, even without access to Meta’s infrastructure.

Benjamin Davenport, who became part of Facebook Messenger’s founding team after his mobile messaging app Beluga was acquired, testified in a 2022 deposition that he worried in 2012 that Google could acquire WhatsApp and “bake it into Android.” Google could then make WhatsApp the default option on the operating system, and quickly growing its distribution, he says. Davenport wrote in a 2012 message that Google could create “a cross-platform iMessage with a far larger network.”

In a 2017 competitive assessment, Pinterest warned that Instagram was “taking direct aim at our core turf.” On cross-examination, Meta is working to show that Pinterest actually does see itself in direct competition with its products. At the time, Pinterest noted there was a “rapid increase in customer overlap” with Instagram and the app was even “replicating” some of its own features, like the ability to save pictures.

The FTC has asked several witnesses today about their trust and safety operations and infrastructure investments, which might be a way to show that even apps without Meta’s backing can maintain robust operations — just as Instagram might have. Roberts testifies, for example, that she’s not aware of any concerns that staying on AWS servers would limit Pinterest’s growth in the future.