Huh? The USA Wants To Stop Acquisitions Before They Look Smart?
Do you remember when Facebook acquired Instagram for $1B? I wasn't the only who through that was nuts? Now that history is being rewritten....
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Google Search isn’t very good at helping you remember reality, since this topic — the US Government’s role in enhancing competition and preventing concentration — is so hot right now, it’s hard to find the original coverage of Facebook’s acquisition of Instagram in 2012. Here is the New York Times Dealbook story. The key conclusion: “It’s a notable move for Facebook, which has exclusively focused on bite-size acquisitions, worth less than $100 million.” In other words, it was remarkable the price the company paid for another company with no revenue, “only” 30M users, and no apparent way to make money. The New York Times job is not be extreme, even if it does tend toward a liberal point of view; at the time, there was a LOT more extreme reactions to this deal, more along the lines of Zuckerberg is nuts.
To be honest and clear in your thinking, you do have to recall that in 2012, unicorns were unusual as private companies, and it was still really hard to get to be a public company. The current valuation “enthusiasm” had not yet taken hold (and really didn’t until the pandemic shifted so many fundamentals in our daily behavior just 18 months ago.) To take yourself back to 2012 and imagine who would have said what in Barack Obama’s administration to lead to an action to block Facebook’s acquisition of Instagram then?
Now there is a drumbeat that the United States of America federal government should unwind that acquisition, more than 9 years later, simply because the acquiring company is now too powerful and too valuable. $1T! Not to mention that the same federal government (run by different people) Should Have Known at the time that this acquisition was actually brilliant.
Should the USA have prevented the acquisition of Oculus for $2B just two years later? I ask because that deal is still not considered brilliant; the subsidiary company has since produced multiple products that are generally considered well made. Oculus Inc. still has not achieved the kind of scale that would justify its original price. The future of virtual reality (versus alternate or augmented or mixed reality) is still hotly debated, and considered… Competitive! Who in the current administration would predict that Oculus is going to be a key part of Facebook’s future dominance (when it’s worth, what?, $4-5T in 2030) and take action now, in 2021? In other words, what are the mechanics of a democratic government deciding in advance what is going to happen and preventing only the “bad stuff” from happening out then?