In the world of "What Ifs", an interesting take was provided by Morgan Stanley when the bank was sought to advise WhatsApp during acquisition talks. According to a Federal Trade Commission expert witness, if Google acquired WhatsApp instead of Meta (then Facebook), the search engine-driven tech firm would have threatened Facebook’s dominance in the world of social media.
Last week, the high-stakes antitrust trial began between Meta and the FTC, in which the agency has alleged the company has built a social media monopoly through its acquisitions of Instagram and WhatsApp. If found to have violated antitrust laws, Meta could be forced to divest these platforms, which are central to the social media giant’s revenues and strategic long-term growth plans.
Executives who have been called to testify during the 8-week trial include CEO Mark Zuckerberg, chief operating officer Sheryl Sandberg, and Instagram co-founder Kevin Systrom.
Last 21 April, the FTC called on Jihoon Rim, New York University professor and former CEO of messaging app and WhatsApp competitor Kakao, as its expert witness, The Verge reported.
During Rim’s testimony, he emphasized that both WhatsApp and Instagram were "highly likely to be successful" regardless of an acquisition. Both platforms saw 60 percent of their monthly active users on a daily basis, and WhatsApp's lead investor — Jim Goetz of Sequoia Capital — had dubbed the app the highest-engagement platform he had ever seen, according to Rim.
WhatsApp's success made Meta executives nervous after the messaging platform saw breakout popularity overseas, surpassing Meta’s Facebook Messenger. But the real danger was WhatsApp's potential as a social media competitor, according to a 92-page memorandum opinion that was introduced in the case. The memo, a ruling on cross-motions for summary judgment, also outlines the FTC antitrust lawsuit against Meta, specifically surrounding the company’s acquisitions of WhatsApp and Instagram.
Meta leadership was openly concerned about WhatsApp’s scalability into more than just a messaging platform if Meta didn’t buy it or another competitor got to it first. According to the memorandum opinion, during an internal presentation some leaders said WhatsApp was "'one of the most significant competitive threats [Meta] face[s]' because developers were 'increasingly moving into core social networking product areas,' posing 'a direct threat to [Meta’s] primary products.'"
Additionally, in February 2013, Zuckerberg alerted the company’s board of directors that the "use of M&A to build a competitive moat around [Meta] on mobile and ads" was necessary. He emphasized that "the biggest competitive vector for [Meta] is for some company to build out a messaging app for communication with small groups of people, and then transform that into a broader social network," according to the memo.
Subsequently, Morgan Stanley wanted in on a deal between the messaging platform and a potential buyer. In its bid to advise WhatsApp, Morgan Stanley bankers drew on Zuckerberg’s concerns about potential Facebook rivals, including any budding deal between Google and WhatsApp.
"WhatsApp could determine the social network winner on mobile," the bank wrote on a deck referenced by Rim in the trial as reported by The Verge. "Google’s resources combined with WhatsApps’s user base and traction could create the predominant social network on Mobile (surpassing Facebook)."
While it's unclear if the specific pitch was ever delivered, Morgan Stanley represented WhatsApp during the acquisition negotiation in early 2014.
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