Why Did Mark Zuckerberg Buy Instagram? Leaked Emails Reveal
Leaked emails, which originally surfaced in 2020, allegedly revealing discussions between Meta CEO Mark Zuckerberg and then Facebook CFO David Ebersman, have resurfaced online.
Facebook's acquisition of Instagram for $1 billion in 2012 is seen as a major turning point. Initially, analysts criticized the hefty price tag for Instagram. However, today, the photo and video-sharing app is valued at a staggering $500 billion, showcasing Zuckerberg's strategic vision and willingness to take risks.
A set of leaked emails
A set of leaked emails, also from 2020, purportedly showing conversations between Zuckerberg and his team prior to the Instagram acquisition, is once again making rounds on social media. Nevertheless, the alleged exchange sheds some light on factors to consider when planning an acquisition.
Zuckerberg's email to Ebersman discussed the potential cost of acquiring mobile app companies like Instagram. He highlighted their large user base, rapid growth, small team size (10-25 employees), and lack of revenue at the time. Ebersman, who oversaw Facebook's IPO in May 2012, responded to these considerations.
Zuckerberg also stated, "The businesses are still new, but their networks are well-established, and their brands already hold significance. If they expand on a large scale, they could pose a significant threat to us. These entrepreneurs aren't eager to sell (largely inspired by our success), but if the price is high enough¡ªlike $500 million or $1 billion¡ªthey might consider it...we're vulnerable in mobile..."
Ebersman's response focused on the "value creation" such a merger or acquisition would bring to Facebook. He emphasized the potential benefits of integrating acquired products with Facebook's services to enhance overall offerings. However, he also stressed the importance of having a clear vision for implementation and considering cost-effective strategies such as internal product improvements.
Responding to the leaked email gaining traction, Professor Paul Nary, a corporate strategy expert at The Wharton School, shared his thoughts on the micro-blogging platform, X (formerly Twitter).
"This seems to be, at the very least, a well-thought-out and cautious approach to making a deal," Nary commented on X.
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Did Mark Zuckerberg buy Instagram to crush the competition?
Professor Nary shared his view, saying, "It's an interesting idea, considering the concept of 'killer acquisitions' of rivals... or maybe something similar but not quite? Is integrating and absorbing different from outright elimination? There are various perspectives on this spectrum."
From a mergers and acquisitions standpoint, Zuckerberg's confidence was well-placed, turning what was initially seen as a hefty price tag into one of the most celebrated deals in the tech world. The Facebook founder saw the potential of Instagram's growing user base to reshape, or even disrupt, the social media landscape. This strategic decision emphasizes the importance of focusing on long-term growth and innovation rather than short-term gains.
Since Facebook acquired Instagram in 2012, its user base has soared from 30 million to over 2 billion monthly active users globally (as of January 2024), surpassing platforms like TikTok and WeChat, according to Statista. In terms of revenue, Instagram contributed nearly 30% of Meta's revenue in the first half of 2022, as reported by Bloomberg. Meta listed Instagram¡¯s ad revenue as $22 billion in 2020 and $17.9 billion in 2019.
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