Why did Mark Zuckerberg buy Instagram? Leaked emails resurface

Leaked emails, that first came out in 2020, allegedly showing a discussion between Meta CEO Mark Zuckerberg and David Ebersman, CFO of Facebook at the time, have surfaced online again.

It is claimed that Zuckerberg wrote the following in the leaked email to Ebersman: "How much we should be willing to pay to acquire mobile app companies like Instagram...These companies have the properties where they have millions of users (up to about 20m at the moment for Instagram), fast growth, a small team (10-25 employees) and no revenue." Adding, "The businesses are nascent but the networks are established, the brands are already meaningful and if they grow to a large scale they could be very disruptive to us. These entrepreneurs don't want to sell (largely inspired our success), but at a high enough price -- like $500m or $1b -- they'd have to consider it...we're vulnerable in mobile..."

He wrote. “Given that we think our own valuation is fairly aggressive and that we’re vulnerable in mobile, I’m curious if we should consider going after one or two of them. What do you think?”

“All the research I have seen is that most deals fail to create the value expected by the acquirer,” Ebersman wrote back. “I would ask you to find a compelling elucidation of what you are trying to accomplish.” Ebersman listed four potential reasons to buy companies: neutralizing a competitor, acquiring talent, integrating products to improve the Facebook service, and “other.”

The emails first surfaced in 2020. Now in 2024, on Elon Musk-owned social media platform, X, Professor Paul Nary, shared the alleged leaked emails written by Zuckerberg while sharing his takeaways: "Fascinating thread illustrating real world/real time thinking about corporate (not just business) strategy and a potential acquisition that turns out to be transformative for Facebook $META. Very cool."

Nary added a few comments from an academic perspective: "Mark repeats the old line about "most deals fail to create value". This is one of those things I wish I could erase from collective memory because it is not true, and is largely based on imprecise/bad citations. Nuance is important here. How do we measure performance? What type of deals are we comparing? By some measures, more acquisitions create value, especially acquisitions of smaller, private, well-matched, and perhaps not overvalued firms like IG. Yet on the other hand, very large, public transactions like most "mergers of equals" (no such thing in reality, but that's a different story) destroy so much value that they bias absolute value results on average.. at least in my reading of research."

Nary made another observation: "This is at least a reasonably careful, thoughtful approach to doing a deal. Yet only a couple years later, Zuckerberg acquires WhatsApp where sure, maybe there are similar reasons, but both valuation and path to monetization are questionable (I teach this case in my MBA class). Would love to see similar emails about that."