By Stefano Sciandra
Your commercial awareness dose.
Facebook, Inc., the American social media conglomerate corporation founded by Mark Zuckerberg, has been at the centre of attention since the very beginning, for its message, for its cultural impact, and for its many lawsuits, filed both in the US and the EU. Analysts and regulators, however, think governments’ approach to Big Tech companies’ shenanigans have been too mild and advocate for more meaningful action. The antitrust lawsuit launched by the US Federal Trade Commission (FTC), alongside 46 US states, the District of Columbia and Guam, on December 9th, might be the right answer to the prayers of many.
The FTC, an agency of the US government, promotes the protection of consumers and enforces antitrust law, which is an umbrella term for a wide set of laws focused on the prevention of unfair competition and unfair business practices. In which, the FTC filed a lawsuit against the social media giant, accusing it of engaging in “systematic strategies” that involve the acquisition of competitor companies as well as seeking to eliminate any form of threat to its monopoly, depriving advertisers of competition, and leaving little choices to consumers.
The FTC and the 48 attorney generals, from the territories mentioned above, are seeking to break up the company, which offers many products and services, and which notoriously acquired Instagram in 2012 for $1 billion and WhatsApp in 2014 for $19 billion. Breaking up the company, freeing Instagram and WhatsApp from Facebook’s grip, would mean to restore fairness and competition to innovation, something that could be further achieved by forcing Facebook to give notice and seek approval for mergers and acquisitions with businesses valued at $10 million or more.
Mark Zuckerberg is denying claims of breaching antitrust laws. In regards to Instagram, for instance, he stated that the company, at the time of the acquisition, was not considered to be a social network, hence not a competitor. In relation to competitors, Facebook says it has many, citing TikTok, Twitter, and Snapchat as examples.
The aforementioned 48 attorney generals, after an 18-month investigation, have also filed separate lawsuits against Facebook, accused of acquiring competitors in a “predatory manner”. This approach has been called “buy or bury strategy”, which, for instance, perfectly describes Facebook’s relationship with Snapchat.
Facebook unsuccessfully tried to acquire Snapchat back in 2016, and not being able to do so, decided to copy its many innovative features, such as its notorious expiring pictures and videos. The FTC and attorney generals are ready to fight this aggressive behaviour back and Facebook should get ready for some serious antitrust action. There is plenty of evidence of Mark Zuckerberg’s company engaging in illegal anticompetitive practices to protect his social media monopoly, however, analysts are almost entirely sure a breakup is highly unlikely.
Facebook has been focusing on integrating Instagram and WhatsApp into a single platform, but what if a breakup is possible? These apps are key to Facebook’s success, both in terms of revenue and future success. According to Bloomberg, Instagram generated $20 billion from ads in 2019, a staggering 29% of Facebook’s total ad revenue. Furthermore, analysts predicted these figure will rise sharply in the following years. In countries like Japan, Instagram has much more users than its parent company and in emerging markets, such as in India and Brazil, both Instagram and WhatsApp are rapidly growing.
Even in case of a breakup, Facebook won’t collapse, however, no matter the outcome, the company should focus on two ways to improve the business. First of all, it should start taking into account protecting users’ private information and finding the right balance between tackling hate and allowing people to express their views.
Finally, it is vital for the company to try to become more appealing to younger people, who are leaving Facebook en masse (if users at all) to seek a more engaging and funnier social media experience on competitor platforms, such as TikTok. At the moment, only Instagram seems to be able to rival the Chinese video-sharing app.
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