Facebook Chairman and CEO Mark Zuckerberg testifies at a hearing of the House Financial Services Committee in Washington on October 23, 2019.
Erin Scott | Reuters
Facebook CEO Mark Zuckerberg on Wednesday gave a complete defense of the company's ownership of Instagram, describing the fierce competition the combined company faces in the market.
Speaking to a conversation with analysts following Facebook's third quarter revenue report, Zuckerberg was asked how the increased regulatory scrutiny the company faces will affect its ability to roll out new services in new markets.
Zuckerberg immediately focused his response on Instagram, the photo-sharing app that Facebook bought in 201
"Many of the antitrust issues that are out there will be about acquiring Instagram, right?" Sa Zuckerberg. "There's going to be a lot of scrutiny of the acquisition in particular."
Democratic presidential candidate Senator Elizabeth Warren has called for Facebook to be split, especially the divestment of Instagram, a sentiment shared by Facebook founder Chris Hughes, who published a New York Times op-ed, claiming the deal should be "wound up. " In addition, Facebook faces investigations and probes from the Federal Trade Commission, the Department of Justice and 47 attorneys generally related to antitrust issues.
Zuckerberg began his last defense by highlighting the competitive environment Facebook was in before the deal took place. At the time, Instagram had just 13 employees supporting the app's 30 million users.
"In some ways, we considered Instagram a competitor, but we've always thought that the better way to think about Instagram was that it's complementary to Facebook and what we do," Zuckerberg told analysts.
He is trying to make the point that whatever market power Instagram has now is the result of the work that has been going on since Facebook bought it.
Adam Mosseri (center), takes over the leadership of Facebook's Instagram from co-founders Mike Krieger (left) and Kevin Systrom (right).
"Instagram wouldn't be what it is today without [co-founders Kevin Systrom and Mike Krieger]," Zuckerberg said. "But it wouldn't be what it is without everything we put into it, whether it's our infrastructure or advertising model, our expanded security services and much more."
There is no doubt about the value that Instagram has given to Facebook, so it attracts a younger demographic and gives it a product that was entirely built for smartphones.
In Facebook's updated IPO Prospect, which was published shortly after the acquisition, it said that Instagram would help "improve our product products and enable users to increase their mobile engagement and image sharing levels." Facebook barely generated any revenue from mobile ads, a risk so serious that it weighed on the stock for many months after the IPO. As of the last quarter, ads account for 94% of Facebook's total revenue, and Instagram is a significant part of that.
So far the pressures of the government do not harm Facebook's financial performance. The company posted quarterly revenue, revenue and average revenue per user beating analyst estimates, sending the stock up more than 4% after the clock.
However, Zuckerberg said that Facebook continues to face competition from a variety of sources.
19659002] "We have different competitors in the room today like Snapchat, which shows that people are always building new ideas," he said. "Of course, on mobile phones, remember that both Apple and Google have built cameras and private photo sharing and photo management directly into the operating system."
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