

Expect a 6 month freeze on Facebook’s Instagram acquisition - markerdmann
http://gigaom.com/2012/05/11/expect-a-6-month-freeze-on-facebooks-instagram-acquisition/

======
gyardley
Well, sure. This FTC-imposed delay is standard operating procedure for almost
every large tech company acquisition in the United States.

Some recent examples on the Google side:

AdMob - announced November 9th, 2009, FTC approval May 21st, 2010

ITA - announced July 1, 2010, FTC approval April 8th, 2011

AdMeld - announced June 13th, 2011, FTC approval December 2nd, 2011

(Each of those acquisitions were for less than Facebook's paying for
Instagram, although the decision to investigate isn't just based on money.)

This is why large acquisitions usually include a breakup fee in case they
don't go through.

~~~
dmbaggett
I was a co-founder of ITA and can tell you that a second request is not
"standard operating procedure". It's a big deal, and it's likely to be a very
expensive learning experience for both Facebook and Instagram. Big mergers in
spaces of interest to the regulators are always reviewed carefully, but it's
simply not the case that every deal this size must endure a second request and
a "full monty" regulatory process.

Assuming the report of a second request is true, this is quite problematic for
Instagram. Once a process like this is underway, the outcome is inherently
uncertain. They will be left twisting in the wind for many months. It is an
absolutely awful place to be, both strategically and psychologically.

For Facebook, as well: expect various "helpful third parties" to work behind
the scenes to convince the regulators to impose onerous conditions on Facebook
as part of a consent decree to "ensure consumers are not harmed by the deal;"
this is one of the few mechanisms by which competitors can damage Facebook
without needing to compete with them successfully in the market. (Ironic,
isn't it?)

This also means that the integration of Instagram's technology into Facebook's
platform will not begin for many months. Once such a review is under way, the
two teams cannot collaborate other than superficially; doing otherwise is
known as "gun-jumping," and can lead to not only the deal being scuttled, but
additional penalties as well.

(BTW, the DOJ reviewed the acquisition of ITA Software by Google, not the FTC.
They are entirely different entities, and often squabble with each other over
who gets to prosecute a given case.)

~~~
gyardley
That's really interesting -- thanks for the correction.

------
damncabbage
_"He adds that the agencies also use the review process to get up to speed on
fast-moving industries they may not fully understand."_

Wonderful. Private business picks up the government's tab for training?

~~~
ticks
Several months is also a long time in tech. An opportunity for FB to
reconsider the deal? After all, it seems like it was arranged on a whim.

------
Jimmie
If the investigation happens that'll really suck for Instagram.

Any chance they'll get the same offer in 6 months? I doubt it.

~~~
astrodust
It sounded like it was a done deal, that it was agreed to in such a way that
it could only be un-done by law.

I think Instagram is shrewd enough they could parlay this into an even bigger
deal if they had an opportunity to.

What is probably the biggest concern is being ham-strung for six months. If
Facebook had plans for Instagram then it would be hard to work on "new" things
if they didn't matter in the long run because they duplicated what Facebook
already has.

~~~
dsl
If Facebook's lawyers are worth their salaries, they have an out. They might
incur a penalty, but if a simple walk-away isn't in the deal, multiple people
will get canned.

I suspect the FTC is looking long and hard at the Andreessen Horowitz
connection. Even if Marc recused himself, the price tag being 1000x the
companies actual "value" (think sane business people outside the valley here)
and the fact that FB took out a loan against its IPO income to fund the deal
both scream dirty dealings to investigators.

~~~
AVTizzle
Wow - I thought I'd heard about this deal from every angle over the last few
weeks since the deal, but for some reason I hadn't heard or considered your
point about the AH connection.

Really interesting point.

~~~
loceng
I wrote a blog post about this
([http://mattamyers.tumblr.com/post/22070489398/re-how-
twitter...](http://mattamyers.tumblr.com/post/22070489398/re-how-twitters-
secret-offer-for-instagram-made)) which included a link to an article enttiled
Instagram-scam? That can article can be found at
<http://www.donnaklinenow.com/investigation/instagram-scam>

------
staunch
Bored bureaucrats excited to work on hip cases. Instagram was a little startup
getting bought by a big startup. If it wasn't for the high price tag no one
would have given this deal a second thought. The press made a big deal of it
so the bureaucrats will too.

~~~
rieter
Facebook isn't a startup.

~~~
staunch
What you mean to say is that it doesn't fit your concept of a startup. There's
no single definition of "startup" that's commonly accepted. In my view
Facebook is at the very extreme end of the startup spectrum.

~~~
Chrono
An estimated value of $100b, the ability to throw $1b into acquisitions and
over 3000 employees - still a startup?

By such logic you can almost call Google a startup, or any other IT firm
really. What exactly makes Facebook a startup by any definition?

~~~
staunch
The valuation of a company is irrelevant to my definition of a startup. I
think Facebook is still a startup because it's still in the process of rapidly
scaling and transforming itself.

When it slows down and settles into long term strategy it will cease to meet
my definition. It's starting to do that now.

------
adgar
How long did Facebook expect to grow unfettered before their acquisitions
started requiring scrutiny by regulators?

Edit: When Mark Zuckerberg found himself throwing down a billion dollars to
have what a company he wanted, did he ever once seriously consider that he
couldn't have it as soon as he wanted?

~~~
wmf
Who says he wants it right now? Maybe the delay doesn't matter.

~~~
adgar
... right. Surprise the world by throwing _a billion dollars_ down for a
social media company with 11 employees - a month or two before your IPO -
because you don't care if they have to stay your competitor for another 6
months (or more).

Right.

~~~
dsl
They can drag the investigation for as long as possible, then pay a few
hundred million to kill the deal. Killing a competitor (which honestly has
100% userbase overlap with FB anyway) and cockblocking Twitter and Google at
the same time.

It sounds crazy, but remember when Google bid 4 billion on wireless spectrum
just to create a better environment for Android?

------
hnwh
wow Google and Twitter... that's just dirty...

------
mcbaby
it's sad to realize that once blossoming companies fueled with innovation and
hope, like Google and Twitter, have resorted to promoting anti-trust
litigation because they feared their product couldn't stand on its own merit

~~~
adgar
> it's sad to realize that once blossoming companies fueled with innovation
> and hope, like Google and Twitter, have resorted to promoting anti-trust
> litigation because they feared their product couldn't stand on its own merit

It's sad to see people so easily "realize" such sad things because they read a
rumor posted on a website by some guy

------
bstar77
This will not amount to anything (negative) as instagram isn't worth anything
near what Facebook is paying for them. Zuck is taking a gamble by getting a
social network on the rise, but is still completely unproven. The last thing
he wants to do is pull a Murdoch and buy a platform the rest of the world
already knew was dead, so he's goes to the complete opposite extreme (which I
believe is a complete overreaction on Zuck's part).

This is similar to projecting an athlete's career... Zuck is gambling quite a
bit that instagram is a real stud, but there is always the reality that insta
could be a dud long term. Regulators are going to be more concerned with deals
that could disrupt current markets. What market has instagram created or
dominated? (I don't consider sharing pictures a market)

If Zuck has the Clairvoyance to see something here that will generate a strong
return on $1,000,000,000 despite the enormous risk, then I see no reason to
not let this deal go through.

