When Facebook purchased Instagram for $1 billion in 2012, the deal wasn’t seen as obvious or a slam dunk… for Facebook. Which is a statement of the obvious, one abundantly proven by modern estimates that place Instagram’s standalone value at something north of $100 billion.
Which brings us to another statement of the obvious, that commentary after the announcement of Facebook’s purchase wasn’t all or even majority positive about Mark Zuckerberg. Some media accounts suggested Facebook overpaid, some thought it purchased a fad, and no doubt some had simply never heard of Instagram. Notable about the timing of the purchase is that Facebook floated its shares to the public a month after the Instagram acquisition, only for its shares to begin a difficult slide. By April of 2013, a year after the Instagram buy, Facebook’s shares were down roughly 35 percent.
Which requires a pivot, to Meta and Zuckerberg’s critics at the FTC. Evidently investors didn’t know in 2013 what FTC officials purport to know in 2025 about 2013. Please read on.
“Mark bought his way out of competing.” Those were the words of former FTC Chairman Lina Khan this week about Zuckerberg, in an interview with the Wall Street Journal. Khan’s thinking resembles that of the FTC’s lawyer in its antitrust case again Meta, Daniel Matheson.
The words of Khan and Matheson are rhetorically charged, intensely ideological, but also unmoored from market realities. What’s important about markets is that they’re neither rhetorical nor ideological, they just are. And the markets are presently rejecting the FTC’s case.
Which is rooted in Khan and Matheson’s belief that Facebook’s 2012 purchase of Instagram was obvious. In addition to revealing impressive innocence about markets, they’re guilty of presentism whereby they’re judging the past based on present knowledge. Except that in the past no one, including Instagram’s founders, had a clue about Instagram’s bright future.
To which Khan and Matheson might reply that there were clues, that by virtue of it having attained “unicorn” ($1 billion valuation) status, its future was secure. Oh well, tell that to the investors who bought into super-unicorn WeWork, or to the News Corp. executives who paid $580 million for MySpace in 2005, saw its valuation soar to over $10 billion in 2006 and 2007, followed by a long decline…Which is the point, or should be.
Matheson is making his case against Meta largely about it buying off competition, but for one problem: In dynamic markets, “the competition” is very much a moving target. In other words, Zuckerberg would have given anything to have had a fraction of the confidence about Facebook’s acquisition of Instagram in 2012 as Matheson and the FTC have about it in 2025. So would investors in the “unicorns” of today.
According to a report published by the University of Chicago’s Booth School, there were roughly 1,100 “unicorns” in 2021. According to the same report, after 2021 “New funding rounds at valuations of $1 billion have become rare, while additional rounds for existing unicorns have often taken place at lower valuations.” Well, yes.
In the world of business, tomorrow is another century. As difficult funding for would-be unicorns and those of 2021 attests, high valuations cut both ways. What can attain a high value so quickly can lose it just as quickly, if not faster.
Back to the FTC, it’s yet again making its case against Meta all about a $1 billion purchase from 2012, and a $19 billion acquisition two years later. Except Meta and Zuckerberg could have just as easily been wrong as they were right. Unknown is why they’re being demonized for being right.
