Why Whatsapp is no threat to Facebook

The truth is that even if angry users want to switch platforms, they really have no place to go

themselves. With Instagram and Whatsapp, that mantra obviously no longer held: He bought them because he could see that one day, they might become serious threats to Facebook’s social media primacy. That seems obvious now. But that insight was missed by the government’s antitrust regulators in the US and even by the usually more-sceptical European Union regulators.

I looked at what the various government regulators were saying at the time of the acquisitions. In the case of Whatsapp, it doesn’t appear that the US Justice Department did much at all, leaving the heavy lifting to the Federal Trade Commission (FTC). After insisting that Whatsapp not change its privacy protections, the FTC approved the deal. The review took two months. (Four years later, the Whatsapp privacy protections are exactly what Facebook is aiming to change.) As for the EU’S anti-trust regulators, they too were focused on privacy, and approved the deal with similar warnings.

The Instagram acquisition, two years before that of Whatsapp, was approved because of a failure of imagination: Regulators couldn’t envision the photo-sharing company ever competing with Facebook.

Today, in addition to having more than its fair share of eyeballs, ads and “marketing opportunities”, Instagram serves another important purpose for Facebook: It’s the company’s Snapchat killer. Every time Snapchat adds a new feature, Instagram copies it. No wonder Facebook doesn’t seem too worried about competitors.

In an ideal world, an aggressive anti-trust department would sue Facebook to force it to divest its two acquisitions. Instead, this Justice Department put its energy into breaking up the AT&T-TIME Warner deal. What US regulators should be focusing on is the big Internet companies that are only getting more powerful.

In a paper published in October, Carl Shapiro, the University of California Berkeley anti-trust economist, acknowledged the high degree of difficulty in anticipating how future competition might evolve, but he argued that regulators should try anyway.

“There would be a big payoff in terms of competition and innovation if the DOJ and FTC could selectively prevent mergers that serve to solidify the positions of leading incumbent firms, including dominant technology firm, by eliminating future challengers,” Shapiro wrote.

For all of Facebook’s reputational problems, no one in the government is calling for it to be broken up. But if this Justice Department truly wants to stop mergers that reduce competition and innovation, it should focus less on AT&T and more on Facebook — face the future, not the past.