Antitrust

The judge opted to watch video testimony slated for the day in his chambers, so we’re done for the day. We’ll go live again this week when the trial continues.

A 2014 chat log between Systrom and Deng seems to undercut Deng’s testimony that he doesn’t recall Meta scaling back growth resources for Instagram. Deng says he doesn’t have enough context to confirm what he and Systrom were discussing, but described the chat as a “knee-jerk reaction” to an email they mentioned at the time. “Am I reading correctly we now have less growth support, not more?” Systrom asked. “This isn’t great for us,” Deng wrote at the time.

Deng, who moved to Instagram in 2013 until 2015 after working on Facebook Messenger, is challenging Instagram co-founder Kevin Systrom’s testimony that the app could have reached the same success without Meta and that the company deprived it of resources. Deng says Meta helped Instagram with speeding up high quality hiring, and sharing infrastructure and growth team staff. Still, Deng left Instagram several years before Systrom departed the company.

Deng, who led product for Facebook’s messenger product in the early 2010s, says he was not worried about WhatsApp growing into a big rival in the US. Since many people in the US had iPhones where they could send mobile messages including photos through iMessage, he says, “people just expected more here than just text messaging,” which was the focus of the simple WhatsApp service. “There’s nothing about what they did that signaled they remotely wanted to get into more expressive messaging.” he says.

Former product executive Peter Deng warned colleagues about the existential threat of mobile messaging apps moving into Facebook’s core space. In an October 2012 email, he called messaging rivals “the biggest threat to our product that I’ve ever seen in my 5 years here at Facebook; it’s bigger than G+, and we’re all terrified,” he wrote, referring to Google’s now-defunct social media competitor. “These guys actually have a credible strategy: start with the most intimate social graph (i.e. The ones you message on mobile), and build from there.” Deng testifies he was referring to the three mobile apps that had started adding such features, and not the one Facebook ultimately acquired: WhatsApp.

During its Search antitrust trial yesterday, a DOJ attorney produced a document showing that “80 billion of 160 billion ‘tokens’ — snippets of content — after filtering out the material that publishers had opted out of allowing Google to use for training its AI,” according to Bloomberg.

Former TikTok director of UX research Eric Morrison testifies in a short video deposition that as of 2022, unlike Facebook and Instagram, TikTok “was not necessarily serving that need to connect to people that you already know.” This is the need that the FTC says Facebook and Instagram uniquely fill, alongside the smaller apps Snapchat and MeWe.

Hegeman concedes that even with TikTok becoming a more significant competitor in the past two years, Facebook’s user base and the time users spend on it have continued to grow.

Hegeman says that the (not publicly disclosed) number of users who opted out of off-app tracking through Apple’s App Tracking Transparency policy mostly reflects Apple’s scare tactics in framing the question to users, rather than whether users actually prefer not to share their data with Meta. He adds that Apple frames the ask very differently when asking users about similar opt-ins for its own products. “I think it’s a clear example of them trying to leverage their position controlling the iOS operating system to advantage their position in the market,” he says.

Sometime after 2018, Meta realized that focusing on surfacing friends and family content wasn’t helping it as much as it had hoped. Competitors like TikTok were taking over a lot of time users would spend online, and Hegeman says Meta found it to be a better strategy to broaden the focus of the Facebook app to include investments in video and other kinds of content.

In 2021, Meta found that by reducing the relative amount of ads some groups saw by 80 percent, it only saw about a 3 percent increase of a usage metric. This shows ads aren’t a major cost for consumers, Hegeman says, because if a company like Apple lowered the price of its iPhone by 80 percent, it would likely see much more than a 3 percent increase in sales.

In response to regulations in the EU, Meta began offering an ad-free version of its products there for 6 Euros a month. But that offering hasn’t caught on, Hegeman says — just about 0.007 percent of users opted to pay for the service.

Meta found when it tested a new system to customize how many ads it shows based on how much a user likes or dislikes them, users didn’t seem to know the difference. The time they spent on the platforms and engaged on it didn’t change much. “This change had a minimal impact on people’s experience and was not very noticeable,” Hegeman says.

The FTC is asking Meta about Apple’s 2021 App Tracking Transparency policy that let users decide whether to let developers track their activity off-app to help serve more persoanlized ads. Meta warned investors in 2022 that it would result in a $10 billion revenue hit to its business that year. That’s presumably because when users are given an option to give Facebook and Instagram less data, at least a significant chunk of them take it. We don’t know exactly how many, though, since the judge sealed the courtroom to discuss internal metrics like how many people opted into the tracking.

That’s theme of the FTC’s questioning of Meta’s CRO. The FTC’s Stephen Pearson is asking about what Meta says it collects in its privacy policy, and points out that if Instagram were independent, it would have its own policy. Meta uses this data to fuel personalized advertising, which makes money for the company. Pearson is also beginning to touch on ad load — or the relative amount of ads to organic posts users see in their feed — which the FTC has tried to show Meta can increase with relatively little risk of losing users.

John Hegeman, the top executive in charge of monetizing Facebook and Instagram, just took the stand. He previously led product management for the Facebook feed.

What users say they want and what they show they want through their actions can be two different things. Cobb illustrates this point with the example of chronological feeds. While users repeatedly report this as a feature they’d like, Cobb says every time the company has tested it, satisfaction with the app declines and users’ engagement changes.

But that dip soon recovered, Cobb testifies. He’s referencing the sweeping content moderation and fact-checking policy changes CEO Mark Zuckerberg announced in January just ahead of President Donald Trump’s inauguration, which answered a Republican wish-list.

Dips in how users feel about Meta’s brand are often correlated to media coverage — not necessarily actual changes to the product, Meta research executive Curtiss Cobb testifies on cross-examination. The FTC had tried to frame the fact that users don’t leave the apps in droves after reporting feeling worse about Meta’s brand shows they’re locked in due to Meta’s alleged monopoly. Meta is trying to complicate this picture, by showing that just because users feel worse about the brand after a specific media event doesn’t mean that its products are getting any worse — and that might be reason enough to stay.

Now that Judge Yvonne Gonzalez Rogers has issued an order preventing Apple from charging a commission on sales made outside the App Store, the company has confirmed that it will appeal. Here’s the company’s statement, sent by senior director of corporate communications, Olivia Dalton:

Chairman Jim Jordan (R-OH) removed a provision from a budget package that would have stripped antitrust enforcement authority from the consumer protection agency and transferred it over to the Justice Department’s Antitrust Division. The language appeared in an earlier version of the package and has long been on Republicans’ wishlist. President Donald Trump has fired the panel’s two Democratic minority commissioners shortly before the agency went to court over its lawsuit against Meta’s alleged social media monopoly.

A June 2019 document says that the data privacy scandal “is the most likely significant event that would have had a negative impact on both revenue and engagement.” But even so, Meta’s research team found, “we failed to detect significant and consistent effects of sentiment (or adverse events) on these metrics.” Cobb quibbled with how the FTC’s attorney restated the finding back to him, and Boasberg noticeably leaned back in his chair and rolled his eyes after a repeated back-and-forth, before ending the proceedings for the day.

In 2018, Meta found that a majority of Facebook users came to the platform for this reason. A document from the time describes “Facebook’s core value proposition” as “robustly anchored on ‘keeping up with friends and family,’” which is exactly the trait the FTC says is unique to personal social networking services. Cobb makes a point of saying that this was true at the time, seven years ago.

Meta VP of Research Curtiss Cobb, who tracks how users feel about the brand, just took the stand. His team surveys Facebook and Instagram users about how they feel about whether the company cares about its users. In 2020, for example, the team found that “in the US this year Facebook has slid to the 21st place and falls behind all other tech companies we measured” in the metric it calls “Relative Cares About Users” or RCAU.

Drawing on filings in TikTok’s litigation against a US ban, Meta points out that TikTok has said it could take years to perform the maintenance needed to keep a US-only app running if it were separated from ByteDance. TikTok also said that reconfiguring its content moderation systems for a US-only app would reach unsustainable costs, despite serving a platform of 170 million US users. Meta is drawing a comparison to how it believes it was uniquely positioned to help Instagram with its infrastructure and content moderation because of its own scale and success.

Meta is asking about statements TikTok made in its lawsuit against the US ban of its app to show that when TikTok is unavailable, users often turn to Instagram — showing that users consider it to be a substitute in at least some respect. TikTok told the court in its own case that even a temporary shutdown could cause it to permanently cede ground to competitors like Instagram, YouTube and Snapchat. Earlier in the Meta trial, the company showed that TikTok’s temporary shutdown led to a spike in engagement for Instagram.

In a 2022 document presented to TikTok’s leadership, the company wrote that Instagram would likely make Reels its “no. 1 format.” TikTok predicted, “Instagram will redesign the interface and consolidate everything to Reels to make the short-form video first.”

Presser is reluctant to say so straightforwardly, testifying that’s not exactly how he thinks about it. But Meta’s attorney shows him a 2021 internal document where TikTok wrote, “YouTube and Instagram are TikTok’s most important competitors.”

Meta is trying to muddy Presser’s testimony about the distinctions between TikTok and Instagram by pulling up a filing TikTok made with an Australian regulator, arguing against an age restriction exemption for YouTube. “Today, TikTok, Reels and Shorts are virtually — and deliberately — indistinguishable in function and user experience,” the company wrote in March. Presser reiterates that while their features are very similar, the experience of the content on each app is different.

Presser says that only a “very minuscule” percentage of time spent on TikTok is in the friends tab — just about 1 percent. They keep it around in hopes that eventually it will help enhance users’ experiences, he says. Similarly, only a small percentage of users upload their contact lists from their address book or from Instagram and Facebook, he says, reinforcing the FTC’s argument that users don’t really go to TikTok to connect with their real-life connections.

The FTC brought up a declaration from TikTok in its own case against the US government over the law that seeks to ban the app unless it’s sold from its Chinese parent company ByteDance. The government used the declaration to show how TikTok described itself as offering a distinct service from other social platforms available in the US. It’s a reminder of the deeply strange context behind this case and Presser’s appearance today in the same courthouse where the TikTok ban law was litigated (and upheld).

Looking at a screenshot of the same video experience on TikTok, Instagram Reels, and YouTube Shorts that Meta has shown throughout trial to show the similarity between the products, Presser says the snapshot doesn’t tell the whole story. “When you click out of this view for these other platforms, you would get to essentially what I think of as their core business,” Presser says, which for Instagram, is its feed of content and stories. Plus, he says, “as you swipe on any of these platforms, the mix of content that you would get might feel different” because of the different recommendation algorithms.

Presser says the video app doesn’t offer this kind of service, reinforcing the FTC’s view that TikTok operates in a market distinct from the one it claims Meta monopolizes — which focuses on connecting users with friends and family, rather that surfacing content based on users’ interests. Presser’s testimony is significant for the FTC, in part because ByteDance’s submission to European regulators in 2020 uses the term “personal social networking” to define Facebook and Instagram, which Meta has tried to paint as a made-up label.

It’s now TikTok’s turn to explain why it does (or doesn’t) compete with Facebook and Instagram for a social network connecting friends and family. Adam Presser, who leads operations and trust and safety, is walking through a submission by TikTok’s owner ByteDance to the European Commission, where it distinguishes between social networking services like Meta’s apps and “online content creation and sharing services,” which are focused around sharing and consuming content based on interests.

Meta is trying to draw an analogy between Yahoo’s $1 billion acquisition of Tumblr in 2013 with Meta’s 2012 acquisition of Instagram for the same price. Tumblr wasn’t making a profit when it was acquired but had a large user base. A big difference, of course, is the trajectory of each startup. When Meta’s attorney asks if Tumblr’s subsequent sale to Automattic was “significantly less” than $10 million, Tucker says, “I saw a joke that it was near the price of a modest home in Silicon Valley.”

Eli Tucker is walking the court through the blogging platform, including its app store listing that describes it with the words, “Fandom, Art, Chaos.” Just like the FTC did with Pinterest, Strava, and Reddit, the government is trying to show Judge Boasberg that the way these other platforms are designed and used are more about connecting over interests than with friends — and therefore outside of the market Meta allegedly monopolizes.

Meta is pointing out on cross-examination that Apple has chosen to list its own messaging app in this category on the App Store, suggesting there may be more overlap with Meta’s services than the FTC would argue.