Meta Platforms’ top growth executive requested a slide deck to instill fear in Facebook’s senior leadership team during 2012 about growing competitive threats from messaging apps that could “jeopardize our complete existence,” according to internal documents presented to Meta Chief Operating Officer Javier Olivan today in US federal court.
Meta Platforms’ top growth executive requested a slide deck to instill fear in Facebook’s senior leadership team during 2012 about growing competitive threats from messaging apps that could “jeopardize our complete existence,” according to internal documents presented to Meta Chief Operating Officer Javier Olivan today in US federal court.“Can you guys compile a ‘this shit is getting scary deck’ given all the data we have now? Olivan asked in an April 2012 e-mail to a handful of co-workers that included a top data scientist working on Facebook’s marketing strategy.
OIivan, who had risen to oversee company-wide growth after joining Facebook in 2007, said he wanted to circulate the presentation to top management with a message: “we really need to double down on messenger / our messenger is broken.”
The numbers that spooked Olivan included “exponential” growth at mobile messaging software companies led globally by WhatsApp, which eclipsed Facebook Messenger’s total number of messages sent on desktop and mobile combined by August 2013, according to data shared within the company that was presented during today’s trial proceedings.
Olvian testified today that this period was “a critical time for the company,” which included the “peak transition” involving migration from the use of desktop computers toward mobile devices, as well as Facebook’s $1 billion purchase of Instagram in 2012.
At the heart of the Federal Trade Commission’s antitrust suit is whether Facebook’s Instagram purchase and $19 billion acquisition of WhatsApp in 2014 were part of an anticompetitive course of conduct illegally fortifying Meta’s alleged monopoly over personal social networking services (see here).
A few months before August 2013’s “scary milestone,” as Olivan described it internally, he had received the “shit is getting scary” presentation he requested.
Mobile messaging services were “one of the most significant competitive threats we face” and “are increasingly moving into core social-network product areas,” according to slides sent to Olivan in June 2013.
“This marks a transition from SMS replacement and a generic ‘time spent’ threat to a direct threat to our primary products,” the document said.
That threat included sustained, rapid growth of highly engaged users who were flocking to apps like WhatsApp because it offered a simple, reliable and free web-based messaging service that could effectively replace costly SMS mobile messaging services offered by traditional phone companies.
Olivan had many sleepless nights during 2012 and 2013 – and not only because of a newborn child – according to internal documents where the veteran Facebook executive repeatedly warned that the tech giant could end up losing its shirt should quickly growing messaging services leverage their user pools to morph into a fully fledged social networking platform.
Shifting consumer behavior from the use of desktop computers to mobile devices, plus mobile messaging apps with organic growth, “huge retention” and “virality," equaled a potential recipe for Facebook to “not be around” in a couple years, Olivan wrote in a September 2012 chat discussion with Facebook executive Mike Vernal.
Olivan said he shared Vernal’s worry about “the future of the company” in an exchange where the growth chief noted that WhatsApp was one of the top three apps in Apple’s App Store for 100 of 134 countries at the time.
In October 2012, Facebook employee Dan Rose told then-Chief Operating Officer Sheryl Sandberg he wanted to talk about the heat coming from WhatsApp, KakaoTalk and LINE — which “might be the biggest threat we’ve ever faced as a company.”
Sandberg responded by backing Rose’s proposal, asking Olivan to pull together some data to inform that conversation.
By January 2013, Olivan was encouraging top Facebook leadership, including Chef Executive Mark Zuckerberg, to move forward with blocking advertisements from Google and messaging apps that might end up eating their lunch.
While blocking competition from advertising their products to Facebook users might make them “look weak,” Olivan wrote, “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.”
“The sum product of shift to mobile + messenger services morphing into fully fleshed [social networking] sites is IMO the biggest competitive threat we face as a business,” he added.
On the stand today, Olivan called that e-mail “a bit hyperbolic,” noting that Facebook did ultimately end up blocking the apps.
“I would block products that, if successful, could replace our core functionality and engagement / jeopardize our complete existence,” he said in a separate e-mail.
During his trial testimony, Olivan called out an “important edit” he made to the “shit is getting scary” slides before sharing them more widely with senior colleagues.
That edit excluded WhatsApp from a group of messaging apps that had parlayed their growth into expanded services before finally monetizing the platform.
Messaging is a “country-by-country” game, Olivan said, contrasting WhatsApps ability to “spread like wildfire” in countries across the European Union against much lower adoption in the US, UK, Australia, Japan and South Korea.
WhatsApp offered “no signals” of trying to do anything other than replace SMS, Olivan testified, while also defending Meta’s acquisition of the company.
— WhatsApp acquisition, iMessage —
As Olivan scrambled to improve a Facebook Messenger product that was struggling to compete with mobile-first messaging apps in August 2013, he received a query from a member of Facebook’s growth team asking whether the company had considered buying WhatsApp.
“That is what i would do if i was google,” Olivan responded.
WhatsApp would give Google its “best shot” at, for the third time, having a social product and “hopefully not mess it up,” he said.
At this time, Olivan had his hands full advocating for improvements to Facebook Messenger, according to internal communications.
Meta should “continue investing in Facebook Messenger since there are meaningful complementary differences” between the product and a service like WhatsApp, Olivan said in a Feb. 2014 e-mail.
His e-mail also outlined three things owning a service like WhatsApp would enable Meta to do: “meaningfully improve WhatsApp’s experience,” expose new users to sharing content with friends on Facebook, and offer developing markets a simple, useful piece of the Internet for free to increase adoption of online services.
During questioning by FTC attorney Noel Miller today, Olivan acknowledged that Meta did not do any pre-acquisition analysis to estimate the potential costs associated with these initiatives.
Meta’s alleged procompetitive benefits arising from the WhatsApp transaction were a topic of dispute during expert testimony from FTC in-house financial analyst Kevin Hearle last week (see here).
Prior to the acquisition, Meta’s Board of Directors was presented with a non-standard valuation of WhatsApp that exceeded a separate estimate from KPMG provided to Meta by $11 billion, Hearle said. Meta disputes the FTC’s claims that Facebook overpaid for WhatsApp and that its valuation methodology was inappropriate.
“On a purely texting basis…did WhatsApp offer something that iMessage didn’t offer? Or were they basically equivalent?” US District Judge James Boasberg asked Olivan at one point.
Amid additional questions from the judge about the technology and economics behind mobile messaging services, Olivan acknowledged that, “on a purely texting basis,” WhatsApp and iMessage were “basically equivalent.”
Toward the end of the day, Apple executive Ronak Shah provided remote testimony revolving around his role shepherding the development of the company’s iMessage service, which launched in 2011.
Apple has not attempted to offer a personal social networking service, and its messaging tool on iOS devices “is not a place, or about discovering new people, it’s about communicating with the people in your life that you know,” Shah said.
“Does Apple pay special attention to Meta when developing its messaging product?” Miller asked. “No,” Shah responded.
He also said that competition from mobile messaging applications is not a “primary driver” behind Apple’s messaging product development decisions.
After a brief period where Shah was questioned by the FTC during proceedings closed to the public, Meta attorney Daniel Dorris asked whether sharing life updates with family and friends could be part of iMessage’s core use case.
“It can,” Shah responded.
He also said he wasn't sure whether iMessage is the most used app used for communicating with friends and family in the US.
— Instagram —
Olivan also faced questions from both sides today about Instagram.
“Here are links to the main places with all the details on the topic of family cannibalization,” Olivan said in a May 2018 e-mail to Zuckerberg.
So-called cannibalization — in this case, Instagram pulling user engagement away from Facebook — is an issue that has cropped up across the testimonies of some of the most high-profile witnesses in the case so far, including Zuckerberg and Instagram co-founder Kevin Systrom (see here).
During Olivan’s testimony, he repeatedly pointed out that his 2018 exchange with Zuckerberg and the company’s subsequent deactivation of some features promoting Instagram on Facebook came after six years of helping support the app’s growth.
Between 2012 and 2018, Facebook’s monthly active users in the US grew from 173 million to 217 million while Instagram’s users grew from 3.9 million to 160 million, according to a chart shown to Olvian during his cross examination.
“We pushed the hell out of it,” he testified after being presented with an April 2012 email exchange he described as querying Zuckerberg on how “wild” they should go with promoting Instagram on Facebook. “Yes, we should absolutely push this hard,” Zuckerberg told Olivan.
The FTC objected after Meta showed Olivan a more recent chart showing Facebook and Instagram neck-and-neck as they approach a quarter billion monthly active users.
Meta attorney Kevin Huff asked Olivan during cross examination whether Instagram would have grown as quickly had it not been acquired by Facebook.
“I don’t think so,” he responded, later testifying that Meta currently spends about $60 billion annually on its infrastructure.
Product roadmaps that map out how engineering teams will prioritize their work tend to be a bottleneck for tech firms, Olivan said, and Meta was able to save Instagram from the “trial and error” required to figure out what works and what doesn’t.
He also highlighted Facebook’s promotion of Instagram as a “first class citizen” on the platform and its access to Facebook’s social graph, which maps out the connections between people and the strength of those connections.
Olivan said it became “extremely easy” for potential rivals to create a new social graph by utilizing the information included in the address book on a user’s devices.
The longtime Meta executive previously lost an internal debate at the company over whether Facebook should write its social graph directly into the address books on Apple devices, where any other app could then “rip it” and be off to the races.
“I think going nuclear with Apple would literally be the stupidest decision we’ve made as a company (and I’ve seen a lot of bad decisions),” Vernal told Olivan during a September 2012 exchange touching on the issue. “If we end up on the brink with Apple I really think we’re going to need better data about the threat.”
— The future —
Toward the end of Olvian’s cross examination, Huff asked what now keeps the Meta COO up at night when he thinks about the future.
Olivan responded that he no longer thinks content generated by a user’s friends is the “best and only way” to offer a really engaging experience.
TikTok “invented the trick” of leveraging algorithms to deliver hyper-relevant content in an “extremely engaging way” despite starting with “no connections,” he said. “That’s why we built Reels.”
Olvian faced extensive questioning from the FTC about his claim that, in contrast to the “early days” of Facebook, the app is now no longer “useless” to a user with no friends.
The “next wave,” according to the Meta COO, is “custom content” created by machine learning models that are already looming over a world where algorithms constantly compete to identify and deliver interest-based content to people that may have little or no connection to their real-life personal relationships.
Companies adept at utilizing so-called generative AI technologies will be able to create content “that doesn’t even exist,” rank its relevance to different people, and start “upending social network feeds,” Olivan testified.
During a lunch break, the FTC's Miller could be heard bantering with Boasberg’s court reporter about her struggles with speaking too quickly during her direct examination of Olivan.
“I get so excited,” she said after mentioning that once a lawyer starts getting suggestions on the sidelines to slow things down, “you know it’s bad.”
The parties provided Boasberg with their first update on how much time has been used up on each side’s “chess clock” today, which tracks the equal share of time given to each side during the trial.
As of the end of last week, the FTC had used about 30.5 hours compared to Meta’s 18 hours, according to agency attorney Daniel Matheson.
Even though most Facebook users now purportedly spend the majority of their time watching Reels' short-from video content, “You are not saying that people don’t care anymore about connecting with people they care about?” Miller asked Olivan at one point.
“I don't know whether they care or not,” Olivan responded. “I just look at the metrics.”
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